In the 8th edition of Canada’s Food Price Report, published by both Dalhousie University and the University of Guelph, some predictions for 2017 were realized, but most of the food categories were affected by a significant structural change, which started in September 2016.
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The report notes that major discounting and disruption within the Canadian food distribution landscape caused by the increasing pressures coming from Walmart, Costco and Amazon led to this major shift in the market. Coupled with these sectoral changes were misleading macroeconomic forecasts set forth by most financial institutions 12 months ago. Most believed the Bank of Canada would decrease its overnight rate in 2017, and that the Canadian Dollar would be below $0.70, in comparison to the U.S. Dollar. However, the Bank of Canada increased its rate, twice, and the Canadian Dollar is now worth more than $0.78. Both events contributed to keeping prices much lower than predicted, in some categories.
Food inflation over the last 12 months has been reasonable for Canadian households, a trend which is expected to continue. In 2018, food prices in Canada are expected to rise 1% –3%. This is a slightly lower estimate than last year’s forecast, but still higher than what we have experienced to date in 2017. Annual food expenditure for a family of 41 is expected to rise by $348 to a total of $11,948 in 2018.
Vegetables and food purchased at restaurants are expected to see the highest increase in 2018. Vegetable prices are expected to be affected mainly by unaccommodating climate patterns. The food service industry is expected to be responsible for 59% of the anticipated food expenditure increases in 2018. The average family is expected to spend $208 more when eating out. In other words, we expect the average Canadian family to increase its food-away-from-home expenses by almost 8% in 2018. The average home is expected to spend almost 30% of its food budget in food service, the highest level in history.
While the province of Saskatchewan surprisingly experienced the highest increase in food prices, Nova Scotians saw their food prices drop by more than 1% overall in 2017, to date. But for 2018, food price increases are expected to affect most provinces, including the Atlantic Region and British Columbia. The Atlantic Provinces will likely see food prices go up, after a year of food price stagnation. For British Columbians prices will continue to increase, due to a higher general inflation rate. Both Ontario and Alberta will be faced with a more competitive marketplace, which will entice grocers to keep prices low. Higher minimum wages will not have an impact on food prices, since most companies are finding innovative ways to cut operating and labour costs and the focus on protecting margins will be enhanced as a result.
Food price increases in Quebec should follow the Canadian average. But generally, the researchers expect food inflation to be somewhat consistent with the general inflation rate for 2018, across the country. However, there is consensus that the aggressive discounting strategies being employed by major grocers cannot continue indefinitely.
Major food topics for 2018 are expected to be the ongoing aversion to animal proteins, the new Canada’s Food Guide, and the rise of the Grocerant1.
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