Fresh produce costs drive grocery inflation higher

For those who handle the grocery shopping in the household, you might be surprised to hear that recent run ups in grocery store prices are somewhat of an anomaly.

As Kevin Grier, with KG Market Analysis and Consulting explains, price inflation of grocery items has actually been low to negative in the past few years, but several factors are converging to push prices higher.

“In the last few months, we’ve had about one per cent, (to) two per cent, in March even four per cent price inflation, which is really, really high,” Grier says. We haven’t seen inflation that high since early 2016, he says, and when you compare to other items, such as energy or clothing, the cost inflation to groceries is nearly double.

Grier explains there are two underlying conditions that drive grocery costs higher: either the cost of the underlying commodity, or a lack of competition between food retailers.

From the produce perspective, fresh veggie prices have gone up huge at a retail level, and that’s being driven by big increases at the producer levels in the U.S. depending on the item, Grier says there’s been 10, 15, and even 20 per cent increases in prices.

But for packaged goods, the so-called “middle of the store” product, it’s another issue entirely that’s driving prices. Packaged product price increase are sitting at about two per cent, suggesting there may be a little less competition out there between food sellers.

What companies are losing ground? General merchandisers, such as Walmart and Costco are really biting into supermarket sales according to Grier.

And what about the very important impending long weekend BBQ push? Will pork win the weekend? Listen below!

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