Fresh vegetables and easing retail competition fuel food inflation

Canada’s food retailers have been looking to reduce competitive price wars —  but it’s not enough to ease continued food inflation.

That’s market analyst Kevin Grier’s take on what’s happening across Canada’s food retail landscape. Earlier this week, Grier joined RealAg Radio host Shaun Haney to discuss his latest Grocery Trade Report and says grocery retailers may have finally stopped shooting themselves in the foot and started increasing their margins.

Grier says that Canada’s food inflation continues at three to four percent, which is quite high by historical standards. Much of that increase is driven by higher prices for commodities like fresh vegetables — up 17 per cent in June, and 10 percent or more for the past six months. Meat increased by four per cent, and eggs and fresh fruit by just over three percent.

Grier notes that consumer packaged goods — those cookies, jams and condiments found in the middle aisles of the grocery store — are also on the rise. He says that’s likely an indication that competition at the grocery level is starting to ease a little bit. “There’s only one way you can compete on Heinz ketchup or Oreo cookies. Price. It’s the same if it’s a high-end store or a discount store.”

It all adds up to higher food prices, says Grier. “When they start increasing [packaged goods] it makes me think that grocers are easing back, they’re not competing as hard against each other as they often do.” When you add in those high commodity prices, you have a recipe for continued food inflation. (Story continues after the interview.)

Grier also comments on StatsCan numbers indicating retail food sales at grocery stores like Loblaws outpaced food sales at general merchandisers like Walmart and Costco for the first time in more than ten years — four percent compared to two percent. That’s an eyeopener for Grier, but it’s too early to consider it a trend, he says. “It’s something to watch, but way too early to say that share erosion is happening.”

In the interview, Haney asks Grier for his thoughts on the potential impact last weekend’s fire at Tyson’s Holcomb, Kansas beef packing plant could have on beef prices. The fire put six percent of the U.S. weekly processing capacity for fed cattle (6,000 head per day) out of commission indefinitely. Grier’s take is pretty simple — Tyson is in the business of serving their customers, and they don’t want to lose customers. The company has said it will allocate sufficient beef supply and Grier believes they likely will.

“Things will calm as people realize they are going to get served… For the most part, we are not going to see any change on supermarket shelves,” adds Grier.

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