Grocery price bumps, hoarded products, and a hoped-for rebound in restaurant sales

We knew the numbers would be bad, but a recent trade report puts in to perspective just how bad COVID-19 has hit food service, grocery stores, and food supply chains.

Kevin Grier of Kevin Grier Market Analysis and Consulting in Guelph, Ont., led the study, and says that food service sales throughout the beginning of the COVID-19 shutdowns continued to spiral downwards throughout April, which isn’t a total surprise.

“Total food service sales declined by over 60 per cent in April,” says Grier. That’s the first glimpse of the full impact of a month of shutdowns on the grocery trade. More specifically, year over year sales declined by 60 per cent overall, while sit-down service sales declined by 80 per cent, quick serve was down 40 per cent, and bars were down 90 per cent.

For the restaurant industry’s sake, there’s hope for a strong comeback, and that those regulations to support social distancing, such as square footage limitations can be overcome to provide enough income for that rebound. Restaurants can’t raise their prices because they still need to be competitive, but might save money on staff wages, since the capacity isn’t there.

Restaurants are the key driver for the meat industry, so we really hope for a strong snap back, says Grier. There was a surge in grocery sales, but not enough to completely balance out the market. “Over the long term it’s probably going to hurt beef most, because beef is mostly going to be consumed at those sit-down restaurants, which are going to be the slowest to come back,” he says.

May was the first month where grocers could have made price adjustments considering the changes related to virus-related consumer patterns, according to Grier. “For most of 2019, retail grocery food prices went up about three to four per cent. In early 2020, inflation was only about two to three per cent, and come March, inflation was about four per cent,” he says.

For that first month of the pandemic in March, we saw the first glimpse of hoarding and pillaging products like meat, flour, yeast, and sugar, then into later months, items like ice cream and apples were snatched up. Intuition would say that now would be the time that grocers should increase their prices, but in April prices went up three or four per cent. May came and prices only went up about three and half per cent. Canadian grocers aren’t taking advantage of the pandemic situation, perhaps an opposite reaction to what’s happening in the U.S.

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