Grocery prices could climb, even as food service comes back online

A surprising thing happened during the COVID-19 lockdown: grocery stores in Canada didn’t jack prices in comparison to their American counterparts.

What’s more, the sales of certain items, such as beef, held very strong — much stronger than many anticipated. That demand helped offset the loss of sit-down dining demand.

But as Kevin Grier of Kevin Grier Market Analysis and Consulting explains in the interview below, increasing commodity costs could push grocery inflation higher in the year ahead.

Grier says that initial cost increases in American grocery stores were largely driven by opportunity. Panic buying and closed restaurants pushed more sales to grocers, and they took advantage.

Here in Canada, he says, our food inflation rate actually went down, despite some cost increases, likely because of strong competition between retail properties.

Looking ahead, there are two major factors at play that will influence the level of grocery cost increases. One is competition between stores, which has held strong, and the other is commodity pricing — and those prices are on the rise. Those rising prices will work their way through retail too, he says. The smart money is on inflation.

What about food service coming back online? Grocers will have to consider that, as consumers will have that option back, Grier adds.

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