According to a report from Statistics Canada, rising food costs are causing consumers to shift their shopping preferences from food and beverage stores to more affordable general merchandisers, such as large department or discount stores including warehouse clubs and supercentres. This trend is a result of changing consumer behavior driven by food inflation, which has led to a decrease in the volume of food purchases and a reduction in shopping at higher-priced food and beverage stores.
“While food inflation has eased in recent months, prices for many grocery items have continued to increase month after month, with an overall increase of 20% compared to two years ago,” the StatCan report states.
Prior to the COVID-19 pandemic, food sales at food and beverage stores accounted for 73% of all retail food purchases, but during the pandemic years, sales at general merchandise stores increased from 21.6% in early 2021 to 25.9% in late 2022. Although purchasing at food and beverage stores has decreased overall, the country’s largest grocers are still reporting profits. Loblaw, for example, exceeded Wall Street expectations for second-quarter revenue and profit and maintained its annual profit forecast growth in the low double digits.
Despite a cooling overall annual inflation rate of 2.8% in June, the price of food bought at grocery stores continued to rise at a rate of 9.1% year over year, according to StatCan’s latest Consumer Price Index report. The main contributors to food inflation in June were meat, bakery products, dairy products, and a significant increase in the price of grapes, which pushed the price of fresh fruit up by 10.7% annually.
The persistent food inflation in Canada is expected to face additional challenges in the coming months, as Russia’s decision to allow the collapse of the Black Sea grain deal could disrupt the flow of wheat products from Ukraine and Russia to international markets.
To compensate for higher grocery prices due to inflation, the federal government provided a “grocery rebate” to eleven million Canadians alongside July’s GST tax credit payment. This rebate was introduced to alleviate the impact of high inflation on low- and modest-income families, although recipients have the freedom to spend it on anything.
The report from StatCan suggests that the decrease in purchasing at food and beverage stores may also be influenced by other emerging trends, such as the rising popularity of meal-prep kits delivered to the home, increased coupon usage, switching certain purchases from one store to another, or reducing food waste.
Overall, as food costs continue to rise in Canada, consumers are adapting their shopping habits by choosing more affordable general merchandisers over traditional food and beverage stores.
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