Amid Canada’s food price inflation, center of store opportunities lie in premium and private label brands

By Adi Menayang

- Last updated on GMT

The St. Lawrence Market south building in Toronto, taken in 2015. Photo: iStock/Andres Garcia Martin
The St. Lawrence Market south building in Toronto, taken in 2015. Photo: iStock/Andres Garcia Martin

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Food price inflation has colored the behavior of shoppers in Canada, with soaring vegetable prices early in 2016 prompting many Canadians to become more conscious about food prices in general, according to food price experts from Dalhousie University.

The researchers recently updated their annual Canada’s Food Price Report 2017​ with a mid-year amendment​, which revealed that there were deflationary pressures early in the year, though in some food categories, such as meat, prices may jump as high as 7% to 9% by the calendar year end.

The mid-year update softened inflation projections a little bit, but the rising prices of food continues to be a hot topic in Canada, especially as official data released by Statistics Canada​, which show food price increases hovering around 0.3%, conflicts with numbers calculated by the university.

Researchers conducted several informal ‘price spot checks’ at stores around the country, and said that “this non-scientific survey suggests food prices in grocery stores may have increased by more than 5% over the last five months or so, which is a sharp contrast to what is being reported ​[by Statistics Canada].”

Shopper behavior: Bearish, as Canadian shoppers become more price-conscious

Analysis of the Canadian public’s comments on social media show that many Canadians are skeptical about Statistics Canada’s numbers, and still feel like they are spending more money on groceries, according to the Dalhousie researchers.

Echoing this is market research firm Mintel’s latest Canadian Lifestyles 2017 report​. Grocers have seen sales growth soften, which Mintel analysts say may be attributed “to a continued focus on price for consumers seeking more deals and the growth of discount formats over conventional banners.”

According to Mintel’s report inflationary pressures ​will force food retailers to enhance value for the consumer in the competitive grocery market by ​[optimizing] product assortments based on pricing and on selection reflecting growing areas of demand.”

An opportunity in premium

A key opportunity to shield margins, Mintel’s report added, lies in premium products. Citing data from the research firm’s different surveys, for example, they found that a third of Canadians who eat meat agree that “high quality meat is worth paying more for.”

Furthermore, Canadian shoppers want “freedom to pick and choose what they want to spend more or less of their money on.”

“Consumers may be reluctant to pay a premium for all the products they purchase in a shopping trip, but this doesn’t mean they won’t pick their spots where they may prove less willing to ‘compromise’ on quality,” ​the analysts wrote.

‘Skippy Syndrome:’ Multinationals are leaving the country

Last month, US company Hormel Foods announced that it is discontinuing Canadian distribution of the peanut butter Skippy​, part of the increasing trend of foreign processed foods exiting the Canadian market, according to Dalhousie University’s food price experts. Just a few days before Hormel’s announcement, Mondelez discontinued the Dad’s chocolate chip brand​, which was only sold in Canada.

“The trend is likely to continue and could impact the level of competitiveness in the middle of the store,” ​the researchers at Dalhousie University wrote in their report. “Savings could prove more difficult in that section of the store in the future.”

Additionally, they expected that Canadians could see a reduced number of national brands in the center of the store, where traffic is scarcer when compared to 10 years ago. This provides opportunity for private label manufacturers, the researchers wrote.

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