Cost of groceries will grow
Meat, produce, bakery expected to drive 3%-5% increase in 2021, passing inflation
It’s only going to get worse for Canadians who are already feeling stretched at the grocery store, with food prices set to rise in 2021 due in no small part to COVID-19.
The 11th annual Food Price Report, a collaboration between Dalhousie University, the University of Guelph, the University of Saskatchewan and the University of British Columbia, predicts that food prices will rise by three to five per cent next year, outpacing general inflation.
The annual cost of groceries for the average Canadian family will go up by five per cent in 2021 — by almost $700, the largest dollar increase the report has yet predicted. That figure doesn’t include restaurant spending and groceries purchased through ecommerce.
“It’s going to be a tough year,” said Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University and the report’s lead author.
The rise in food prices will be driven by meat, produce and bakery. Meat prices in particular are expected to rise by 4.5 to 6.5 per cent, as is the price of vegetables.
The price of meat products, especially chicken and pork, are expected to remain higher because of the increased cost of production associated with COVID-19 restrictions, Charlebois said, and the same goes for eggs. However, when it comes to beef, the “worst is behind us,” he said.
“We are expecting both chicken and pork to drive prices higher at the meat counter,” he said.
Bakery prices will also rise between 3.5 and 5.5 per cent, he said, in part because commodity prices are higher.
In 2021, according to the study, a family comprised of one man, one woman and two children (a boy and a girl, 14-18 and 9-13, respectively) is expected to spend $13,907 on groceries — $695 more than the same family would have spent in 2020.
However, this year, for the first time, the report has added annual grocery spending estimates per individual, based on age and gender. For example, a woman between 19 and 30 is predicted to spend $3,256.34 on groceries in 2021, while a man between 31 and 50 is expected to spend $3,559.37.
Using these estimates, families can calculate how much their individual household is likely to spend, instead of relying on one “average family” total that doesn’t represent the diversity of families across Canada, said Simon Somogyi, report co-author and the Arrell Chair in the Business of Food at the University of Guelph.
The price of oil and the Canadian dollar are normally the two strongest factors impacting food prices, said Somogyi, alongside other metrics like commodity prices and employment rates.
But every year, researchers have to deal with some wild cards when predicting food prices, said Charlebois — the biggest of which is usually climate change.
This year, COVID-19 was the new wild card, said Charlebois, and will continue to be in 2021.
Last year’s report predicted food prices would increase by two to four per cent in 2020, and the average family would spend $487 more annually than the year before. The team put out an update to the prediction in March when the pandemic struck, but the price predictions remained around the same, despite the factors changing.
Despite the pandemic, last year’s predictions were more or less accurate, Charlebois said, though they couldn’t account for the dramatic drop in spending on food service caused by COVID-19.
Prior to the pandemic, the average household spent around 38 per cent of their total food spending outside of the house, according to the report. After a sharp drop at the beginning of the pandemic, that number is now closer to 25 per cent, Charlebois said.
“Because food service became such a wild card this year, we decided for 2021 to just not look at it and just look at price behaviour,” he said.
Somogyi added that restaurant prices are also expected to rise next year, but it’s harder to predict what the industry will look like. The pandemic has made food price predictions more difficult — consumer behaviours have changed drastically in 2020, he said, pointing to the rise in home cooking and gardening.
And the wildfires in California will continue to impact produce prices, said Somogyi, especially over the winter months when Canada imports the most in terms of fresh fruits and vegetables.
“If you’ve got bad winter storms or fires in California and then smoke damage to fruits and vegetables, that has a big impact on the quality of the product we get here … and increases the price,” he said.
As well, the fees placed onto suppliers by several grocery giants could impact food prices in the long run, said Charlebois.
Somogyi said the pandemic has shed a light on the power dynamics within the Canadian grocery industry, driving forward the possibility of a grocery code of conduct — something many industry players have wanted for a while.
He said the trend toward grocery e-commerce, as well as food boxes like HelloFresh, is here to stay.
“I think the investment the grocery stores have made and our trial of it during the pandemic has allowed us to understand its value,” he said.
The pandemic has already increased food insecurity for many — the Food Price Report notes that food banks saw demand rise by 20 to 50 per cent, depending on the area. The need to save money will impact consumer behaviour, Charlebois said.
For instance, he predicts an increase in spending on private labels, such as President’s Choice or Life, as people look to “trade down” and save money.
And Somogyi thinks the upcoming ban on certain singleuse plastics could also impact food prices in 2021 and beyond.
“That means that companies will use more recyclable plastic, which is more expensive, and that cost gets passed on to us.”