The Canadian Food Sentiment Index: October 2024, released Oct. 10, is based on responses from more than 3,000 Canadians.

Food prices have increased 27 per cent since 2019, the report said, and 84 per cent of respondents cited food as the expense that has surged the most in the past year. Nearly half — 48.2 per cent — reported that they look for more sales and discounts, while also using coupons, shopping at less expensive stores and switching to generic brands.

Twenty-two per cent of respondents said they are buying fewer non-essential foods, such as ice cream, and opt for bulk or staple foods like pasta and beans.

Food spending per capita has had a modest increase. A notable spike in food spending occurred at the onset of the COVID-19 pandemic, but expenditures have since stabilized at just above pre-pandemic levels, report authors noted.

Restaurant spending took a hit during the pandemic, dropping to less than $40 per capita in early 2020 due to pandemic-related closures and restrictions.

Food insecurity is a growing challenge, especially among younger Canadians, according to the report. Nearly half of Generation Z — 46 per cent — reported drawing from savings or borrowing money to afford groceries, the highest percentage among all age groups. Only 13 per cent of the oldest generation — those born before 1946 — said they needed financial help for food.

Some 47.3 percent of respondents said affordability was their main concern. Nutrition, at 24.9 per cent, and taste, at 16.7 per cent, also scored highly.

Many respondents said they check nutritional labels, opt for local foods and take steps to reduce food waste.

Farmers were the most trusted choice when respondents were asked about trust in the Canadian food industry, with a score of 3.69 out of five. They were closely followed by Health Canada and the Canadian Food Inspection Agency.

In contrast, major grocery chains received the lowest trust scores. The report also showed that most Canadians believe food prices are rising faster than government estimates. Over 54 per cent of respondents said they perceived food inflation to be higher than official reports.

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Gross margins, however, should increase as the effects of falling commodity prices work their way through the supply chain, the farm lender said in an April 9 news release.

In its Food and Beverage Report 2024, FCC said that Canadians spent less than average on food and beverages in 2023. People shifted shopping habits to purchase more sale items and cheaper brands, and even cut back on the volume of food purchased.

“While changing shopping habits may pose challenges, they also present opportunities for food and beverage manufacturers,” said FCC chief economist J.P. Gervais in the news release.

“Taste remains the top consideration for consumers, but price sensitivity has increased, leading processors to innovate and meet evolving consumer demands.”

A growing, diverse population also provides opportunities for food manufacturers, the report said. More than one million people came to Canada in the first nine months of 2023.

“That’s a lot more mouths to feed,” FCC said.

FCC projects food and beverage sales to slip 1.4 per cent in 2024, while gross margins improve 1.5 per cent on average—varying widely across the sector.

Much of sales growth in the last three years has been influenced by inflation, “as manufacturers aimed to pass on increases in input costs to the best of their ability to protect margins,” the report said.

In 2023, input costs like commodities, fuel and transport began to stabilize or decline. Wage growth is still hot, but falling job vacancy rates suggest that could soon moderate.

FCC projects grain and oilseed milling sales to decrease by 11.3 per cent while volumes increase by 1.1 per cent.

Dairy products should see sales grow by 6.5 per cent, while volumes grow 7.5 per cent. The sector can also expect improving margins—though still below 2022 levels.

Sales of meat products are expected to grow by 2.7 per cent, with volumes bumping up 0.7 per cent year over year. Pork margins are expected to improve compared to a difficult 2023. Beef processing margins should stay in the black, but competition for live cattle will be fierce. Poultry processors will deal with plateauing demand and high frozen inventory.

The U.S. economy is a wildcard, FCC said.

“Should the U.S. economy continue outperforming expectations, export growth could surprise to the upside and turn the projected small sales contraction forecast into small growth,” the report said.

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The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, averaged 118.5 points in December, down 1.5 per cent from November and 10.1 per cent below December 2022 levels.

For 2023 as a whole, the index averaged 13.7 per cent below year earlier levels, with only sugar prices higher over the period. The FAO’s sugar price index did, however, decline 16.6 per cent in December from November.

This was “mainly driven by the strong pace of production in Brazil, along with reduced use of sugarcane for ethanol production in India,” the UN agency said in a statement.

The FAO’s cereal price index rose 1.5 per cent in December from November, as wheat, maize, rice and barley prices all rose amid hindered shipments from major exporting countries.

For the year as a whole however, cereal prices were 15.4 per cent below their 2022 average as markets are well supplied with the exception of rice.

The largest price falls were in vegetable oils, with the price index slumping 1.4 per cent in December, from November, and a substantial 32.7 per cent drop for the year as a whole.

The FAO’s meat price index dipped 1.0 per cent in December from November and was down 1.8 per cent year-on-year, while the December dairy price index rose 1.6 per cent month-on-month, but was down 16.1 per cent from a year earlier.

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“It is probable that Canadians will continue to experience the strain of food inflation compounded by increasing costs of housing, energy and various other expenditures,” according to Canada’s Food Price Report 2024.

The food bill for a family of four is estimated at $16,297.20, an increase of $701.79 compared to 2023.

The report is produced by Dalhousie University, the University of Guelph, the University of British Columbia and the University of Saskatchewan.

Sylvain Charlebois, project lead, professor, and director of the Agri-Food Analytics Lab at Dalhousie University, said this reflects two major disruptions — the global pandemic and the war in Ukraine — having been largely absorbed by global food markets.

“These ‘black swan’ events have kind of faded away,” Charlebois said.

Grocers are responding to the return of some stability by running promotions and generally engaging in stiffer competition.

“It is much easier for them to plan, and plan promotions,” Charlebois said.

Last year’s report forecast a five to seven per cent increase in food prices in 2023. The current rate for food price increases is 5.9 per cent, according to Consumer Price Index data.

The increase was attributed to enduring COVID-19 supply chain problems, climate change, carbon taxes, the conflict in Ukraine and labour disruptions.

Charlebois expects food inflation to continue to fade throughout 2024. “The sweet spot for food inflation is 1.5 to 2.5 per cent,” he said. “We’re not there yet, but I think we will be there by the end of 2024.”

Still, Canadian consumers have been hard-pressed in recent months when it comes to food prices. There were nearly two million visits to food banks in Canada in 2023, a 32 per cent increase over the previous year.

“This is the highest level of food bank use in Canada on record,” stated the report.

Consumers believe that price gouging by grocery companies is the main reason for escalating food prices, but a Bank of Canada study shows markups were in line with inflation rates.

Charlebois expects to see the political heat surrounding food inflation to fall in lockstep with the slower growth in food prices. He also noted that consumer fury around food prices was largely a reaction to another runaway piece of the Canadian consumer economy — the cost of shelter. As that’s risen rapidly, consumers are frequently forced to make hard decisions in other areas of their domestic economy — such as food choices, as it’s easier to make changes to food purchases than it is to find suitable affordable

“We’ve had a massive trading down in food choices in Canada over the past year — mostly from February to October,” Charlebois said. “That is stabilizing now.”

Charlebois added that the recent Bank of Canada decision to hold pat on interest rates will also contribute to consumer relief both on food prices and shelter costs. He noted that global warming and the desire to decarbonize food supply chains remain inflation risks in the food sector.

Concentration

The report noted that 80 percent of Canada’s grocery market is controlled by five companies: Loblaws (29 per cent market share), Sobeys/Safeway (21 per cent), Costco (11 per cent), Metro (10.8 per cent), and Walmart (7.5 per cent).

“Canada has a concentrated grocery industry and is a tough landscape for new players to break into,” stated the report.

One thing that should help is the “imminent introduction” of a consumer protection code of conduct in Canada’s food sector.

“(It) is a momentous development with promising implications for consumers and the industry,” stated the report.

Australia, the United Kingdom and Ireland have already adopted codes and those countries have shown more modest increases in food prices when adjusted for inflation. However the voluntary code has run into newfound opposition from grocers as it nears the finish line. Loblaws is suggesting it could raise grocery prices by more than $1 billion, and Walmart Canada has said it could add unnecessary burdens to producers.

That’s led to a code of conduct push from two high-profile Canadian political leaders.

Lawrence MacAuley, federal minister of agriculture and agri-food and Andre Lamontagne, Quebec’s minister of agriculture, fisheries and food, have issued a joint statement.

“After years of work, broad consultations, and unprecedented engagement across the grocery supply chain, we’re disappointed to see that the Grocery Sector Code of Conduct has still not been launched and that supply chain partners are hesitant to move forward,” the statement reads.

The Canadian government has also introduced Bill C-56, which proposes amendments to the Competition Act to enhance competition in the grocery sector.

—Gord Gilmour is senior editor, news and national affairs with Glacier Farmmedia. He write from Winnipeg.  Additional reporting from Sean Pratt.

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