Canadians are sending a message due to increases in grocery prices, which when measured year over year, have outpaced headline consumer inflation since late 2021. While food inflation has eased in recent months—falling out of double-digit territory in March and April 2023—prices for many grocery items have continued to increase month after month and, on balance, are 20% above levels reported two years earlier. During 2022, the sticker shock in grocery aisles became remarkably broad-based, with elevated price growth—year-over-year price increases of 10% or more—affecting a larger share of overall food expenditures. This included spending on many household staples.
Several factors have contributed to the steady acceleration in food prices. As economies emerged from the COVID-19 lockdowns, higher energy prices put upward pressure on costs along the food distribution channel, from planting and harvesting to transporting and selling. Poor growing conditions in Canada and the United States in 2021, rising input and transportation costs, increasing producer prices, supply disruptions, and rising margins at wholesalers and retailers all contributed to the steady increase in food prices. Many of these factors were either stronger than usual or occurring simultaneously, amplifying pressures at different points along the food supply chain. This “Spotlight on data and research” article examines data from recent business and household surveys on how Canadians have been adjusting to higher food prices.
Households are consuming less and changing how and where they shop
Statistics Canada conducted a special household survey in 2022 that asked Canadians how they were coping with higher living costs. During the spring months, before inflation had peaked, nearly three in four Canadians reported that rising prices were affecting their ability to meet day-to-day expenses. For many families, higher food costs were their biggest concern. Two-thirds of Canadians reported that they were very concerned about rising food prices, while 4 out of 10 indicated that, when viewed in relation to price increases in other areas (e.g., shelter and transportation), they were most impacted by higher food costs.
Many households were actively adjusting their purchasing habits as food inflation was ramping up. One-half of respondents reported that they had sought out sales or promotions, while a similar percentage indicated that they had purchased cheaper alternatives, brands or items in response to price pressures.
Consumers have also adjusted how much food they are buying. Data on the volume of food purchases are available from the household expenditure tables, released with quarterly estimates of gross domestic product. These data show that the volume of food products purchased by households rose sharply in the first year of the COVID-19 pandemic, peaking at about 11% above pre-pandemic levels in early 2021, before trending lower as consumers ramped up their spending at restaurants and on other out-of-the-home services as COVID-19 restrictions eased. As of early 2023, household food volumes had declined in six of the past eight quarters (and were unchanged in the remaining two) and were 1.1% above pre-pandemic levels.
The pullback in food spending as prices increased is clear in the retail sales data from food and beverage stores. Since grocery prices began to increase in early 2021, constant dollar sales—a measure of the volume of sales at food and beverage stores—have trended down (Chart 1). Shoppers are spending more but buying less. In 2022, c