By Isabella Diez, Co-President
The Canadian inflation rate surpassed 5% this past January. This has not been seen since the fall of 1991. This 30-year-high has affected gas, house, and food prices, and in response, Canadians are now changing their shopping behaviours.
More than 66% of Canadians have adjusted their shopping habits due to inflation and the increase in prices, and more are planning on doing so if increases continue to happen.
In response to the increase in prices, businesses are resorting to passing the additional costs over to their customers. With this, more and more buyers are shopping at discount stores to find lower prices. Not only are consumers shopping at discount stores, but they are also substituting their purchases for less costly items. Some of these behavioural changes include purchasing chicken and pork rather than beef.
Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University explains that “When food inflation becomes an issue, we do believe that dollar stores will get more traffic because people are looking for better deals.”
Last quarter, Loblaws reported an increase in sales which was attributed to increased lockdown measures due to the Omicron variant. Consumers are altering their habits by shopping at Loblaw’s discount brand, No Frills due to the increase in prices at other major grocery stores. Catering to price-sensitive consumers, No Frills is able to provide consumers with lower prices.
Loblaw Executive Chairman and President, Galen Weston states that “The five per cent [inflation] in the quarter is significant and there continues to be pressure as we look forward, especially over the next couple of months. This is a result of …very real cost pressure all the way through the value chain.”
In efforts to remain price competitive, Loblaw’s relationships with their suppliers have faltered. One, in particular, is Frito-Lay Canada. As one of Canada’s biggest manufacturers, Frito Lay supplies fan favourite brands such as Lays, Doritos, and more. After a moderate price increase by Frito-Lay, Loblaws refused to accept the prices. Consequently, all product deliveries to Loblaw and banner stores such as Shoppers Drug Mart, Real Canadian Superstore, and others have stopped. Consumers have noticed this by the less full or even completely empty chips and snacks aisles.
This is one example of how relationships with vendors have been challenged due to the effects of rising prices. Experts have noted that this tension could lead to further problems in Canada’s food industry, and could get increasingly worse as supply chain issues continue to persist. Statistics Canada reported an increase of 6.5% in prices at grocery stores, the highest since 2009.
With consumers having to take the hit on higher prices of food and gas, more Canadians may need to continue to make adjustments to their current purchasing habits.
FINANCIAL MARAUDER 