More bargains expected in grocery aisles next year as supermarket wars intensify

Remember when soaring oil prices and China’s burgeoning middle class were supposed to squeeze foodstuff supplies and stoke grocery bills sharply higher?

The spectre of food inflation, feared by experts not long ago, has subsided substantially since the recession.

And a new report Tuesday from the University of Guelph suggests shoppers stand to see more bargains at the supermarket next year as Canadian incumbent grocers Loblaw Cos. Ltd., Metro Inc. and Sobeys step up efforts to fend off bigger U.S. discount giants.

READ MORE: Grocery wars ringing up savings for shoppers

Cheese, eggs, milk and frozen vegetables could all see decreases in price through next year, according to Sylvain Charlebois, associate dean of research at Guelph’s College of Management and Economics, a lead author of the report. Pasta prices may also drop, the report said.

By offering deals on such staples, grocers hope to get shoppers through the door to spend on items that carry higher profit margins, experts say. It’s a feat that proved much harder to do for grocery chains in 2013 as Walmart introduced food aisles at superstores and Target, which also retails food, launched stores across Canada.

Overall food prices inched ahead by a meagre 1.2 per cent as a result of the battle for family grocery budgets, according to Guelph’s 2013 Food Price Index, below the expected range of 1.5 to 3.5 per cent growth that was expected.

“We actually underestimated the impact of the competition in the market,” Charlebois said in a release.

READ MORE: Grocers look to grind down wages as Walmart, Target take aim 

The battle between Canadian grocers and U.S.-based discount rivals picked up the pace through the summer months as Target continued its roll-out and Walmart continued to add food to existing stores.

Metro saw net prices fall 0.5 per cent between July and the end of September as it slashed prices, while Loblaw management reported a 0.3 per cent dip in prices.

Loblaw and Sobeys owner Empire Co. Ltd. have responded with multibillion-dollar acquisitions of rivals — Empire bought Safeway Canada while Loblaw is acquiring Shoppers Drug Mart.  Metro, however, has yet to find a takeover candidate in can use to bulk up.

The index estimate for 2014 is for net food prices to rise between a paltry 0.3 per cent – below inflation – and 2.6 per cent.

That’s well below price hikes in the order of five and six percent witnessed a few years ago.

Additional predictions for prices of certain foods for 2014:

• Meat: increase 0.6 to 2.1 per cent.
• Dairy and eggs: down 0.6 to 1.5 per cent.
• Grains: up 0.2 to 2 per cent.
• Fruit and nuts: up 0.6 to 1.2 per cent.
• Vegetables: up 1.4 to 2.1 per cent.