Loblaw Cos. Ltd warned Thursday that prices on produce and meat items have begun to rise thanks to the loonie’s steep decline since late last year.
The biggest hit is being felt in the price of fruits and vegetables, which Loblaw sources largely from the United States or Latin America and are purchased in U.S. dollars.
Those added costs are typically flowed through and tacked onto your bill, something that’s happening now.
Just how much prices are increasing as a result of the currency swing is hard to say. The loonie has declined more than 5 per cent against the U.S. dollar over the past three months and is now worth about 90 cents US.
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Doing without
Experts say when prices jump for items like fresh produce and meat people simply go without, re-jigging their shopping lists to exclude costlier items.
“When it comes to the full food basket, the magnitude of the shift in exchange rates is moderated by the balance of items,” Irene Nattel at RBC Capital Markets said in a note last month.
Still, grocers like Loblaw, Metro and Sobeys won’t be able to flow the price increases onto shoppers so easily at the moment.
Supermarkets are facing unprecedented pressure from the likes of Walmart and Target, a pair of U.S. retail giants that continue with expansion plans in Canada this year.
READ MORE: Walmart Canada makes bigger push into grocery aisle
The discount retailers have targeted food sales in particular, aiming to steal a greater share of your weekly grocery budget.
The affect has been intense competitive pressures among grocers and falling food prices for shoppers.
Davis said Thursday the currency swing has provided some reprieve, but unlike during previous dives in the value of the loonie when Loblaw could pass the costs on entirely, price hikes are being roll out in a “measured fashioned” now.
“Ultimately, two key factors that will influence actual food price inflation,” RBC’s Nattel said. “Consumer substitution; with consumers trading down to less expensive products to save money.”
Or, “competitive activity that can erode actual food price inflation,” the analyst said.
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