Food getting costlier in every aisle of the supermarket, Loblaw says

WATCH ABOVE: Meat eaters may get sticker shock as they head to the butcher shop this week. As Sean O’Shea reports, the lower dollar and higher demand means higher prices for beef and pork.

The tumbling Canadian dollar has helped fan fresh food prices considerably higher over the past year, the country’s largest supermarket operator says, resulting in a spike in what we’re paying for fruits, vegetables and meat.

But now the price-stoking effects wrought by a lower loonie are entering the last sections of the grocery store to resist the pull: the centre aisles, where everything from cookies, to canned goods to pre-made taco kits are beginning to rise in cost.

“We were expecting to see this,” Galen Weston Jr., president at Loblaw, said on a conference call Wednesday.

Products coming from big food processing firms south of the border are moving higher in price, Weston said, “as a result of the depreciation in the Canadian dollar.” Quite simply, Loblaw needs to pay more nowadays for the same amount of food, and in turn is flowing the higher costs onto shoppers.

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Inflation isn’t moving nearly as fast for so-called “centre-of-the-store” products – dry goods, carbonated beverages, household items and other non-perishables – as it has for fresh foods which have soared in some cases by double digits compared to year-ago prices.

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“But it is moving, and there is pressure,” Weston said.

Price sensitive

“These are the categories that tend to be the most price sensitive and so we’re cautious, and watching very carefully the extent to which the consumer will accept these increases,” Weston said.

Grocers had been offering generous discounts on centre-aisle products in recent years, using the relatively cheaper items to save customers money – and compete more effectively in an environment where many fretted Target Canada and Walmart would steal customers.

That’s all changed, though, as Target has bolted for the exit and the Canadian dollar has dropped sharply.

“It’s the first time we’ve heard about [centre-of-the-store inflation] in quite a while,” Irene Nattel, an analyst at RBC Capital Markets said.
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For consumers, the loonie’s descent is lifting the cost of daily life virtually across the board, experts say, as every import feels inflationary pressures.

Experts suggest Canadian supermarkets import as much as 80 per cent of fruits, vegetables and meat products, making grocery stores – and their customers — especially susceptible to downswings in the currency.

More to come?

Some, like Loblaw’s rival Metro, say the big jumps shoppers have been noticing in fresh food prices could soon fade.

The inflationary effects of the currency drop have largely worked their way into produce prices at this point, according to experts. Meat prices, while still high relative to last year, aren’t poised to jump higher anytime soon with supply now catching up with demand.

MORE: Sharp run up in food prices has ‘peaked’ grocer Metro says

“We believe inflation has probably peaked,” Eric La Flèche, chief executive of Metro, said last month.

Loblaw’s Weston isn’t as convinced. “I’m not sure we’re quite as definitive on the subject,” he said.

“We’re not calling this the peak just yet. I would say it’s slowing, it’s not going to get a whole lot rapidly higher but I wouldn’t say it’s flattening out.”

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