Soaring food prices are changing the way Canadians shop for groceries

Rising food costs are leading consumers to pivot away from shopping at food and beverage stores to less costly general merchandisers instead, Statistics Canada reports. 

General merchandise is classified as a large department or discount store, which includes retailers such as warehouse clubs and supercentres, StatCan said in its report published Wednesday.

The shift aligns with changing consumer trends resulting from food inflation, such as a decrease in the volume of food purchased and reducing shopping at pricier food and beverage stores.

“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,” the report by StatCan says.

Food sales at food and beverage stores prior to the COVID-19 pandemic accounted for 73 per cent of all retail food purchases, the agency reports. During the pandemic years, food sales at general merchandise stores increased from 21.6 per cent in early 2021 to 25.9 per cent in late 2022.

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While purchasing at food and beverage stores has decreased overall, the country’s largest grocers continue to post profits.

Loblaw beat Wall Street expectations for second-quarter revenue and profit, maintaining its annual profit forecast growth in the low double digits, according to its latest earnings report Wednesday.

The company’s revenue rose 6.9 per cent to $13.74 billion in the quarter that ended June 17, compared with analysts’ average estimate of $13.63 billion, according to Refinitiv data.

Its profit rose by 31.3 per cent to $508 million for the quarter.

StatCan’s latest Consumer Price Index report for June released last week showed that while the overall annual inflation rate cooled to 2.8 per cent last month, prices for food bought at the grocery stores continued to rise at a pace of 9.1 per cent year over year.

StatCan said the biggest contributors to food inflation in June were meat (up 6.9 per cent), bakery products (up 12.9 per cent) and dairy products (up 7.4 per cent). The agency also pointed to a 30 per cent month-to-month jump in prices for grapes as pushing the price of fresh fruit up 10.7 per cent annually.

Persistent food inflation in Canada is set to face more challenges in the months ahead. Last week Russia allowed the collapse of the Black Sea grain deal, which enabled the peaceful flow of wheat products from Ukraine and Russia to international markets.

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Eleven million Canadians received a “grocery rebate” from the federal government at the start of the month alongside July’s GST tax credit payment.

The rebate was introduced as a way to compensate Canadians for higher grocery prices due to inflation, though recipients could spend it on anything.

The federal government also provided a similar payment last fall in what it said was an effort to blunt the effect of high inflation on low- and modest-income families.

StatCan said in its report that decreased purchasing at food and beverages stores may also partly be due to “other emerging trends that are harder to assess, for example the rising popularity of meal-prep kits delivered to the home, an increased use of coupons, switching only certain purchases from one store to another, or reducing food waste.”

— with files from Global News’ Craig Lord and Reuters.