The COVID-19 pandemic is having a huge impact on how Canadians shop, but it won’t have much of an impact on their wallets—yet.
Dalhousie University and the University of Guelph released an update on their forecast for food prices for 2020. Overall, food prices are still expected to increase by the 2% to 4% that was initially predicted in the 10th annual edition of Canada’s Food Price Report, released in December 2019.
The only food categories with changes are bakery and vegetables, which have been revised upwards due to the weakened Canadian dollar. The December report anticipated a rise of up to 2% in bakery prices and 2% to 4% in vegetable prices.
“Food inflation is completely natural, and we are still expecting food prices to go up by as much as 4%,” Sylvain Charlebois, scientific director, Agri-Food Analytics Lab Faculty of Agriculture, Dalhousie University. “The Canadian dollar is going to impact a few food categories and that has nothing to do with COVID-19—it has everything to do with the oil price war.”
As the updated report explains, the dollar is currently at its lowest level in many years, affecting importers’ buying power. “If the dollar drops further, many items we import will cost more, from produce to canned goods, to many other processed foods we purchase regularly,” the report states.
Grocers under new pressures
While COVID-19 isn’t driving up food prices, consumers aren’t exactly getting deals right now. As the report notes, grocers are shifting away from promotions and discounting, and turning their attention to food safety and public health protocols. Many grocery retailers have put up Plexiglass barriers between employees and customers and are asking customers to adhere to physical distancing while they’re shopping.
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Security to control traffic in stores and store-cleaning protocols have been enhanced across the country, which have also increased the cost of operating a store.
“Promotions are not as present in the marketplace compared to before COVID-19, and frankly, it’s totally understandable because grocers have other priorities,” says Charlebois. “However, put real financial pressure on grocers and that’s why we may eventually see food prices rise as a result.”
On top of rising costs from new protocols, many major grocery retailers have committed to wage increases until early May, which also drives up operational costs.
Though the increases are meant to be temporary, that could change. “I suspect that grocers may decide to continue because employee tasks are changing,” says Charlebois. “Grocers will want to attract strong talent and you can’t do it without increasing salaries.”
On top of that, grocery store employees have never been so popular, he says. “People glorify them and are thankful for these hard-working people who are not earning a whole lot. And from a social and political perspective, they have way more currency than ever before.”