From Higher Food Prices to Price Wars?

by Sylvain Charlebois

The recent surge in food inflation has transformed us into dedicated bargain-hunters. Consumers have become more strategic in their shopping habits, and have become indifferent to brands, stores, or chains; their primary concern is finding a good deal.

According to a recent survey by Caddle, many Canadians are planning to alter their approach to grocery shopping in the coming 12 months. A significant 43.3% of respondents stated they intend to focus more on promotions in the new year to cope with rising food prices. Additionally, 33.6% of Canadians plan to utilize loyalty programs more frequently, while 30.6% intend to explore other stores in pursuit of better deals. The Canadian market is now teeming with shoppers in search of the best possible bargains.

The same survey reveals that when selecting a new store, prices and affordability are the most critical factors for Canadians. A staggering 77.9% will prioritize lower prices when assessing a new store, while 50.9% will consider quality, and 42.7% will take proximity into account. Many retail chains are adapting by offering more discounts nationwide.

For the near future, cost management and supply-chain efficiencies will be paramount, as consumers are being retrained in the art of loyalty. While the middle-mile competition within the industry is heating up, successful execution will be the name of the game. The relationship between vendors and grocers is expected to come under even greater strain as consumers recalibrate their food budgets to address housing costs. One life necessity will continue to compete with the other, and this trend is likely to persist for some time.

As predicted by Canada’s Food Price Report 2024, food inflation is expected to return to a more manageable range of 1.5 to 2.5% in 2024. Encouragingly, the gap between food inflation and overall inflation is expected to narrow, possibly reaching zero at some point. The sticker shock and blame game directed at grocers are likely to become less intense compared to 2023. The rhetoric of “record profits” is waning, and those accusing grocers of profiteering are increasingly being challenged. The food retail industry can refocus on addressing challenges and enhancing business practices. The pursuit of greater food price stability continues, and the turbulence and dramatics that characterized much of 2023 are likely behind us.

In the coming months, the spotlight will be on deals, and attention will be paid to rebates, discounts, and loyalty programs. The trend of trading down will gradually evolve into an intelligence-savvy market, with consumers turning to digital tools for more information to secure the best deals. Grocers will need to assess their readiness for this intriguing battle for consumer loyalty, with some better prepared than others.