Competition driving down food prices



Debora Van Brenk, QMI Agency

, Last Updated: 11:35 AM ET

LONDON, Ont. -- Price-shocked meat-eaters might be astounded by a new analysis that shows the cost of most grocery items has dropped since last year.

An agriculture think-tank has digested the latest food cost trends and determined that most prices -- especially in middle grocery aisles, where packaged food is sold -- are leaner in general than they were a year ago.

"Consumers aren't remotely thinking they're getting a bargain ... (but) the consumers are winning," said Kevin Grier, senior market analyst with the George Morris Centre, a Guelph, Ont.-based ag think-tank.

"Even though they're paying through the nose on meats right now, they're not paying as much as the grocers' increases."

In packaged food, customers are seeing food deflation of about 2%.

The numbers surprised even Grier, who figured that higher prices for red meat would mean grocery bills jump higher than the 1.4% annual inflation rate.

Not so, he discovered by comparing Statistics Canada data for the first three months of 2013 and 2014.

The price of an average food basket has increased just 1%; within that basket, meat and produce prices have increased about 4%.

The packaged-food segment has been fiercely contested with the entry of stores that aren't conventional supermarkets -- Target, Walmart and Shoppers Drug Mart, as examples.

"That's the area of the store that is a real battlefield," Grier said.

That may be good news for shoppers "but it puts a squeeze" on processors whose profit margins become even smaller, said Steve Peters, executive director of the Alliance of Ontario Food Processors.

He noted Canadians still spend a far lower percentage of their dollar on food than people in most developed countries.

Price-matching policies of some stores also drive down prices.

That may present more opportunities by processors to promote the value, not just the price point, of Ontario-grown and -processed food, Peters said.