Tackling Food Inflation: Can Canada’s New Grocery Strategy Lower Your Bill?
Lea Reambeault can walk to three discount supermarkets in minutes from her Toronto apartment above a Food Basics store. Still, grocery shopping is a chore she often leaves to her partner out of anxiety.
The 36-year-old mother of three has been out of work since the birth of her youngest daughter a year ago. Her family of five — squeezed into a two-bedroom unit — relies on her partner’s roughly $80,000 annual income and spends about $600 a week on groceries and household essentials. Sometimes the couple has to put off rent to keep food on the table.
Every trip to the store is a reminder of how sharply prices of basics like milk, formula and diapers have risen since the births of her two youngest children. With a preschooler on the autism spectrum who has a limited diet and a one-year-old still on formula, Reambeault finds that even a routine grocery run has become a source of stress.
“I’ll walk up and down the aisles and constantly look at prices and put things away that I probably need,” she said. “I get too anxious, so I’ll end up not even buying the things that we need.”
As of May, grocery prices had risen faster than the overall inflation rate for the 16th consecutive month and were about 31 per cent higher than five years earlier, according to Statistics Canada.
The outcry from Canadians about food insecurity prompted Ottawa last month to announce a national food security strategy backed by more than $3 billion in investments over 10 years. The strategy aims to build a more affordable food system by helping independent grocers compete, boosting domestic food production, and expanding year-round production of fruit and vegetables.
“Canadian families will see lower prices at the grocery store, greater choice in where to shop and what to buy,” the 27-page strategy read.
Meanwhile, the Competition Bureau has announced an examination of Canada’s food supply chain, from production and transportation to price algorithms and shrinkflation, to look for potential competition issues affecting food affordability.
Will the government’s multi-billion-dollar plan and the competition investigation be enough to rein in grocery prices?
The Star spoke with 10 experts across the food, agriculture and competition law sectors, who welcomed the government initiatives, but offered divided views on whether the measures can address the forces driving food inflation.
The national food strategy “should make Canada’s food system more domestic. It should, in theory, make it more resilient,” said Tyler McCann, managing director at Canadian Agri-Food Policy Institute. “That may not mean that all of those investments are going to make food more affordable in Canada.”
What is driving food inflation?
When consumer inflation hit a 40-year high in 2022, many hoped that easing pandemic pressures and recovering supply chains would bring food inflation under control. But that relief never came.
McCann said Canada is experiencing a “polycrisis,” with multiple factors driving up food prices simultaneously, making inflation more sustained than usual.
Over the past few years, more frequent extreme weather has disrupted the supply chain of many goods, from coffee to beef. Years of droughts in the Prairies have led to a reduced cattle herd, causing beef prices to rise significantly, he said.
Ground beef now sells for $16.07 per kilogram, which is 70 per cent higher than it was five years ago, while tomato prices rose 45.2 per cent per kilogram in May due to poor weather in Mexico and reduced planted acreage following U.S. tariff implementation, according to Statistics Canada data.
The macroeconomic environment in Canada is not favourable either — the loonie lost value in late 2024 and again over the past three months, raising costs for imported products.
Moreover, geopolitical factors, such as sanctions on Russia and the conflicts in the Middle East, have triggered repeated spikes in fuel prices, driving up transportation and fertilizer costs, said Al Mussell, founder of the research organization Agri-Food Economic Systems. Higher oil prices tend to drive up corn prices, which in turn push up the prices of wheat, soybeans and other food commodities, he added.
“There’s not one thing,” said Michael Graydon, the chief executive officer at Food Health & Consumer Products of Canada. “It’s this massive combination, and it all seemed to hit at the same time.”
Will the national food strategy actually work?
For a country that relies heavily on imports and is therefore vulnerable to supply chain disruptions, many experts agree that a national food strategy — which commits to “growing, processing and selling more of our own food here” — would make the food system more resilient.
Canada processes far less of the food it grows at home. As part of the strategy, Farm Credit Canada (FCC), a Crown financial institution, is committing to a $1-billion agri-food project finance fund to finance scaling and processing infrastructure in Canada and hopes to attract private-sector investment, according to Craig Johnson, the FCC’s chief economist.
“If we’re building up this ability to process and create value-added infrastructure at home, we’re less vulnerable to those price shocks when they come,” Johnson said, adding that greater domestic processing capacity should lower prices for some processed foods on grocery shelves in the long run.
Earlier this year, the FCC pledged $2 billion, backed by $5 billion from the private sector, for a total of $7 billion in Canada’s largest agricultural technology investment to support innovation and adoption that could improve farm efficiency and lower costs.
As part of the $3-billion national food strategy, Ottawa is pledging $650 million in controlled-environment agriculture, including greenhouses and vertical farms. Those investments could buffer Canada against sharp price swings triggered by weather disruptions abroad, according to Mike von Massow, a food economics professor at the University of Guelph.
“It means that future prices might not go up as much when there are problems in some of our supply areas,” von Massow said. “So what we’re doing is preventing future increases, not necessarily generating future decreases.”
Graydon, representing food and consumer goods manufacturers, said he is encouraged by the government’s efforts to cut red tape in food inspection and pest control regulations, which he says are holding back innovation and investment.
However, many remain skeptical about how effective the strategy will be in combating food inflation.
McCann said growing and processing food domestically may not be the most affordable approach, since relying on imports allows Canada to shop globally for the lowest-cost food.
Von Massow argued Ottawa’s $1-billion investment in food terminals and food hubs could lower costs for independent grocers, but they’ll still struggle to match the distribution efficiencies of major chains.
The food strategy could narrow the gap between food and headline inflation, he said. But the strategy’s claim that “Canadian families can expect lower prices at grocery stores” is “definitely an exaggeration.”
Sylvain Charlebois, the director of the Agri-food Analytics Lab at Dalhousie University, said he wouldn’t call the federal announcement a “strategy,” as it lacks measurable goals for tackling food inflation.
Charlebois argued the government also failed to address two major factors driving food inflation: reviewing all interprovincial trade barriers affecting food, and reforming the supply management system to encourage greater competitiveness among farmers.
While the government plans to help 4,000 provincially licensed food businesses obtain federal licenses, Charlebois said the process is costly and time-consuming and fails to address the lack of mutual recognition of processors between provinces.
“The heavy lifting has to come from the provinces,” he said. “Nothing has been done so far.”
Stuart Smyth, an agriculture professor at the University of Saskatchewan, noted there is still a lack of harmonized trucking regulations across provinces, which is driving up fuel and labour costs as some truckers face hours-long waits at provincial borders.
“If you are not addressing the underlying factors behind what’s causing the problem, more money isn’t the solution,” he said.
Is the government doing enough to boost competition?
Last week, Reambeault got her first Canada Groceries and Essentials Benefit payment: more than $600. She’s grateful, but that money covers only a week of groceries.
She wishes there were regulations limiting how much “massive” grocers can raise prices and forcing them to absorb some of the costs of food products.
“Inflation should affect them more than it does us,” she said.
Some Canadians told the Star that they felt the national food strategy does not go far enough, calling for stronger measures against the oligopolistic companies — Loblaws, Empire, Metro, Walmart and Costco — that dominate 75 per cent of the grocery market.
Michael Prophet, 37, who spends about $300 on groceries weekly for a family of three in Peterborough, said the government needs to slow down the expansion of big grocers or break up some of their assets.
None of those measures are included in the national food strategy, and most experts interviewed by the Star supported the decision not to pursue such a path.
Bronwyn Goodman, spokesperson for Agriculture and Agri-Food Canada, said price caps may offer short-term relief but could also create unintended consequences, including weaker incentives for production and investment, higher prices for non-capped products, and potential product shortages.
Von Massow and three other experts who spoke to the Star said they do not believe grocery sector concentration is driving higher food prices, citing the Competition Bureau’s 2023 study, which found that major grocers’ margins rose modestly above inflation but uncovered no causal link to overall food price increases.
Keldon Bester, executive director of the Canadian Anti-Monopoly Project, disagreed, saying the big grocers do contribute to food inflation. In a fiercely competitive market, he said, major grocers should have eaten into their margins to absorb the cost of price shocks.
“Canadian policymakers are not ready to break up a company. It seems like an extremely drastic measure,” Bester said. But he applauded the national strategy, saying it creates a system that supports competition on an ongoing basis.
Under the national food strategy, the Competition Bureau and Competition Tribunal will receive $130 million to strengthen enforcement against anti-competitive practices, and the Bureau will conduct an examination of competition across the food supply chain.
Two companies — JBS and Cargill — account for 85 per cent of beef processing in Canada. The concentration warrants an investigation, Smyth said, even if regulators find no anti-competitive practices.
While some critics told the Star that the examination is too broad and lacks the power to subpoena information, Jeanne Pratt, the interim commissioner, said the Bureau deliberately cast a wide net to examine the entire supply chain — from fertilizers to transportation to retail pricing — and identify problems.
While the past cannot be changed, Pratt said that recent competition law reforms have strengthened the Bureau’s ability to “take concentration into account more seriously in our enforcement framework for mergers.”
No short-term relief
Beyond the Canada Groceries and Essentials Benefit, the national food strategy is unlikely to ease food inflation in the short term, as investments in food infrastructure and domestic production will take years to deliver results.
While strengthening domestic food production and diversifying supply sources could help ease food inflation pressures over time, most experts caution that a return to lower grocery prices is unlikely.
Even the federal government is reluctant to say whether its strategy will ultimately make groceries cheaper.
“Specific projections on food prices, and the impact from the National Food Security Strategy, are not available as there are many different factors that can drive up consumer food prices,” said Goodman, adding that the strategy will address long-term structural issues in the food system to help reduce food costs.
Experts say there is still a long way to go to boost competition. The federal government made no headway in attracting international grocers in 2023, while only Manitoba has adopted the Competition Bureau’s recommendation to ban property controls, the real estate clauses that restrict grocery competition.
Back in Toronto, Reambeault says the national food strategy sounds too technical for her to know whether it will improve her daily life.
Affording more nutritious food for her daughters or a larger apartment still feels far out of reach.
“Trying to survive is just so hard. I don’t want to just survive,” she said. “I want to provide a good life for my kids.”
This article was first reported by The Star
