Expect to dish out more on food in 2018 

New report predicts average Canadian family will pay $348 more on groceries next year

click to enlarge WWW.SHUTTERSTOCK.COM - PRICE HIKE Canadian consumers can expect to spend more at the grocery store and on eating out in 2018, according to a new joint report out of the University of Guelph and Dalhousie University.
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  • PRICE HIKE Canadian consumers can expect to spend more at the grocery store and on eating out in 2018, according to a new joint report out of the University of Guelph and Dalhousie University.

If you were planning on taking a bite out of your food budget next year, think again. A joint report out of the University of Guelph and Dalhousie University predicts Canadians will shell out more at the till in both grocery stores and restaurants in 2018.

The eighth edition of Canada's Food Price Report forecasts that food prices will rise between one and three per cent next year. The average Canadian family of four can expect to spend $11,948 on food in 2018, an increase of $348.

Consumers are likely to feel the brunt of the cost in the produce aisle, where the price of both fruit and vegetables is expected to climb — fruit between one and three per cent, and vegetables between four and six per cent — due largely to poor weather.

"La Nina, a reoccurring weather phenomenon that affects global climate patterns, will likely result in below-average precipitation in farming-intensive regions of the southern U.S.," the report states.

The report looked closely at what researchers called "the Amazon effect" on prices following the online giant's push into food retailing through the acquisition of Whole Foods. "Desperate to grow its grocery business," Amazon's $13.7-billion deal is "a quick way to build a high-margin business" in the food retail industry, analysts say. But Amazon will have to work to change consumers' perception of Whole Foods as a high-priced retailer.

"Through its advanced technologies, Amazon can make Whole Foods more democratic and economically accessible. More selection, lower prices and delivery accuracy will be the cornerstone of making this acquisition work," the report states.

With a massive trove of customer data at its fingertips, researchers predict Amazon will significantly change the way we shop for food in the same way the Seattle tech titan has disrupted the publishing sector. Its cashier-less stores, called Amazon Go, already allow consumers to walk into a store, pick food off the shelves, and leave without paying, with all transactions done on smartphones.

Given its ability "to fuse efficient distribution and strong strategic market insight," analysts believe Amazon could one day become the No. 1 food retailer in the country, which has traditional retailers scrambling to align their brick-and-mortar and virtual spaces.

"Amazon's size and reach gives it the ability to beat most competitors on price. And since Millennials already have a long-standing relationship with online shopping, such a competitive advantage is key," say the report's authors.

Amazon has managed to tap into consumers' increasing prioritization of convenience, a trend researchers say will lead to Canadians spending more in restaurants and on ready-to-eat products in 2018.

The average family can anticipate forking out $208 more on eating out next year compared to 2017, a hike of almost eight per cent. Overall, the average home is expected to spend nearly 30 per cent of its food budget on food service next year, the highest proportion in history.

"Canadian consumers will eat out more frequently in 2018, and that will come at a cost," says lead researcher Sylvain Charlebois, dean of Dalhousie's Faculty of Management.

In the continued push for consumer convenience, another recent trend that has taken hold of the food industry is the rise of the "grocerant," a portmanteau of "grocery" and "restaurant." Grocerants offer a "one-stop-shopping solution" that merges food retailing and food service under one roof.

"Given that convenience seems to have more currency than ever before, two worlds are colliding in the ready-to-eat space at grocery stores, which caters to people seeking portable solutions to accommodate their hectic daily lives," the report says.

The market potential for grocerants is huge. According to market research company NDP Group, grocerants generated 2.4 billion new visits and over US$10 billion in sales in 2016. Although the stats for Canada are a little sparser, researchers have observed similar trends domestically.

To view the full report, visit dal.ca/faculty/management/news-events/canada-s-food-price-report.html.

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