Sep 09, 2009 04:09 PM
THE CANADIAN PRESS
Canadian shoppers should expect to pay more at supermarket cash registers this fall as food prices keep ticking higher despite a weak economy, according to industry watchers.
And chains across the country who choose to pass on the ballooning costs of food ingredients and workers' wages could face pressure from disgruntled shoppers who continue to worry about the possibility of job losses and tight credit.
Toronto shopper Merle Pierre said higher prices have left her with some bitter choices about where she'll buy food, forcing her to decide between quality and quantity when she decides which store to visit.
"For people whose incomes are low, like mine, you have to go to No Frills," she said on Wednesday, while standing outside a Metro supermarket where she had just finished buying her groceries.
Pierre said living on a pension leaves her with a tight food budget, which means she buys most of her groceries at low-cost stores that offer only the basics. However, this week she decided to splurge and shop at the higher end Metro store, which offers a wider variety of selections.
"When you come to these places, you pay more for the area," said the resident of downtown Toronto.
"If you want to get the best you have to pay for it – and lots of money."
The story is much the same for many Canadians and industry observers suggest that the trend will continue in the near term.
Brian Yarbrough, retail analyst at Edward Jones in St. Louis, said Canadian grocers could start to see a backlash from consumers who become dissatisfied with their reluctance to lower prices.
"It's going to remain challenging for the back half of the year and they're going to have to discount somewhat to drive traffic to the stores," he said.
"We've probably seen bottom on how bad it gets, but consumers remain concerned about job losses and credit card issues. The consumer is going to continue looking for a good value."
A report from Statistics Canada released last month said that food prices continued to move higher in July, up 5.6 per cent from a year earlier. The growth was slower than recent increases and well off the peak growth of 7.9 per cent in March.
But it's a dramatic contrast from U.S. supermarkets, many of which have mounted massive campaigns to slash prices on key items such as milk, meat and eggs and increased promotions to pull recession-wary consumers back into their stores after many strayed to cheaper outlets like Wal-Mart.