Food Price Report 2019 Authors and Advisors
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CANADA’S FOOD PRICE REPORT 2019 AUTHORS AND ADVISORS DALHOUSIE UNIVERSITY MEMBERS UNIVERSITY OF GUELPH MEMBERS Dr. Sylvain Charlebois Dr. Simon Somogyi (Project Lead – Dalhousie University) (Project Lead – University of Guelph) Faculties of Management and Agriculture College of Business and Economics [email protected] [email protected] Eamonn McGuinty Dr. Francis Tapon Faculties of Management and Agriculture College of Business and Economics [email protected] [email protected] Dr. Vlado Keselj Paul Uys Faculty of Computer Science Arrell Food Institute [email protected] [email protected] Dr. Catherine Mah Dr. Erna Van Duren Faculty of Health College of Business and Economics [email protected] [email protected] Dr. Andrea Giusto Department of Economics NOVA SCOTIA COMMUNITY COLLEGE (NSCC) [email protected] Jay Harris Dr. Megan Bailey Faculty of Computer Science Faculty of Science [email protected] [email protected] Joon Son Janet Music Faculty of Computer Science Faculty of Management [email protected] [email protected] Canada’s Food Price Report 2019 is a collaborative effort between Dalhousie University, led by the Faculties of Management and Agriculture, and the University of Guelph’s Arrell Food Institute. CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 2 TABLE OF CONTENTS AUTHORS AND ADVISORS Dalhousie University Members 2 University of Guelph Members 2 Nova Scotia Community College (NSCC) 2 EXECUTIVE SUMMARY 2019 Food price Forecasts 5 2019 Provincial Breakdown – Food Prices 7 RETROSPECTIVE ON 2018 Table 1: 2018 Food Price Results 8 INDEPENDENT GROCERY EXPERIENCE AND DIFFERENTIATION 9 Figure 1: How often do you visit a store where you purchase food? 9 Figure 2: On average, how much time do you spend in a store every visit? 10 Figure 3: Have you purchased groceries online? 11 Figure 4: How often do you use self-checkouts when grocery shopping? 11 PROTEIN WARS: THE RISE OF PLANT-BASED ALTERNATIVES 12 Figure 5: In the next 6 months do you intend to reduce your meat consumption? 13 BREAD PRICE-FIXING SCANDAL 13 FOOD PRICES SINCE 1986 AND THE NEW NORMAL 14 Figure 6: Food prices since 1986 14 CANNABIS LEGALIZATION: A NEW BEGINNING 15 CORPORATE TRANSACTIONS IN THE FOOD ARENA FOR 2018 16 NO MORE NAFTA: WELCOME USMCA 17 CANADA’S NEW FOOD GUIDE 18 CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 3 CANADA’S FOOD PRICE REPORT 2019 FORECAST METHODOLOGY 19 2019 MACRO-ECONOMIC FACTORS AND DRIVERS 20 Table 2: Macro-level drivers for Canadian Food Prices in 2019 21 VEGETABLES: THE 2019 WATCH-LIST ITEM 23 Table 3: 2019 Food price Forecasts 23 Table 4: 2019 Provincial Breakdown – Food Prices 24 MAJOR FOOD TRENDS AND INDUSTRY OBSERVATIONS FOR 2019 CANNABIS LEGALIZATION AND RELATED EDIBLE PRODUCTS 25 CANADA’S FOOD GUIDE 27 AVOIDANCE OF MEAT AND A PUSH TOWARDS PLANT-BASED ALTERNATIVES 29 CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 4 EXECUTIVE SUMMARY Dalhousie University and the University of Guelph present herein Canada’s Food Price Report for 2019, the ninth edition of this report. In 2018, all of our major expectations were realized with the exception of one food category. This past year, the price of fruit did not increase as forecast by our models. For the other eight food categories, expected changes in prices were accurately predicted. The report contains forecasts for the following nine categories for 2019: 2019 FOOD PRICE FORECASTS Food Categories Anticipated Increase Bakery 1% to 3% Dairy 0% to 2% Food 0% to 2% Fruit 1% to 3% Meat –3% to –1% Restaurants 2% to 4% Seafood –2% to 0% Vegetables 4% to 6% Total Food Categories Forecast 1.5% to 3.5% For the first time since its inception, this report forecasts a decrease in two highly discussed categories in the food sector: meat and seafood. We are seeing meat prices decline while plant-based proteins are on the rise, in addition to seafood price fluctuations due to availability, quality and traceability of certain imported products. Despite the anticipated negative numbers for these two categories, overall food prices are expected to rise up to 3.5% in 2019. This represents a slight increase from last year. This forecast means that the annual food expenditure for the average Canadian family is expected to increase by $411 in 2019 to around $12,157 for the year. The cost of vegetables will continue to be an important factor. With regard to out-of-home purchases of food, the average family will see an increase of $143, a more modest increase compared to 2018. CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 5 In hindsight, 2018 brought Canada international trade uncertainty with the replacement of the North American Free Trade Agreement (NAFTA) by the United States–Mexico–Canada Agreement (USMCA). In addition to the new trade pact, still to be ratified, a newCongress in Washington means ambiguity in international commerce for Canadians. Although most are breathing a sigh of relief, our unpredictable relationship with our neighbour to the south, Canada’s largest trading partner, creates many questions about food sectors affected by the USMCA. At the global level, trade wars began between the US and China, affecting the entire food supply chain in Canada from the standpoint of procurement, exports and imports. As a result of tensions with the United States, new opportunities for Canada have emerged, especially in Europe and Asia, under new trade deals. The 2018 year also saw interest rate hikes by the Bank of Canada to protect against economic uncertainty and inflationary pressure. Since July 2017, the central bank has raised rates four times and a fifth increase was seen in October 2018. In turn, food prices felt the impact of the rate hike in addition to inflationary increases. Withwages stagnating, the weight of food expenses for households is at risk of continuing to increase throughout 2019. Of course, the elephant in the room during these changes was the uncertainty surrounding NAFTA renegotiations.1 In terms of weather patterns, 2019 will see an end to La Niña cycles, with the likelihood of El Niño returning.2 While South America and certain parts of Asia will likely receive heavier precipitation, North America might suffer from drier conditions with a chance of reduced water access. In turn, it is important to note the possible impact of El Niño on food prices for this coming year. The Intergovernmental Panel on Climate Change (IPCC) report released on October 8 of this year states that global agriculture remains highly vulnerable to severe weather patterns. 1 https://www.theglobeandmail.com/business/article-bank-of-canada-will-continue- with-gradual-rate-hikes-poloz/ 2 Nooteboom, P., Feng, Q., López, C., Hernández-García, E., & Dijkstra, H. (2018). Using network theory and machine learning to predict El Niño. Earth System Dynamics, 9(3), 969–983. CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 6 Last year, our estimates on a provincial scale were successful for the most part. Surprisingly, Saskatchewan saw a decrease in food prices of 0.4%, and the largest province, Ontario, saw the highest increase of 2.7%. Here are the 2019 projections by province: 2019 PROVINCIAL BREAKDOWN – FOOD PRICES Provinces 2018 Changes3 2019 Forecasts4 Alberta British Columbia Manitoba New Brunswick Newfoundland & Labrador Nova Scotia Ontario PEI Saskatchewan Quebec In 2019, major food trends and highlights of this increasingly complex industry include cannabis in Canada and its related food products, Canada’s new Food Guide and the ongoing protein wars between existing sources and plant- based alternatives. 3 () Expected above-average food price increase, () Expected below-average food price increase, () Expected average food increase. Lower confidence intervals at the provincial level. 4 () Expected above average food price increase, () Expected below average food price increase, () Expected average food increase. Lower confidence intervals at the provincial level. CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 7 RETROSPECTIVE ON 2018 2018’s results show that our forecasts made at the end of 2017 were accurate. Despite inaccuracies in one food category (fruit), prices for the remainder of the categories analyzed were directly in line with our projections: TABLE 1: 2018 FOOD PRICE RESULTS Anticipated Increase Results Categories (Dec. ’17) (Oct. ’17 to Sept. ’18)5 Bakery 0% to 2% 0% Dairy 0% to 2% 0% Food 0% to 2% 0% Fruit 1% to 3% 0% Meat 0% to 2% 1% Restaurants 4% to 6% 4% Seafood 0% to 2% 2% Vegetables 4% to 6% 4% Total Food Categories Forecast 1% to 3% 1.8% Fruit prices did not increase as anticipated due to a stronger than expected Canadian dollar against the American greenback. Other categories saw prices reacting as predicted in Canada’s Food Price Report 2018, released a year ago. 5 Estimates based on Statistics Canada figures. CANADA’S FOOD PRICE REPORT 2019 | PREPARED BY DALHOUSIE UNIVERSITY AND UNIVERSITY OF GUELPH | 8 INDEPENDENT GROCERY EXPERIENCE AND DIFFERENTIATION An online survey in November 2018 by Dalhousie University, drawing data “Canadian from Canadian urban and rural settings, looked at consumer perceptions of consumers the grocery shopping experience. Canadian consumers appear to be visiting more food stores regularly but spending less time per visit. Survey respondents appear to be reported visiting, on average, 2.3 different grocery stores on a regular basis, and gravitating to shopping 5.4 times per month, which translates to 1.29 times per week. A shift downwards from previous years, this could be an indication that consumers convenience are gravitating to other grocery formats, such as convenience stores.