ANALYSIS | Want to fight grocery price gouging and inflation? Do your duty and shop around | CBC News (2023)

A report out on Tuesday from the Agri-food AnalyticsLab at Dalhousie University in Halifax says many Canadians are hoping a grocery code of conduct will protect them from soaring food bills thatthey see as profiteering and "price gouging."

Meanwhile,Prime Minister Justin Trudeau this week has been out promoting the federal grocery rebatefrom last week's federal budget.

But while the effectiveness ofcodes or rebates in driving down prices remains uncertain, experts in the economics of pricing say consumers have access to a powerful tool to fight food inflation by taking advantage of a strategy retailers use to maximize their own profits.

Squeezing for profits

Called "price discrimination"or the "two-price system," it's a long-standing technique used by retailers and service providers to squeeze the most profit out of their customers by selling to different people at different prices.

"The goal is to increase sales and profits," said Jean-Paul Lam, an associate professor of economics at the University of Waterloo in Waterloo, Ont.

"Retailers will charge customers the price they are willing to pay, allowing them to capture more of the consumer surplus, which is the difference between what a customer is willing to pay and what they actually pay," Lam explained in an email."These retailers/producers can increase their profits and profit margins by capturing more consumer surplus."

WATCH | The federal budget'sgrocery rebate is unlikely to drive down prices:

ANALYSIS | Want to fight grocery price gouging and inflation? Do your duty and shop around | CBC News (1)

What is Canada’s new grocery rebate, really? | About That

9 days ago

Duration 7:50

When the federal budget was announced on Tuesday, it included what Finance Minister Chrystia Freeland called a ‘grocery rebate.’ CBC business correspondent Peter Armstrong joins Andrew Chang to break down what it is, who will get it and why it doesn't have much to do with groceries at all.

For most of us, if we think about how grocery stores set their prices at all, we likely imagine it as pretty simple: Retailers see how much their suppliers are charging, then they tack on some percentagemarkup to cover their own costs. But that's not how pricing works.

Instead, retailers use their different branded stores to charge a range of prices from slightly above the supplier's price to many dollars above that price, depending on how much they think we'll pay.

And it is clear that a lot of Canadians don't like it. Following a recent CBC article on grocery pricing, readers from across the countrytold us the huge difference in prices at different stores wasobvious evidence that retailers were price-gouging.

Prices varywildly

Ted KeayofNew Minas, N.S., did some comparison shopping for the same 250-gram container of parmesan cheese at four different stores. Prices varied wildly, he said, going from a high of $10.29 at Sobeys to a low of $6.97 at Giant Tiger.

Mary Briggs ofMississauga, Ont., thought she would take advantage of a 20 per cent seniors' discount at Shoppers Drug Mart, a drugstore chain owned by LoblawCompanies Ltd.But she found thateven after the discount, the drugstore price of $15.99for the Tide Pods she wanted was more expensive than the $10.99 at the Loblaw-owned Independent Grocery.

"Why two companies owned by Loblawshave such a large price difference is the question," Briggs said in her email.

ANALYSIS | Want to fight grocery price gouging and inflation? Do your duty and shop around | CBC News (2)

Someone discovering they bought the Tide Pods for $5more than at a nearby store owned by the same company might feel as thoughthey've been played for a sucker.But for grocery chainsusing the technique of price discrimination, that big difference is not a bug. It'sa profit-maximizing feature.

From old-fashionedhorse traders to moderncar dealershipsto suburban garage sales, wily sellers know that some people are willing to pay more than others. Setting prices toohigh so some people walk awaymeans you won't sell as many horses or cars,or as much basement junk.

  • AnalysisAre big grocery chains profiting from inflation? CEOs say no — but the truth is more complex
  • AnalysisInterest rate hikes have yet to bring down food prices. Here are the tools governments could try

A traditional example in economic theory is the country doctor who chargedthe local gentry top dollar. But in rural areas, there werea lot more poor farmers who couldn't afford those prices.

So countrydoctors keptbusy and maximized their income byalso treatingthe poorer farm families even if they couldonly afford to payin carrots and bushels of apples. Two different prices means more business and more food for the winter.

As much as they can get

David Hardisty, an associate professor of marketing at the University of British Columbia's Sauder School of Business in Vancouver, studies the behavioural economics of pricing, and he says the way retailers decide how much to charge is far more complex that shoppers realize, evenbeyond price discrimination. And when companies are trying to maximize their profits, there's no Mr.Nice Guy.

"They want to charge as much as they can and still get the sale," Hardistysaid via Zoom from Milan, Italy, where he is currently a visiting professor. "And that amount is going to be different for different people ... because some consumers are very price sensitive and others are not."

ANALYSIS | Want to fight grocery price gouging and inflation? Do your duty and shop around | CBC News (3)

Some shoppers may be too rich to pay attention, too busy or not a numbers person. Maybe they value convenience or can only get to the one nearby store. Like customers choosing between Saks Fifth Avenue and Zellers, maybe they are pleased to pay for things like nicer decor or better service.As Lam said, maybe they are "status signalling" by shopping in fancier, more expensive shops.

Hardistysaid that's why having access to all of your data gathered through loyalty and credit cards is so valuable. When they know your shopping habits and price sensitivity, retailers have a better idea ofhow much they can get away with charging.

  • AnalysisInflation's hit to consumer spending power means retailers may refocus on the low end
  • AnalysisSoaring food prices, surging jobs could put pressure on Bank of Canada to return to rate hikes

He said a lot of times, consumers simply don't know what things aresupposed to cost, how much theycostto make or what the things they are buying arereally worth. In other words, when they pay five bucks more for Tide Pods or a block of cheese, they don't know they are being ripped off. And retailers would rather they didn't know.

Sometimes that is called information asymmetry, where the seller knows everything and the buyer is ignorant. Like other parts of behavioural economics, it flies in the face of the concept of Homo economicus, the idea that humans respond to price signals the way traditional economists say they should.

Voting with your dollars

Hardisty said that consumers do have power: They can vote with their dollars. Grocery stores care about customer loyalty as well as profits, and they don't want to alienate even richer shoppers who think they are being suckered with excessive profits.

"You're saving by shopping around," he said, but that's not all. "You're actually doing some good for the world, too. Because you are sending a signal. You're telling the companies,'I'm not going to get ripped off like this' ... and that's the only signal they'll listen to and that's the dollars."

  • Booming consumer demand for discounts drives Dollarama profits up 27%
  • AnalysisFeeling poorer? Inverse wealth effect may add to Canadians' spending gloom

So people likeBarbara Hayes — who wrote from Vancouver saying she's cut off the chain Save-On-Foods for being too pricey — are actually retail heroes. Even if they can affordhigher prices themselves, thosewho have the time to comparison shop are not just saving themselves money;they are holding prices down and fighting inflation for everybody else.

"I can't even imagine how the poor are dealing with food prices," Hayes said. "So sad to think about, but those with a low income won't be able to afford healthy food, let alone any of the 'extras'that make life bearable."


How do you beat inflation and save on groceries? ›

12 ways to save money on groceries
  1. Reward cards, loyalty programs, and rebate apps. ...
  2. Grocery coupons. ...
  3. Buying in bulk. ...
  4. Food assistance programs. ...
  5. Meatless meals. ...
  6. Get organized and plan ahead. ...
  7. Practice meal planning. ...
  8. Consider generic or store brands.
Jan 23, 2023

How does inflation affect grocery prices? ›

While food prices generally increased about 2% in prior years, they increased about 11% from 2021 to 2022. Inflation contributed to the increase. But there were other factors—like global disruptions to the food supply chain—that may have had a greater impact. And not everyone felt this increase the same way.

What can be done to combat rising food prices? ›

Keep reading for top tips to fight rising food prices this winter.
  • Create Your Shopping List. ...
  • Stick to Your List. ...
  • Don't Shop on An Empty Stomach. ...
  • Substitute the Expensive Items. ...
  • Prices Are High, Look Low. ...
  • Shop Fresh Over Prepared. ...
  • Analyze Your Consumption Habits: Is Buying In Bulk Best? ...
  • Sign Up for Rewards.
Feb 2, 2023

Will grocery prices go down in 2023? ›

Food prices are projected to rise in 2023, albeit at a slower pace than they did in 2022, according to the USDA.

What is the most effective way to fight inflation? ›

6 Ways to Fight Inflation and Save Money Now
  1. Cut costs at the grocery store.
  2. Save money on transportation.
  3. Plan ahead for cheaper vacations.
  4. Check your budget.
  5. Pay down credit card debt.
  6. Earn money on your savings.
Apr 6, 2023

What is the best way to reduce inflation? ›

Contractionary monetary policy is now a more popular method of controlling inflation. The goal of a contractionary policy is to reduce the money supply within an economy by increasing interest rates. 5 This helps slow economic growth by making credit more expensive, which reduces consumer and business spending.

How to deal with price increases in this inflationary market? ›

  1. Adjust discounting and promotions, and maximize non-price levers. Price increases are a given in any inflationary environment. ...
  2. Develop the art and science of price change. ...
  3. Accelerate decision making tenfold.
  4. Plan options beyond pricing to reduce costs. ...
  5. Track execution relentlessly.
Feb 25, 2022

How do you prepare for food inflation? ›

14 Savvy Ways to Fight Price Inflation
  1. Comparison Shop Before You Head to the Grocery Store. ...
  2. Do Meal Prep. ...
  3. Minimize Food Waste. ...
  4. Shop Your Pantry. ...
  5. Choose Store Brands Over Name Brands. ...
  6. Buy in Bulk. ...
  7. Cut Back on Meat. ...
  8. Save Money on Produce.

Will there be food shortages in 2023? ›

It was a bad year for food shortages in 2022, with categories including eggs and baby formula hit hard. Unfortunately, 2023 could see its own batches of food shortages. Here's what consumers should start stocking up on now before prices soar and products likely become harder to find on store shelves.

What is causing inflation in the US in 2023? ›

It has been attributed to various causes, including pandemic-related economic dislocation, supply chain problems, the fiscal and monetary stimuli provided in 2020 and 2021 by governments and central banks around the world in response to the pandemic, and price gouging.

Will inflation go away in 2023? ›

The "slowing economy is likely to bring the yearly inflation rate down to around 4.0 percent by the end of 2023," Kiplinger predicted.

How much has the cost of living gone up in 2023? ›

Now, the 8.7% COLA for 2023 is outpacing current inflation, with a 5.8% increase over the past 12 months for the consumer price index for urban wage earners and clerical workers, or CPI-W. The Social Security Administration uses the CPI-W to calculate the annual COLA adjustment.

What groceries are most impacted by inflation? ›

Chicken and eggs

A dozen grade A eggs cost, on average, $4.25 in December—making it the grocery stable with the largest year-over-year price increase.

What foods are most affected by inflation? ›

Top 10 inflation categories for December 2022
Food at elementary + secondary schools305.2%
Fuel oil41.5%
Motor fuelsExcluding gasoline32.3%
5 more rows
Jan 13, 2023

What are two ways to fight inflation? ›

50 Ways to Help Fight Inflation
  1. Increase the Labor Force.
  2. Ease Supply Chains.
  3. Tighten Fiscal Policy.
  4. Reduce Tariffs.
  5. Make More Stuff in the US.
  6. Lower Energy Prices.
  7. Increase Farm Production.
Apr 28, 2022

What are the three strategic options to deal with inflation? ›

Managers should consider these three strategic options, especially if inflation persists: recalibrate and clean up the product portfolio, reposition the brand, or replace the price model. These options are not mutually exclusive, so managers could also pursue a combination of them.

What policies can be used to reduce inflation? ›

Other policies to reduce inflation can include tight fiscal policy (higher tax), supply-side policies, wage control, appreciation in the exchange rate and control of the money supply. (a form of monetary policy).

Why is it so hard to control inflation? ›

Facing higher prices, workers demand higher wages. That fuels further inflation. In extreme cases, it can trigger what's known as a wage-price spiral, in which higher pay and higher costs become a loop unmoored from what's happening in the larger economy.

Why is groceries so expensive? ›

Economists agree that supply chain issues are a major driver of the price hikes we've been seeing. In the food industry especially, transportation disruptions due to the pandemic and higher grain prices have made a significant impact.

Is inflation good for grocery stores? ›

Even during times of high inflation, people need to eat, meaning grocery stocks tend to perform better than other industries in volatile markets. Grocery stores can pass along rising costs to consumers, offsetting a decline in revenue.

What foods are not affected by inflation? ›

The 5 Foods Least Affected by Inflation
  • Tomatoes. Interestingly, tomatoes have seen the lowest increase in price over the last year, at just 1.7%. ...
  • Cheese. Another relief: cheese prices haven't been terribly affected by inflation, at least as of this month. ...
  • Ice Cream. ...
  • Potatoes. ...
  • Canned fish and seafood.
May 24, 2022

Is it cheaper to eat out or cook? ›

For those who want a quick and easy answer: It's generally cheaper to cook food at home than eat out. The reason so many people can get stuck on the question is the human psychology variable. People don't always spend wisely, and it isn't as if prices are always the same at a supermarket or a fast food restaurant.

How does rising food prices affect the economy? ›

In addition to taking a bite out of discretionary spending, increasing food costs have pushed inflation higher and pose a serious risk to global economic recovery. This is especially true in emerging markets, where food represents a large share of overall consumer spending.

What food will be hard in 2023? ›

Champagne will be in short supply in 2023, not just because of the drought, but because demand has rebounded from the pandemic faster than producers can create the bubbly beverage. Butter, corn, tomatoes and eggs are also on the list of potential shortages, as well as baby formula.

What food items will be in short supply? ›

These food staples are in short supply, so stock up your cart now with shelf-stable products on sale.
  • Lettuce. During the fall and winter, much of the U.S. enjoys lettuce from California, specifically the Salinas Valley. ...
  • Champagne. ...
  • Eggs. ...
  • Tomato Products. ...
  • Liquor and Beer. ...
  • Mustard. ...
  • Milk. ...
  • Sriracha.

What foods should I stockpile for survival? ›

  • Ready-to-eat canned meats, fruits, vegetables and a can opener.
  • Protein or fruit bars.
  • Dry cereal or granola.
  • Peanut butter.
  • Dried fruit.
  • Canned juices.
  • Non-perishable pasteurized milk.
  • High-energy foods.
Mar 30, 2022

What is really causing inflation? ›

Inflation is an increase in the prices of goods and services over time due to an imbalance between demand and supply. Increased costs including wages, government policies, and devaluation of the dollar all play a role in inflation.

How bad is inflation right now 2023? ›

The consumer price index eased to 5% in March 2023 on an annual basis, down from 6% in February, according to the U.S. Bureau of Labor Statistics inflation report. Energy and food prices declined in March. Housing prices have proven stubborn, but are expected to start falling in coming months, economists said.

Are we headed for a depression in 2023? ›

Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.

How bad will inflation be in 2025? ›

Projected annual inflation rate in the United States from 2010 to 2028*
CharacteristicInflation rate
9 more rows
Apr 20, 2023

What is the highest inflation rate in US history? ›

Inflation Rate in the United States averaged 3.30 percent from 1914 until 2023, reaching an all time high of 23.70 percent in June of 1920 and a record low of -15.80 percent in June of 1921.

What food fights inflation? ›

Anti-inflammatory foods
  • tomatoes.
  • olive oil.
  • green leafy vegetables, such as spinach, kale, and collards.
  • nuts like almonds and walnuts.
  • fatty fish like salmon, mackerel, tuna, and sardines.
  • fruits such as strawberries, blueberries, cherries, and oranges.

What foods are less affected by inflation? ›

Inflation has not affected all food equally, though. Pantry staples that have stayed below the average increase include potatoes, cheese, tea, tomatoes, pasta, bread, ice cream, and fresh, processed, and frozen vegetables. On the opposite end, price increases for steak and bacon remain in the double digits.

Do grocery stores benefit from inflation? ›

Why grocery stocks hedge against inflation. For two reasons, grocery stocks tend to fare better than most other stocks. First, regardless of what happens in the economy, people need to eat. Because food is a necessity, the higher costs of groceries from inflation can easily pass on to the consumer.

Why are groceries getting so expensive? ›

Economists agree that supply chain issues are a major driver of the price hikes we've been seeing. In the food industry especially, transportation disruptions due to the pandemic and higher grain prices have made a significant impact.

Does inflation affect fast food prices? ›

Inflation is putting the fast food industry in a weird spot. Chains face rising costs for labor and ingredients, which are forcing them to raise prices. But at the same time, inflation puts consumers in the mood for value meals — even if “value” is a relative term.

What are 3 things that the Fed can do to combat inflation? ›

The Fed has several tools it traditionally uses to tame inflation. It usually uses open market operations (OMO), the federal funds rate, and the discount rate in tandem. It rarely changes the reserve requirement.

What food has risen the most? ›

Foods with the biggest price jump include:
  • Olive oil — 49.2%
  • Sugar — 42.1%
  • Milk — 37.9%
  • Cheese — 33.6%
  • Eggs — 32.0%
  • Pasta — 24.1%
  • Butter — 22.7 %
  • Vegetables — 19.3%
Apr 19, 2023

What groceries have not gone up in price? ›

The 5 Foods Least Affected by Inflation
  • Tomatoes. Interestingly, tomatoes have seen the lowest increase in price over the last year, at just 1.7%. ...
  • Cheese. Another relief: cheese prices haven't been terribly affected by inflation, at least as of this month. ...
  • Ice Cream. ...
  • Potatoes. ...
  • Canned fish and seafood.
May 24, 2022

What sells more during inflation? ›

Commodities like gold, oil, and even soybeans should increase in price along with the finished products that are made with them. Inflation-indexed bonds and Treasury Inflation-Protected Securities (TIPS), tend to increase their returns with inflationary pressures.

Will inflation go down in 2023? ›

Ben Johnson, Chief Operating Officer of Kapitus, says, “We expect inflation to remain above the Fed's 2% target rate throughout 2023… [and] we do expect the Fed's action to ultimately succeed in slowing the economy and reducing inflation rates, especially in the second half of the year.”

What is the main cause of food inflation? ›

Those lead to rising energy prices, rising transportation costs, rising labor costs. On average, 16 cents out of every dollar spent on food can be tied back to the farm. Everything else, the vast majority, has to do with things like processing cost, transportation, the wholesale and the retail trade.

What food to stock up on in 2023? ›

  • Corn. Historically, Ukraine has been one of the world's leading providers of corn, but that's all changed since Russia's invasion — which has no end in sight. ...
  • Bread. ...
  • Vegetable Oil. ...
  • Baby Formula. ...
  • Champagne. ...
  • Canned Pet Food.
Apr 6, 2023

What food will there be a shortage of? ›

Canned foods, pet food and beer may be in short supply due to a widespread aluminum shortage. Lettuce crops and orange groves were affected by plant viruses. One major producer of lettuce lost 80% of their crop in 2022.


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