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

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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)

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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.

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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)

(Video) Rising Food Prices & Inflation

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.

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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."

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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.

(Video) Ep 362 - Investing for inflation, getting insurance with long-covid & Spring Statement round-up

"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.

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.

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.

How does inflation affect shopping? ›

High inflation rates mean consumers' purchasing power decreases, resulting in less consumer spending and lower business sales. This, in turn, can create excess inventory, dead stock, and therefore lost revenue for your business.

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.

How does the government control food prices? ›

Federal agencies don't control food prices, but may indirectly affect them. For example, by relaxing regulations to let food made for restaurants be diverted to grocery stores, the FDA helped to avert food shortages that could've further increased prices during the COVID-19 pandemic.

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

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.

Why are groceries so expensive in the US? ›

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.

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.

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 food is 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

What sells most 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.

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

Does inflation help or hurt consumers? ›

In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.

Does inflation hurt consumer spending? ›

Rising Inflation Means Consumers Will Buy Less Overall

Many consumers are tightening their purse strings in response to the rising cost of living.

How does inflation hurt consumers at stores when they shop? ›

Higher prices across the board can deter potential consumers from buying from their usual stores. Recent studies have shown that 76% of buyers are spending less money. Entertainment and clothing are the main areas where consumers are cutting costs, prioritizing more essential needs.

Why does inflation hurt consumers? ›

Inflation Erodes Purchasing Power

This is inflation's primary and most pervasive effect. An overall rise in prices over time reduces the purchasing power of consumers since a fixed amount of money will afford progressively less consumption.

Does inflation affect the cost of everything? ›

Inflation can impact the price of everything you need for daily living, from food to housing to what it costs to fill your tank so you can drive to work or put clothes on your back.

Does buying things cause inflation? ›

A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product. Some companies reap the rewards of inflation if they can charge more for their products as a result of the high demand for their goods.

Should we be stockpiling food? ›

All Americans should have at least a three-day supply of food and water stored in their homes, with at least one gallon of water per person per day.

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.

Is there going to be a food shortage? ›

According to many reports, the current situation with food supplies is, in fact, already dire. The WFP predicts that by 2023 there will be a shortage of wheat and corn, which are two staple products in the food supply chain.

What is the average monthly grocery bill? ›

What does the average U.S. household spend on groceries per month? According to 2021 data from the Bureau of Labor Statistics, which is the most recent available, the average spending on food at home is $5,259 annually, or about $438 per month for U.S. households.

Who controls the price of food? ›

Price controls are normally mandated by the government in the free market. They are usually implemented as a means of direct economic intervention to manage the affordability of certain goods and services, including rent, gasoline, and food.

Is the government controlling our food? ›

Regulatory Agencies. The USDA was started under Lincoln in 1862. There are two main agencies that regulate food in the U.S; the Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA.) Both are charged with overall food safety nationwide.

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.

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).

How do you defend a price increase? ›

Tips for Announcing a Price Increase to Your Customers
  1. Contact them directly.
  2. Let customers know well in advance.
  3. Remind them that higher prices mean better quality.
  4. Explain the reasoning behind the price increase.
  5. Ensure the entire organization is aware of the price increase before announcing it to customers.
Jan 5, 2022

What food items will be in short supply? ›

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.

What vegetables are in shortage 2023? ›

Food shortages 2023: Carrots, leeks and cabbages could run low in weeks as supermarkets ration | The Independent.

What to stock up on if there is a food shortage? ›

What foods should I stock up on?
  • Dried or canned beans. “Beans are such a versatile kitchen staple,” DiMarino says. ...
  • Rice, grains and pasta. ...
  • Canned fruits and vegetables. ...
  • Tuna or salmon. ...
  • Broth and stock. ...
  • Peanut butter. ...
  • Smart snacks.
Nov 2, 2022

How can I save on groceries during inflation? ›

Buying in bulk

You can save on groceries during inflation by buying household products in bulk at warehouse stores like Costco and Sam's Club. These memberships come with an upfront cost, but you'll lower your per-unit cost. And buying in bulk can help you make fewer trips to the grocery store.

Why is everything in the US so expensive? ›

Inflation is so high because many consumers are spending more money than they usually do, and because supply chain issues and global fuel shortages have lingered since the pandemic. That high demand and low supply have led to an increase in prices.

Why are eggs expensive right now? ›

Egg prices have skyrocketed because of a widespread outbreak of H5N1, a highly transmissible and fatal strain of avian influenza, or bird flu. This outbreak started in early 2022 and has grown into the largest bird flu outbreak in U.S. history.

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

How bad will the recession be in 2023? ›

Many economists believe the strategy will trigger a recession this year. But the NABE forecasters expect the economy to grow 0.8% in 2023 – based on the change in average GDP over the four quarters compared with 2022. That is down from 2.1% last year but up from their 0.5% estimate in December.

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.

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 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 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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