Food prices are expected to rise as much as 5 per cent in 2017, outpacing this year's anticipated increase of up to 4 per cent, as retailers grapple with steeper import costs as a result of a weakened Canadian dollar.
That's the conclusion of a new food-price forecast from Dalhousie University's faculty of management, which says the increase of between 3 per cent and 5 per cent next year would be above what is considered to be an acceptable food-inflation rate of between 1per cent and 2 per cent.
It predicts the average Canadian family's food expenses could increase in 2017 by as much as $420 on a total bill of roughly $9,000, including restaurant meals.
"There's not a whole lot of good news for consumers in 2017," Sylvain Charlebois, dean of the faculty of management, said in an interview.
The forecast comes as cautious consumers struggle to make ends meet and increasingly look for bargains, prompting grocers to press their suppliers for cost breaks so that they can pass on lower prices to shoppers – creating tensions between retailers and vendors.
As well, grocers feel the pressure of U.S. discount giants Wal-Mart Stores Inc. and Costco Wholesale Corp., which have been lowering prices and pushing their suppliers for concessions.
As a result of the jockeying, food prices have been dropping in Canada over the past several months. In October, food prices fell by 0.7 per cent from a year earlier, the first year-over-year decline since January of 2000, according to Statistics Canada.
Since March of this year, food prices have declined every month except one from the previous month, slipping 0.4 per cent in October, Statscan data show.
Still the deflationary trend is expected to turn to inflation by the second quarter of 2017, Mr. Charlebois predicted.
Amid the changes, grocers here face the potential arrival of German-based grocery discounters Lidl and Aldi, which are taking steps to aggressively expand in the United States and could eventually come here, he said.
Lidl, which considered rolling out stores here more than a decade ago, recently registered its trademark in this country, he said.
Lidl got trademark registrations as recently as in October, according to documents from the Canadian Intellectual Property Office. In all, it has filed more than 1,000 trademark applications over the past 15 years or so and got about 600 trademark registrations for various products and services under its name, said Philip Lapin, partner at trademark law specialist Smart & Biggar in Ottawa.
"It would be unusual to file applications if they're not planning to do business here," Mr. Lapin said.
Lidl and Aldi have been disruptive forces in the European grocery market and now could be a threat to U.S. supermarkets, said Stewart Samuel, program director at food research firm IGD Services Canada.
But Mr. Samuel didn't think Lidl would arrive so quickly in Canada, where discounters are more established than in the United States. For example, Loblaw Cos. Ltd., the country's largest grocer, runs discounter No Frills, and Sobeys Inc., the second largest supermarket operator, owns FreshCo.
Even so, in the near term, the Dalhousie study forecasts rising prices in 2017 as a result of the tumbling loonie as well as uncertain conditions in the United States following the election of Donald Trump. The Trump factor could lead to higher labour costs if illegal farm workers have to be replaced by higher-paid Americans, as well as steeper oil and commodity prices, Mr. Charlebois said.
Prices of vegetables, meats and seafood are expected to increase by 4 per cent to 6 per cent next year while prices of fruits and nuts could rise by 4 per cent to 6 per cent, the study says. Food prices in restaurants are expected to gain between 2 per cent and 4 per cent.