Retail pricing increases 'exaggerated'

Tuesday, February 3, 2009

Retail pricing increases are greatly exaggerated, writes Kevin Grier, senior market analyst at the George Morris Centre in Guelph in a report published in November.   

Year over year, September prices jumped seven per cent, according to Statistics Canada's Consumer Price Index. It's the biggest increase in 10 years. The average over 10 years is two per cent and decreases were common.

Grier charted price increases and decreases and pointed out that, in September 2007, prices were actually dropping from the year before, accentuating the gain in the subsequent year. The increase in food was largely due to the impact of the Canadian dollar on the value of imports such as fruits and vegetables. Bakery prices also rose by 14 per cent, buoyed up by higher commodity prices.

In some cases, writes Grier, grocers added increases themselves. Dairy prices increased two per cent at the wholesale level and four per cent at retail. Chicken wholesale prices declined while poultry retail prices increased. Wholesale coffee prices were flat, but retailers marked coffee up three per cent. His conclusion: "The claims of an intense competitive environment in the Canadian supermarket sector, particularly due to Wal-Mart, may have been overstated."

Grier warns that retailers are likely to be more competitive in the future and food makers are unlikely to be able to increase prices further with grain and oilseed prices falling from summer peaks. BF