The Consumer Price Index (CPI) measures changes in prices paid for a basket of goods and services (i.e., inflation). For the past three decades the Bank of Canada has successfully targeted an inflation rate of between 1% and 3%. The latest figures show year-over-year inflation at 1.9%.
But as you know, our personal inflation rate can vary widely from the basket of goods and services used to measure CPI. There are eight major categories, which include:
- Food
- Shelter
- Household operations, furnishings and equipment
- Clothing and footwear
- Transportation
- Health and personal care
- Recreation, education and reading
- Alcoholic beverages, tobacco products and recreational cannabis
We’re going to focus on the food category. Covid-19 has had a major impact on food spending and consumption in Canada. Before the pandemic, 62% of personal food consumption was purchased at retail grocery stores, and 38% was consumed outside the home.
At the beginning of the pandemic, food spending and consumption shifted to 91% retail grocery and just 9% of food spending outside the home. This makes perfect sense, as many businesses closed, and people stayed at home as much as possible. This immediate shift in spending also resulted in disruptions to the supply chain and shortages of items like toilet paper and bread flour.
As lockdown restrictions eased in the summer and into the fall, we’ve seen food spending shift again to 75% retail grocery and 25% dining out.
Food Inflation and Changes in Consumption
Food inflation has trended higher than the CPI for many years. What can we expect as we head into 2021? According to a report issued by Dalhousie University, University of Guelph, University of Saskatchewan and University of British Columbia, Canadian families can expect their household food bill to increase by more than 5% next year.
“Canada’s food inflation index has outpaced the general inflation index over the last 20 years, and that trend is likely to continue for a while,” the report said.
source: tradingeconomics.com
The report indicated the premium for consuming food outside the home is between 40-45%, so even though prices at the grocery store have increased, overall household food spending may be lower if more people are buying groceries instead of dining out.
In a recent episode of the Stress Test podcast, co-hosts Roma Luciw and Rob Carrick looked at how Covid-19 has shifted out food spending. Two areas they focused on was the rise of meal kit delivery services like HelloFresh and Chefs Plate, and the growth of online grocery shopping and delivery.
Roma tried one of the options and wasn’t overly impressed, saying the portions were small, the price per person was high, and that the kit came with an uncomfortable amount of plastic packaging. The main benefit is saving time figuring out what to make for dinner, although you still need to prepare the meal yourself.
Rob wasn’t a fan of online grocery shopping, saying he’d prefer to pick out items himself rather than relying on a grocery picker to find the best produce and cuts of meat. He was also concerned about the grocery picker substituting other brands or similar items that may not be desirable.
My Personal Food Inflation and Consumption
The pandemic has certainly impacted our food spending as well. We weren’t big spenders on dining in the first place, but our spending on food prepared outside the home has decreased by 26% this year. Meanwhile, our retail grocery spending is up 7%.
As a percentage of our household food bill, groceries make up more than 86% of that total, which is up from 81% last year.
| Grocery increase | Dining increase | Groceries % of Food | Dining % of Food | |
|---|---|---|---|---|
| 2020 | 7.01% | -26.03% | 86.35% | 13.65% |
| 2019 | 19.09% | 22.01% | 81.39% | 18.61% |
| 2018 | 0.01% | -17.62% | 81.76% | 18.24% |
| 2017 | 16.36% | 11.24% | 78.48% | 21.52% |
| 2016 | 12.50% | 2.97% | 76.15% | 23.85% |
The biggest change in our food spending during the pandemic has been in the way we purchase groceries. Almost all of our grocery shopping is now done online (and delivered) through Save On Foods and Spud.ca.
We definitely pay a premium for this service, not just in extra delivery charges but we’re less apt to find a bargain in store. On the other hand, when shopping in person I tend to wander the aisles and pick-up items that aren’t necessarily on the grocery list.
The advantage of grocery shopping online, outside of limiting my trips outside of the house, is saving time. It takes 10 minutes or so to complete an order online, versus the hour or more spent driving to and from the store, shopping, and waiting in line at the checkout. That’s more time I can spend working on my business or hanging out with my family. A good trade-off.
I’ll concede to Rob’s point that we don’t always get the best selection of produce, and sometimes items are substituted or end up being out of stock.
We have yet to try a meal delivery service (despite the constant barrage of flyers in our mailbox). I agree with Roma’s concerns about getting value for the meal kit – small portions and a high cost per person. Plus, we’re not busy professionals working outside the home and pressed for time. We both work at home.
Finally, our family switched to a vegan diet (no meat, eggs, or dairy) last fall. While I expected a decrease in our household food bill over time, so far that hasn’t been the case. I suspect this is because we spend more on good quality produce, plus meat and dairy substitutes tend to be more expensive alternatives. No, we don’t just live on rice and beans.
That said, our diet doesn’t lend itself to meal delivery services or to dining out that often. That’s fine. We’ve found great recipes and we love to experiment with new dishes by cooking at home. I expect our food spending and consumption will continue to stay in the 85-15 ratio of retail grocery to dining out.
How has your food spending changed this year?
