With Canadian grocers spending more on store upgrades, ecommerce platforms and sanitation to protect workers and customers from the spread of COVID-19, will Canadians soon see higher food prices? One University of Guelph food economist says it’s likely – but not in the way you might think.
Prof. Michael von Massow is a food economist in U of G’s Department of Food, Agricultural and Resource Economics who studies the performance of food supply chains.
He recently explained to The Canadian Press why several Canadian grocery chains have begun raising the supply fees they charge food suppliers to place food on their shelves. He said those price hikes are a way of helping offset costs associated with COVID-19.
“We’re likely going to see this happen across the board,” he said.
But, as Von Massow wrote in a recent post on his Food Focus blog, there could be other consequences of higher supply fees. For example, some producers may be unwilling to pay these higher costs, leading to fewer brand choices for consumers.
Producers, who don’t want to increase retail prices either, could choose to reduce their investment in research and development, which could mean less product innovation.
They could also choose to reduce investment in processing – which could be problematic given that processing capacity in Canada is already tight, as many Canadians learned when meat processing plants were forced to close during COVID-19 outbreaks earlier this year.
“None of these choices are good for consumers,” von Massow wrote. “In the end, costs for consumers will go up, choice will go down, and Canadian value-added will be further imperiled.”
He provided further perspective in a recent episode of his Food Focus podcast.
Von Massow is available for interviews.
Prof. Michael von Massow