BUSINESS

Food Packaging, Portions Will Shrink As Food Prices Keep Rising, Study Predicts

12/02/2014 01:02 EST | Updated 12/02/2014 01:59 EST
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Prepare for the portions sold at supermarkets to shrink as producers look to offset rising food costs, a new report says.

Food prices will rise somewhat faster than overall inflation once again in 2015, but slower than they rose in 2014, according to the annual report from the University of Guelph.

Meat, seafood and vegetables will lead the way in food price hikes, growing between three and five per cent, the report predicts. That's higher than overall inflation, which is forecast to come in under two per cent next year.

The report singles out bacon, steak and shrimp as three items to see particularly large price hikes.

Those numbers actually mean price hikes for meats will be slowing down next year. StatsCan’s consumer price index shows bacon prices rose 25.2 per cent in the past year; round steak is up 21.9 per cent.

Meat prices overall are rising at a 12.4-per-cent annual pace, helping to push up October’s inflation rate to an unexpectedly high 2.4 per cent.

There’s good news for dairy lovers, though, as the University of Guelph report predicts prices could fall as much as one per cent.

Food price forecast for 2015. Source: University of Guelph

food price forecast

“Global issues are affecting Canada more than ever,” said study co-author Sylvain Charlebois of the University of Guelph.

“Even as agriculture becomes more efficient, the demand for meat protein around the world is growing at a very rapid pace, driving up prices here. Climate change is also compelling Canadians to pay more for food and make different choices.”

Other factors affecting Canada’s food prices include a drought in California that’s affecting vegetable prices and a virus that’s killing baby pigs, driving up pork prices.

Just as consumers become more picky when prices rise, so too do food retailers become more strategic, says study co-author Sylvain Charlebois of the University of Guelph.

Retailers will look to new, lower-priced sources for their foods, and “packages and portions will likely continue to shrink.”

“Package downsizing,” as it’s sometimes called, has been noticed by consumers of late and has been the target of some consumer activists.

A recent study in the Journal of Retailing found consumers are far less likely to respond to a reduction in the size of food portions than they are to respond to a hike in prices.

This means that “marketing managers can use downsizing as a hidden price increase in order to pass through increases in production costs,” the study concluded.

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