Key Highlights

• Post-COVID food price inflation is largely driven by rising input costs in raw materials and industrial products, but grocers' profit margins have expanded significantly.

• Input costs, as measured by the Raw Materials Price Index (RMPI) and Industrial Product Price Index (IPPI), are strong contributors to the rise in food prices, but there is generally a lag between these costs rising and food prices reflecting those increases.

• Grocers’ margins have increased substantially since 2020, with some chains expanding margins by over 2 percentage points, indicating potential profit-driven inflation.

• The gap between core inflation (CPI-Trim and CPI-Median) and food inflation shows that food prices are rising much faster than general inflation.

• While rising input costs are undeniably pushing food prices higher, grocers have also expanded their profit margins significantly post-pandemic, making food price inflation a mix of cost-driven and profit-driven factors.

CHART 1 - The Dual Drivers of Food Price Inflation

Sample of Grocers includes: Loblaws, Metro, Empire, and North West Company.

Source: t6ix Economics calculations, Company financial disclosures, Morningstar Inc.