The Decibel - Why your grocery bill is still so high

Episode Date: January 30, 2026

Inflation in Canada has stabilized, but food inflation is continuing to rise. Food prices rose 5 per cent in 2025, and some items saw much larger increases – such as beef and coffee. Prime Minister Mark Carney announced some affordability measures this week – like an increase to the GST credit – aimed at lowering grocery bills.Today, food economist Mike von Massow explains why food prices remain so high, what’s driving the increase of specific items and what can be done about it.Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

For many Canadians, the cost of groceries and everyday essentials has been too high for too long. They need more support now. This week, Prime Minister Mark Carney brought in some new measures to target affordability, specifically around food prices. He announced a 25% increase for the next five years to the GST credit, which is a payment for low and modest income households. It helps offset the tax included on most items Canadians buy. There's also a one-time 50% top-up, meaning a single person could receive up to $950 this year,

and a family of four could receive just under $1900. Inflation overall in Canada has stabilized, but food prices are still increasing, and they're expected to keep rising this year. So today, we're going to talk about why. Mike von Masso is a food economist and professor at the University of Wealth. he's going to explain what's causing these consistently high food prices and what could be done to lower your grocery bill. I'm Cheryl Sutherland, and this is the Decibel from the Globe and Mail.

Hi, Mike, welcome back to the decibel. Well, thanks for having me. Let's start by getting a lay of the land. How are food prices looking right now? Well, I think there's two ways to look at that. The first is looking at the big picture, that high-level number, and we know that in 2025, we saw a 5% roughly increase in food prices. It's a big number.

We know we're feeling that, but that doesn't mean all food prices went up 5%. What it means is that on average, the basket of goods that we analyze went up 5%. And so if we look at, for example, beef has gone up significantly and is pulling that up. It's also pulled up some of the other proteins. We know coffee has gone up significantly. We saw big increases in sugar. We saw some sort of small short-term increases during the year for things like lettuce. But there are also other things that haven't gone up in price as much.

You know, milk is in about the 1% range. Vegetables are actually down year over year. And so overall, food prices on average are going up, some up much more than others. it's also worth looking at the monthly numbers. So just what happened in the month of December to see if there's a trend that's happening that that isn't reflected in the annual number because it reflects all the price increases in the last year. It doesn't say that's what happened in December.

So we saw beef actually flatten and go down a little bit in the month of December. So there may be some hope that it's stopped its assent. Coffee is still going up, but at a slower rate. So there's some room for optimism here. Right. Okay. Yeah. And so you mentioned some top lines here.

Like beef is up 16% year over year. Coffee is up 30%, which are pretty high numbers. And I want to talk about those two. So let's start with beef. We did an episode about the rise of beef prices, actually, a whole episode about what's going on there. But let's remind listeners about what's going on with the beef price. Well, beef prices are driven by a supply issue. So we had dry weather in the Western Canada for a couple of years.

the early 2020s, that means there's less grass. It means there's less hay, which is what they feed over the winter. So if they have less feed, they have to have less cattle. And so we saw lots of farmers reduce their herds. And cows are the factory of the beef business. And, you know, so if you don't have as many cows, you have fewer calves and calves turn into into beef. So right now we have a supply issue. It's so basic economics 101, when when, when, when, Ply as down, prices go up. That's going to take some time for the herds to rebuild. Right. You mentioned that the beef prices are actually pulling up other meat prices. Can you explain that? Well, what happens is we haven't seen a significant decrease in beef consumption. We've seen sort of a

switch to cheaper cuts of beef to a degree, but there has been some impact on beef demand. And so we still need protein. So then we've increased the demand for some of those other protein. And again, basic economics 101. When demand goes up, price goes up. Right. Okay. So, yeah, people are maybe turning more to pork or poultry and therefore, like, there's less product and therefore the price is going up.

Yeah. So we saw small increases in pork. Well, not small, sort of 5%. Chicken was a little less than that. Interestingly enough, turkey hasn't gone up a whole lot. I think we don't think of turkey as a real protein alternative. We tend to think of it as Thanksgiving, Christmas. but if consumers are looking for a protein that is not going up as much in price,

thinking about how to prepare and eat turkey outside of the holidays would be a way to get your protein without stretching your wallet quite as far. That's a good tip. Let's talk about coffee here because that's another big inflation hike here. So why is coffee so expensive? Two reasons that coffee's going up. The big one is sort of coffee and chocolate to a degree are the canaries and the coal. mine for climate change and warming. Those two plants are very, very sensitive to small changes in

temperature, more so than a lot of other food crops. And so we're seeing yield reductions. We're seeing disease susceptibility. And so again, less coffee available. Demand doesn't change. We see the price go up. Last year, it was also made a little bit worse by the fact that we saw retirement. Palliatory tariffs on coffee coming from the U.S. And you might say, well, we don't grow coffee in the U.S., and that's right. But some of our smaller roasters will buy from brokers in the U.S. So those brokers buy large volumes and then parse it up and sell it to small roasters. So it was coming from the other countries, actually getting tariffed on the way into the U.S.,

and then getting tariffed on the way to Canada. That ended at the end of August. And so we are starting to see some relief from the tariff and the inventory going through, but we're still having the climate impacts on coffee yields and quality. And that, again, isn't going to happen overnight, right? If you think about lettuce, which we saw go up dramatically in the month of November, the next crop of lettuce can come very quickly after that. So those price effects are relatively transient.

But we have to replant coffee. we have to move it up a little up the mountain a little bit or move it to areas that were previously too cold. And those plants take a while to establish. So the transition will take some time. So you mentioned two factors that I want to get into here. Climate change and tariffs. Let's start with tariffs. How much did tariffs impact food prices in Canada? Well, tariffs did not dramatically impact food prices in Canada except for a couple of products. So coffee was one because it was put on. The federal government was quite selective in how they put tariffs on, and they put it on products that we had alternatives. So it was to hurt the U.S. producers without hurting Canadian consumers.

So oranges and orange juice were one of the things that were on the list. So if you wanted fresh squeezed orange juice from Florida, that got more expensive. But we were importing oranges and orange juice concentrate from South America, reconstituting here. That didn't go up in price. So it depended what you wanted. We also saw sugar go up in price and candy, confectionery, so chocolate and candy, because sugar was also tariffed from the U.S. So there was a couple of things, some individual products that we saw go up in price, but they didn't affect food prices that much, except for those specific examples, which we should see resolved. Let's talk about climate change.

That was the other big thing that you mentioned that has an effect on food prices. How has that impacted prices at the grocery store? Well, I think, you know, we talked about coffee and cocoa, and that's sort of the slow warming that we're seeing and cops that are susceptible to that. The other thing that we talk about a little less is the increased variability and severity of extreme weather. So less about warming, but in November of last year, we saw lettuce prices in Canada go up 30%. And that's because 90% of the lettuce in November and the first half of December comes from Southern California. And that's for all of North America. And when they have a crop problem and they have a viral issue, reduction in yields and reduction in quality.

So again, less lettuce available. We saw that price go up significantly. Less about the warming and more about the variability and water and extreme weather. beef is due to extreme weather where we had two years of drought. And so I think we're seeing individual products be affected by variations in weather that aren't necessarily related to the warming. You may recall a couple of years ago that olive oil prices went through the roof. Oh, yes.

And that was because the Mediterranean basin had a cooler than normal summer and a drier than normal summer. and in places like Spain, which is a big source of olive oil, we saw their yields go down 60%. Now, they recovered the next year, so it's not like coffee where we have that susceptibility to warming, but we saw big increases, and now we've seen them come down as yields have recovered. So I think we need to look at both of those things,

and we can identify individual products, which are affected by weather variability. A couple of years ago, we had a frost in the spring in Ontario, and so many of the apple blossoms were frozen. So our apple yields went down, and so Ontario apple prices went up. So all of those sorts of factors are sort of on and off sort of jumping in and affecting prices of products. Yeah, sounds like volatile weather means volatile prices for food.

You know, we're expecting food inflation to come back down to, quote, unquote, more normal levels. But I think what we're going to see in the future is much more up and down of food prices for specific products because of that variability and weather. So we might get back to more acceptable, if you will, levels of inflation, but have products that go up and down, like this sort of roller coaster of prices, so much greater variability. Some items where the prices do look the same, because that's something we're seeing in the grocery stores as well, may be smaller, right? This is known as shrinkflation, or perhaps the quality doesn't seem as good. What do we see here? Like, are we seeing more of shrinkflation happening?

Well, I think we are seeing shrinkflation happening. We've got some evidence. We're working on a paper some research to get it out. We have a small research grocery store here at the university, and it's not a real grocery store. It's more the size of a convenience store, but we can have people walk through and shop, and we can evaluate how they're shopping. So it's not, like actually shopping in a grocery store, but it is more than filling out a survey. But over COVID, obviously we didn't. We were about to restock it and restart. And I said, well, wait a sec. Let's look at some of these products that were five or six years old and compare them to today's products. So we had sort of a serendipitous opportunity to look at because it's hard to track because the

companies don't tell us when they're doing smaller or bigger packaging. And so we're, we could compare directly from the old packaging to the new packaging and do that evaluation. And we did see some evidence of some products getting smaller over the five years of this inflation, and they got smaller by more than their price came down, or their price didn't come down at all. So essentially, it looks like the price didn't change, but how much you got went down. Frankly, we also saw a couple of examples of products getting bigger, and the price going up more then the package size went up. And we also saw in some cases where the formulation changed a little bit.

So you might have been seeing some cheaper ingredients. And so, as you said, that the quality might not be exactly the same. So I think there are a variety of ways that processors are dealing with the pushback on increasing prices. We'll be right back. Let's talk about inflation in Canada versus the rest of the world. Is this problem of food inflation unique to Canada or are other countries having similar issues? Everyone has had food inflation over the last few years. You know, some countries have had higher levels.

Some countries have had lower levels. It depends how they're reporting. There is some suggestion, for example, that the Bureau of Labor Statistics in the U.S. isn't, you know, they fired their director. Do we trust their data as much anymore? So that's something that we need to evaluate. The other thing to think about is that food inflation, the top line number, is actually an average of a basket of goods that people will evaluate.

So it's often hard to directly compare Canada with other countries. So Japan had a higher level of food inflation than we did last year. The UK had a slightly lower level of food price inflation than we did that. last year. Germany also had a lower level of food inflation. But if you look at the numbers underneath the high number, let's compare the UK, for example. The UK had a similar increase in beef prices, if not a little higher. They had some products go up more in price, some products go up less in price. And so the top line number matters because it means that the things that we prefer to eat, the things that they put in our basket to evaluate inflation are getting more expensive,

but we also have to consider the fact that we eat different things, so that it's the individual products that we should look at. As an example, we drink twice as much coffee as the U.S. does. That's surprising. And so coffee will be a bigger part of our inflation number, a bigger part of that basket, so make our number look a little higher. We eat twice as much, almost twice as much, as the Germans do. And so, again, beef prices are going up, but that will reflect more in

Canada's because we eat more. It'll be in a more important part of the basket. So it's a little bit of comparing apples to oranges. It's not to say we're not feeling the pressure, but the comparison really should be done at the individual product level to get a more accurate reflection of whether this is circumstantial or whether it's a policy difference or a retail difference in the individual countries. Canada, big coffee drinkers and beef eaters. Yeah. Okay, so inflation overall has started to come down.

In December, it was at 2.4%. But food prices have remained high. Why is it so hard to bring food prices down? The big reason is food is a biological process, right? And so, you know, we talked about beef and coffee. Those things aren't being driven by macro-monetary. policy and that sort of thing. They're being driven by circumstances beyond the control of producers and governments. And so we can't just say you, federal government, bring prices down. Federal

government has no control over Russia's invasion of Ukraine. Federal government has almost no control over climate change and, in fact, has started to reverse some of its climate policy, like the carbon tax. The federal government can't increase the number of cows on farms. And so, you know, we say, why isn't it coming down? It's not coming down because it'll take a while for the beef herd to rebuild. It'll take a while for the coffee industry to move and adjust and increase its resilience. So if you think about it, you know, we talk about monetary policy and interest rates as affecting inflation. And I would argue that food prices are less responsive to interest rate.

moves. So you increase interest rates to reduce demand, to moderate demand, right? So there's more incentive to save. There's less incentive to borrow. So if you think you can put off the purchase of a new computer, you can put off the purchase of a new set of headphones, you can put off the purchase of a new car, you can't put off the purchase of food. And so you might adjust your food demand a little bit depending on what you buy, but we're not affecting demand. with interest rate policy as much as we are for other sort of hard goods. You mentioned that the government can't do much about the food prices, but the federal government is trying to address food affordability.

They're aware that people are feeling the pinch. Prime Minister Mark Carney announced this GST credit increase. What kind of difference will that make? Well, I think it's targeted at lower income Canadians. I think they said the number was 12 million Canadians. It'll make it easier for them to stay food secure. right? You know, we're talking about it in the context of food prices, but we know that over the last five years, lots of prices have gone up. Maybe the price increase of things has slowed down,

but, you know, rent has gone up, transportation has gone up, all of those things have gone up. And so giving people some money will allow them not only necessarily to buy better quality of food, but to not have to make the choice between the phone bill and the food bill this month. And so to me, it's a broader afford. affordability measure cast as a measure to address food price increases because that's the one everyone's talking about, right? We're all talking about food prices. It's the one that's that's lingering. And so what I think it does is gives people more spending power to balance in their budget, those that need it more significantly.

What about grocery stores themselves? This week, Metro reported a growth in sales from the first quarter and they boosted their dividend to shareholders. I'm just using Metro as an example, but it does look like these grocery stores are doing well while people are paying higher grocery bills. And I think there's a lot of anger towards the big grocers for these high food prices. What role do they have in fixing this problem of high food prices? The grocers have gotten a lot of attention. You know, I hear about corporate greed and all of that sort of thing.

if you look at the ratio of operating profit, which sort of takes out depreciation and all of those sorts of things, operating profit as a percentage of revenue, those numbers haven't changed a whole bunch. And so I don't think that grocers are contributing significantly to these price increases. We've seen a slight increase in their margins. I might argue that that's because discount stores might have slightly higher. margins and that might be a shopping behavior. And so they're not necessarily making higher margins. They're making more money because the number is higher, right? The price is higher. Some people might argue, well, then they should shrink their margins. But it's not clear that they're driving it up.

I would say I'd be more nervous of them slowing price decreases because it's much easier to hide a margin increase in a decreasing market than it is in an increasing market. So I think that grocers aren't driving this food price inflation. And we're seeing big profits, but not different margins. People are buying more at grocery stores. What they're buying is more expensive. So that number in between, that five or six percent number in between is getting a little bit bigger. You know, I've heard things like, oh, we should cap grocery profits. And I think it's an awfully difficult thing to do. So if you say we're going to cap your profits, you can't make more than this, we might actually see things that we don't want to see like some stores closing.

Less profitable stores are closing. So we might as well just keep the stores open that are most profitable because if we can't make more, then let's get rid of it. So does that affect underserved communities? Does it affect rural communities? So I think we'd have to be pretty careful about that. Just lastly here, Mike, how are you feeling about your own grocery bills this year? Like, what are you expecting this year?

Well, I'm optimistic that we might see a slowdown in food price inflation. You know, there were some early signs in the December number, so we'll see. I don't have a crystal ball, so I can't tell you what the U.S. administration's going to do from a tariff perspective. I can't tell you what extreme weather experiences will have around the globe this year. But all else being equal, I'm pretty optimistic. You know, at our house, we are taking some strategies to try and buffer ourselves to these price increases. So we focus on what's on special, right? So yogurt, I'm not particularly brand loyal.

I will buy the yogurt that's on sale. And yogurt is, there's always some yogurt on sale because it brings people into the store. We adjust our protein consumption depending on what is our. sale in the store that week. And I think many Canadians can do that. If we're more flexible, if we have the courage to cook things that we're not as used to cooking, you know, my youngest son is a huge fan of YouTube and he'll go look at, you know, how do I cook this? I got this. My oldest son lives downtown Toronto and he buys baskets of sort of almost expired stuff and those sorts of things as a way to save money. So you can do that if you're willing to cook things

that you're not as familiar with. So there are ways that you can buffer. So, yeah, we're feeling it as a family, but we're working hard to find ways to adapt. Good tips to end on, Mike. Thanks so much for coming on the show. Well, thanks for having me. Have a great day.

That was Mike von Masso, a professor and food economist at the University of Guelph. That's it for today. I'm Cheryl Sutherland. Our producers are Madeline White, Mikhail Stein, Ali Graham, and Rachel Levy McLaughlin.

Our editor is David Crosby. Adrian Chung is our senior producer and Angela Pichenza is our executive editor. Thank you for listening.