Weak competition in the grocery sector affects food prices in Canada

The significant increase in the cost of living has become a major issue, and is now at the heart of discussions among decision-makers and households alike. Once a research topic focused primarily on developing economies, food price inflation is now at the forefront of studies conducted in Canada. Food price inflation has accelerated sharply since the summer of 2021. The significant concentration of the Canadian food retail market is often cited as a potentially exacerbating factor in inflation. Against this backdrop, we set out to identify the indicators influencing the rise in food prices over the period 2009-2023. In order to incorporate a diagnosis of the evolution of competition between grocers, we chose to use the Retail Services Price Index (RSPI) in place of traditional profit margin indicators. We observe that, although market concentration is not the main driver of food inflation, it does exert a concrete and persistent influence on food prices. This impact is significant in both the short and long term. It would therefore make sense to consider measures that encourage competition and establish clear rules governing the behavior of grocers.