The cost of feeding a family in Canada has become one of the most persistent and politically charged economic stories of the past five years. In a new analysis published August 26, 20261, RBC Economics' Salim Zanzana works through six essential questions about Canadian food inflation, and the answers carry implications well beyond the checkout line.
Two Waves, Not One
The starting point matters. The biggest recent spike occurred between 2021 and 2023, when grocery inflation soared to a new high since the early 1980s, and prices grew 11% year-over-year in late 2022. That first wave was pandemic-driven, broad-based, and global. Prices of virtually all food items ballooned, with the bill for a typical grocery basket rising 18% from fall 2021 to spring 2023.
But the story did not end there. A second wave of food price pressures emerged in late 2024, driven by a narrower set of factors. Three stand out. Meat prices have risen 9% since the end of 2024 and more than 40% from December 2019, driven by drought-reduced herd counts. The Canadian dollar's depreciation has made imported processed foods meaningfully more expensive. And retaliatory tariffs on U.S. food imports between March and September 2025 temporarily added pressure before easing once measures were removed.
Zanzana points to the structural reason grocery prices are particularly vulnerable: "Food prices soared above general inflation partly because grocery items are more vulnerable than many other consumption items. They are affected at nearly every production stage from raw commodity flows through processing, packaging, and distribution, along with food's perishable nature making it more susceptible to transportation delays."
A Canadian Problem, or Everyone's Problem?
To be fair, Canada is not uniquely afflicted. Among peer countries, food costs have risen 33% on average across the G7 over the same period, with Germany and the United Kingdom recording the largest increases at 38%. Canada ranks roughly in the middle of the pack. The global nature of supply chain shocks means no country escaped unscathed. Within Canada, the problem is also notably uniform. The structure of Canada's food supply chain tends to keep grocery inflation similar coast to coast, with large national suppliers and retailers transmitting cost changes uniformly across regions.
The Middle East Wildcard
The conflict in the Middle East introduces fresh uncertainty, though the immediate transmission has been more muted than feared. So far, the direct impact in Canada appears limited. Higher fuel prices increased production and transport costs, but grocery inflation has trended lower since the conflict erupted in late February. This is not grounds for complacency. Zanzana notes that "a prolonged escalation in fuel and fertilizer prices could eventually feed through to consumer prices. These shocks typically flow through the food supply chain with a lag, taking between six to nine months to be fully reflected in grocery prices, according to the Bank of Canada."
Critically, cost increases do not automatically become price increases. "Whether higher production costs are passed on to consumers depends on factors such as competitive conditions, consumer demand, and firms' pricing power. Many producers are global price takers and have limited pricing power, making it difficult to fully pass higher costs to distributors, retailers or consumers." In other words, the supply chain absorbs some shocks before they reach the consumer.
Where Prices Go From Here
The near-term outlook is not encouraging. "We expect Canadian grocery prices will continue rising at a rate likely exceeding overall inflation as existing pressures work through the supply chain over the near term." Meat is a particular concern: cattle herd rebuilding takes years. And the broader cost structure is sticky. Processing, labour, packaging, wholesale and retail margins, and transportation make up to 90% of consumers' food costs and are often stickier. Zanzana's base case has grocery inflation moderating closer to headline inflation next year, but only if oil prices trend lower, trade disruptions are avoided, and supply normalization continues. Longer term, climate-related disruptions, protectionism, and unintended policy impacts remain live risks.
Who Bears the Burden
This is where the analysis becomes most consequential. For the average household, disposable income growth has generally outpaced the increase in food spending. Average annual food spending rose roughly $2,200 between 2019 and 2025, while average household disposable income rose by approximately $23,000 over the same period. That aggregate picture masks a starker reality at the lower end of the income distribution. Food costs are a much greater burden for lowest-income Canadian households, with food and non-alcoholic beverage spending accounting for nearly one-quarter of their disposable income. With shelter and transportation costs also up roughly 30% since 2019, lower-income households have less room to absorb rising food costs. The result: food bank visits have risen more than 99% between 2019 and 2025.
5 Key Takeaways for Advisors and Investors
1. Food inflation is structural, not transitory. Two distinct inflationary waves over five years, with multiple reinforcing drivers, suggest this is not a temporary supply shock. Cost stickiness in processing, labour, and logistics means elevated grocery prices are a feature of the current economic landscape, not a bug that normalizes quickly.
2. The Canadian dollar is an amplifier. A weaker loonie directly raises the cost of imported foods and processed inputs. Advisors should treat currency depreciation as an embedded food inflation risk, with implications for consumer spending capacity and real disposable income.
3. Meat prices signal a multi-year supply constraint. Herd rebuilding timelines measured in years, not quarters, mean sustained pressure on one of the highest-weight grocery categories. This is a slow-moving but durable inflation input that monetary policy cannot easily address.
4. Trade policy is a persistent wildcard. Both Canada's retaliatory tariffs and U.S. measures on imported produce have demonstrably moved Canadian grocery prices. With Section 338 tariffs still evolving, supply chains remain exposed to policy-driven cost disruptions that are difficult to model and hard to hedge.
5. The distributional story has macro implications. When the lowest-income quintile spends nearly a quarter of disposable income on food while absorbing simultaneous shelter and transportation cost increases, consumer spending capacity at the lower end deteriorates meaningfully. This is relevant to consumption-exposed sectors in Canadian equity and credit portfolios.
Footnote:
1 Zanzana, Salim. "Food Inflation in Canada: Six Key Questions About Higher Prices." RBC Economics, Royal Bank of Canada, 26 Aug. 2026, https://www.rbc.com/en/economics/canadian-analysis/featured-analysis/insights/food-inflation-in-canada-six-key-questions-about-higher-prices/.
