As spring spending picks up, pricing is becoming one of the most critical levers across the grocery industry, shaping both margins and consumer behaviour.
With consumers more price-conscious, yet still spending in key categories, companies are rethinking how they price, promote, and position products in real time. The result is a more dynamic pricing environment driven by shifting demand and evolving expectations.
Elliot Morris, Partner at EY Canada discussed the issue with Retail Insider.
Question: How are grocery retailers and brands adjusting pricing strategies this spring in response to changing consumer spending patterns and ongoing inflation concerns?
Answer: Grocers are moving away from broad price cuts toward targeted, data-driven pricing, focusing discounts on key items. At the same time, they’re leaning into private label and loyalty programs to deliver value in a more precise way.
Grocers are adjusting pricing strategies to reflect more cautious, value-focused consumers amid ongoing inflation pressures. A key shift is the continued expansion of private label, with retailers increasing penetration to offer lower-cost, high-quality alternatives to national brands.
This gives budget-conscious consumers a clear in-store trade-down option without leaving the retailer ecosystem. At the same time, discount banners are growing as grocers respond to consumers heightened focus on value. Alongside this, retailers are leaning more heavily into loyalty programs and first-party data to deliver personalized, data-driven promotions allowing them to offer value directly to the price-sensitive customer.
We’re also seeing more visible value messaging with “locked” or “lowered” price campaigns, both in-store and online, being used to reinforce price trust and simplify decision-making for shoppers. On the brand side, there is increased focus on price per unit with larger pack sizes and multi-buys being promoted to appeal to household shopping missions, while retailers manage shelf prices of smaller, more discretionary items.
Overall, the approach is becoming more surgical, balancing affordability and profitability by focusing on the products and customers that matter most.
Q: What categories are consumers proving most price-sensitive in right now, and where are they still willing to spend more despite economic pressures?
A: Canadian consumers are trading down on everyday staples but they’re still willing to spend in areas tied to health, convenience, and quality. It’s a more selective approach to spending, where value, not just price, is driving decisions.
Canadians are becoming more selective with their spending, trading down in core grocery categories while protecting spend in areas they see as higher value. The most price-sensitive categories right now are staples. Meat, particularly beef, and fresh produce are seeing consumers shift toward lower-cost protein alternatives like beans or dairy. Similarly, center-of-store packaged goods such as cereals, pasta, and dry goods are experiencing increased price sensitivity as consumers opt for generic or store-brand alternatives. Bakery and frozen categories are also sensitive, particularly where pricing has been volatile, although some stabilization is beginning to emerge.
In contrast, consumers are still willing to spend in a few key areas. Health and wellness remains resilient, with strong demand for products that offer clear functional benefits, such as added protein, fibre, or gut health support. Pet food is another category holding up, as consumers continue to prioritize quality for their pets despite broader budget constraints. Convenience is also proving durable with prepared meals and easy-to-cook solutions performing well, as consumers balance cost savings from eating at home with a willingness to pay for time and ease.
Q: How are grocers balancing the need to protect margins while remaining competitive in a market where consumers are actively comparing prices and seeking value?
A: Grocers are becoming more targeted in how they compete on price, investing in key traffic-driving items while relying on private label and targeted promotions to protect margins. It’s about offering value without eroding profitability across the entire basket.
Grocers are moving away from blanket promotions and toward more targeted, data-led strategies to stay competitive while managing margin pressure. One of the biggest levers is private label. Grocers are increasing the SKU count of higher-margin, private-label products while reducing the space for national brands that offer lower margins or have become too expensive. This gives consumers a ‘value’ option in-store rather than forcing them to go to a competitor.
Loyalty programs are also playing a bigger role. By using customer data, retailers can target discounts to specific segments, rather than lowering prices across the board. This allows them to maintain higher average prices while still appealing to price-sensitive shoppers. There is also increased collaboration and pressure on manufacturers. Retailers are scrutinizing cost increases more closely and looking for greater transparency and shared accountability.
Finally, pricing investment is becoming more strategic. Grocers are focusing discounts on “basket-building” staples that drive traffic, while preserving margins in less price-sensitive categories like convenience and discretionary items.
Q: To what extent are technology, data analytics, and real-time consumer insights shaping pricing and promotional decisions across the grocery sector?
A: Pricing and promotions are becoming faster and more dynamic, with data and AI helping grocers adjust offers based on demand, competition, and customer behaviour. This shift is making promotions more targeted and more efficient.
Technology and data analytics are now central to how grocers make pricing and promotional decisions. Retailers are increasingly using AI-driven tools to monitor competitor pricing, assess demand, and adjust offers. This allows them to respond quickly to market changes and stay competitive while providing value for consumers.
Loyalty programs are another critical data source because by analyzing individual purchasing behaviour, grocers can deliver highly personalized promotions, improving relevance for consumers and efficiency for the retailer. Advanced analytics are also being applied to supply chain management. Better demand forecasting helps reduce waste, particularly in perishable categories and allows retailers to price more competitively by improving inventory efficiency.
Overall, the shift is from static, manually driven pricing to a more dynamic, data-led model that enables faster and more targeted decision-making.
Q: Looking ahead to the rest of 2026, do you expect pricing volatility and promotional intensity in grocery retail to continue increasing, and what could that mean for both retailers and consumers?
A: Promotional activity is expected to intensify as retailers compete for increasingly price-sensitive consumers in a more divided economic environment. For grocers that means continued pressure on margins and for households that means more pressure on budgets.
Looking ahead to the rest of 2026, promotional intensity will rise due to the “K-shaped” economy where higher-income households are less affected while lower-income households are severely feeling the pressure. Competition for the budget-conscious consumer will remain fierce which in turn will drive higher, more targeted promotional activity.
For retailers, this means they must be agile. Data analytics, private-label innovation and optimizing the omnichannel experience (online/in-store) will be critical. The pressure on margins will remain extreme, forcing retailers to scrutinize every cost, including logistics and inventory. Those who cannot effectively manage their private-label portfolio or who fail to offer a good digital experience will be challenged in the market.
For consumers, they’ll continue to feel pressure, with an average family of four potentially spending $1,000 more on food in 2026 compared to 2025. This will reinforce the behavioural shifts observed in early 2026: increased meal planning, more consistent shopping at discount stores and higher reliance on loyalty programs to manage budgets.
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