Canadian grocery prices are expected to continue rising at a rate that exceeds overall inflation in the near term as pressure from meat prices, imported foods and other costs works through the supply chain, according to a new report from RBC Economics.
The report, by Salim Zanzana an economist at RBC, says grocery inflation could moderate closer to headline inflation next year, but that outlook depends on lower key input prices, no major trade-related supply chain disruptions and easing industry-specific supply challenges.
Multiple factors driving higher prices
Zanzana said food inflation has remained a persistent issue for Canadian households, although the factors behind rising prices have shifted over time.
The report said the largest recent spike occurred between 2021 and 2023, when grocery inflation reached its highest level since the early 1980s and food prices rose 11 per cent year-over-year in late 2022. Pandemic-related disruptions and the Russia-Ukraine war increased costs for transportation, materials, labour, energy and fertilizers, while the cost of a typical grocery basket rose 18 per cent between the fall of 2021 and the spring of 2023.
Price growth moderated to about two per cent in early 2024 as supply chains stabilized, the report said, but a second wave of food price pressures emerged later that year.
Higher meat prices have been a significant contributor, with prices rising nine per cent since the end of 2024 and more than 40 per cent from December 2019 as of July 2026. RBC said droughts and higher feed costs contributed to lower animal herd counts, constraining supply.
Imported food costs, particularly for processed products, have also contributed to higher prices through 2025, reflecting a weaker Canadian dollar, weather-related challenges affecting products such as coffee and U.S. tariffs impacting supply, according to the report.
Canada’s retaliatory tariffs on certain U.S. food imports between March and September 2025 also temporarily boosted food prices before the measures were removed and price pressures eased.
Canada in the middle of G7 food inflation
The report said higher food prices have been a global issue since the pandemic, with the United Nations nominal Food Price Index rising more than 30 per cent since the end of 2019.
Among G7 countries, food costs have increased by an average of 33 per cent over the same period, with Germany and the United Kingdom recording increases of 38 per cent. Canada ranks roughly in the middle of the group, RBC said.
The impact of grocery inflation has also been broadly similar across Canadian provinces because local food prices are shaped by many of the same national and global factors. Large suppliers, distributors and retailers operating in multiple regions also contribute to similar pricing trends across the country, although transportation costs, provincial regulations and other regional factors can create some variation.
RBC said the conflict in the Middle East has raised concerns that higher energy and fertilizer prices could generate another round of food inflation. So far, however, the direct impact in Canada appears limited, with grocery inflation trending lower since the conflict erupted in late February despite higher fuel prices increasing production and transportation costs.
The report said a prolonged escalation in fuel and fertilizer prices could eventually affect consumer prices, with such shocks typically taking six to nine months to work through the food supply chain.
RBC also noted that higher production costs do not necessarily result in a one-for-one increase in grocery prices because the extent to which costs are passed on depends on competition, consumer demand and firms’ pricing power. Producers, distributors and retailers may absorb some increases through lower profit margins or cost savings elsewhere.
Outlook remains dependent on supply and trade conditions
RBC said pressure on meat prices is likely to continue because rebuilding cattle herds takes several years, even though early signs of recovery emerged in 2026. A weaker Canadian dollar is also expected to keep imported food costs elevated.
Some food commodity prices could ease depending on crop conditions and other factors, but the report said there is likely to be little relief in costs related to processing, labour, packaging, wholesale and retail margins, and transportation.
“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.”
The report said its outlook for grocery inflation to move closer to headline inflation next year depends on key input prices such as oil trending lower, the absence of major trade-related supply chain disruptions and continued easing of industry-specific supply challenges.
Longer-term risks include climate-related disruptions, additional protectionist trade measures and policy changes that could increase food production and distribution costs.
Lower-income households face greater strain
The report said rising food costs affect households differently depending on income.
Average annual household spending on food and non-alcoholic beverages increased from just under $7,400 in 2019 to about $9,600 in 2025, or roughly $180 more per month. Over the same period, average household disposable income rose by about $23,000, or approximately $1,900 a month.
For lower-income households, however, food and non-alcoholic beverage spending accounts for nearly one-quarter of disposable income, while income growth has been lower. Average disposable income for households in the lowest income quintile rose by $7,300 between 2019 and 2025.
With shelter and transportation costs also rising by roughly 30 per cent on average since 2019, the report said lower-income households have less capacity to absorb higher food costs. Many households have responded by altering their diets, switching to lower-cost products and shopping at discount retailers, warehouse clubs, supercentres and dollar stores.
The report said those adjustments have not been sufficient for a growing number of Canadians, with food bank visits rising more than 99 per cent between 2019 and 2025, partly reflecting the strain that higher food costs have placed on vulnerable households.
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