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Canada appears to be transitioning into a "trading-down" market, a trend likely to continue. Recent statistics from Statistics Canada regarding food retail and service industries, along with GDP figures, paint a worrying picture, especially for those aiming to attract more food companies or grocers to the country.

Despite a population growth of over 3% last year, Canada's GDP increased by less than 1%. While other developed economies like France and Germany are facing challenging economic conditions, Canada's economy is closely linked with the world's strongest economy at present. However, the anticipated benefits from this proximity seem to have stalled.

Of particular concern are the January GDP figures, which highlight that Canada's most dynamic economic sector is currently the public service, while private investments have stagnated, largely due to higher interest rates.

The gap in GDP per capita between Canada and the United States has widened by 106% since 2015, and this trend shows no signs of reversing. In essence, despite a growing population, Canada's overall wealth is diminishing.

This economic downturn significantly impacts the food business. Statistics Canada reports on food and service sales confirm that consumers are grappling with reduced wealth amid higher food prices. As of January 2024, the average Canadian spends $248 monthly on food retail sales per capita, down from $258 in January 2023 and $282 in February 2017. These figures are adjusted for inflation, exacerbating the situation.

According to Canada's Food Price Report 2024, an individual's monthly expenditure for a healthy diet should be $339. Yet, the current average monthly spending stands at $248. Until July 2021, Canadians were spending more than the recommended budget to maintain a healthy diet. However, since then, meeting this budget has become increasingly challenging.

Canadians are either wasting less or seeking alternative food sources outside traditional channels like grocery stores, such as dollar stores and non-traditional grocery discounters. Per capita food expenditures in Canada have reached unprecedented lows.

Grocers are adapting to this situation by adjusting their strategies and exerting more pressure on suppliers through higher fees and lower prices. These conditions may set the stage for a potential price war later this year.

Data on food service provides a contrasting perspective. On average, Canadians spent $169 at restaurants in January, similar to last year but up from $149 in January 2018, adjusted for inflation. However, despite the market's frugality, about 41% of all money spent on food is at restaurants, compared to 54% in the United States, favoring food service.

The uncertainties surrounding remote work versus in-person work have largely dissipated, with the food economy normalizing. Food inflation is driving Canadians to spend less at grocery stores, contradicting expectations. Currently, about 18% of all retail dollars are allocated to food, down from 21% in 2017.

The rising cost of living poses challenges for many Canadian households, making trading down in food purchases a viable option. While trust in Statistics Canada may vary, the agency serves as a crucial indicator, providing insight into the economic landscape. However, regardless of interpretation, the numbers paint a bleak picture of a growing population amid stagnant economic wealth.

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