Why are some grocery store shelves empty? How high will food prices go?

Jordan Depending on where you live in Canada, you may have noticed something missing at your grocery store recently.

News Clip …Empty shelves at the grocery store. Those in the industry are calling this the perfect storm…

Jordan And depending on where you stand, you may have blamed anything from COVID to vaccine mandates to protesters to climate change to the federal government, for the empty shelves that you’ve seen. Of course, you may not have even seen any empty shelves at all. And to you, the constant discussion of what you can’t buy feels like another political ploy. Here is the truth. All of that is true, and all of it is being used as a political prop. Canada is a huge country with a long supply chain and all sorts of challenges getting food exactly where it needs to go, exactly when it needs to get there. The slightest problem can create ripples in the supply chain. And we are talking about several rather large problems right now. So how precarious is Canada’s food supply? How can we tell when empty shelves are a dangerous sign and when they’re being used to score points? When can we expect the pressure on our supply chain to ease? And when it does, how much more will we be paying to put food on the table?

I’m Jordan Heath-Rawlings, this is The Big Story. Sylvain Charlebois is the senior director of the Agri-Food Analytics Lab at Dalhousie University. He is the cohost of the Food Professor podcast, and you can find him on Twitter at Food Professor. Hey, Sylvain.

Sylvain Charlebois Good afternoon.

Jordan Why don’t you begin… I’m kind of stumped by these pictures on both sides of the equation that I’ve been seeing recently. I’m sure a lot of Canadians are. Some of empty grocery shelves looking completely bare, some of aisles overflowing with produce. Is there any way to determine the prevalence of empty shelves across Canada, aside from this kind of anecdotal evidence back and forth?

Sylvain No, it’s really not possible, especially right now. Things are really messy with supply chains. There is a combination of factors impacting the efficiency of supply chains right now. What we’re seeing on social media are groups politicizing the issue of empty shelves, if you will. They are weaponizing pictures of empty shelves. And that’s unfortunate because it really will only get people to be concerned about food security and they shouldn’t. I mean, there are several factors. I would say an almost two year old pandemic will create supply chain fatigue. That’s what we’re seeing. And frankly, I’ve been seeing empty shells for months now in Canada. So this is not new. Omicron was a huge blow to the food industry. It really slowed things down. We saw strikes in different companies like Kellogg’s, for example, recalls of salad, the weather with snow storms and of course, the vaccine mandate. So the vaccine mandate at the border affecting truckers is one of many factors impacting our supply chain right now.

Jordan I’m going to get you to dig into those factors in just a second. But first, since we can’t determine how many shelves are empty or when they’re restocked or all of that kind of stuff and it is being so politicized, I will ask you, as somebody who studies the big picture of this, how do we go about assessing the health and capacity and functionality of our food supply chain? What do we look at?

Sylvain The one measurable outcome is what you see at the grocery store, to be honest.

Jordan Really?

Sylvain Yeah, absolutely. Because you really want to see what type of food, where it’s coming from, the amount, how its displayed, in store merchandising, it really is an outcome that will tell you a lot. When I go in a grocery store, I actually can tell a lot about the state of our food economy, really, depending on the time of year, depending on where I am, the type of store as well, you can tell a lot.

Jordan So take me through that process, then. You walk into a grocery store, what are you looking at? What does it tell you?

Sylvain Well, I mean, I look at what’s for sale, what’s being promoted right now, where it’s located in the store. I look at store design, I look at how displays are positioned. I mean, I’m more focused on the economics of food distribution. So obviously price is a big focus of mine. Because if something is on sale, there are a variety of reasons why something is on sale. Maybe there’s too much inventory or because perishability is an issue. Perhaps it’s because of an event of some sort and the Super Bowl is coming, so I suspect that there’s going to be some sales of chicken wings or even shortages because demand is going to go up. So there’s lots of things that can impact either the supply or demand of a particular product.

And I actually do think that in the future the interaction between the two will become even more dynamic with, say, real time price fixing. And this is something we’re seeing more and more like in Asia or Europe. If you have too much inventory, for example, grocers will want to reduce the price of a product to get consumers to buy more of that product or vice versa. So there’s more to it than just walking to the grocery store and just look around.

Jordan Right. Maybe you can take us through, you touched on them briefly, but I’m hoping you can go a little more in depth on the past several months and how things pile up. Obviously, since the beginning of the pandemic, I think we started with toilet paper was the big one, and things have been available and then not available. But from my point of view, anyway, when we first started hearing about this latest wave, it was during the floods in BC when a lot of produce couldn’t be trafficked out of the province and the highways were down. What has compounded since then and how much of an impact did natural disasters play in it?

Sylvain What BC experienced the last few months is unbelievable, I suspect that people in BC have more of an appreciation for what supply chains are all about, because we’ve seen one miracle after another. We’ve seen the Valley being impacted by floods, we’ve seen Railways being destructed by atmospheric Rivers and the heat Dome during the summer as well, which really impacted production as well. So there was lots going on disrupting supply chains. But when you deal with a natural disaster, the impact is often temporary. What we’re seeing right now is more of I mean, I’ve talked about supply chain fatigue, and what I mean by that is that really you have the entire world coping with public health measures and people being sick. And I think there’s a bit of an under appreciation for how COVID, the pandemic itself, has slowed things down.

It’s really complicated out there for logistics companies, because you have to deal with new measures. And frankly, every time there’s a change in market conditions, ie public health measures, it tends to take more time for companies to comply. And, of course, it costs more money and it slows things down. That’s why, for example, to go back to the vaccine mandate issue at the border affecting truckers. I think the last thing we want at this point, because it’s done, is to actually have a reversal of mandates, because, again, companies will operate on the basis that policy won’t change a whole lot. But with COVID, it’s been different. It’s been very, very different and dynamic. So that’s why I suspect that most companies aren’t necessarily pleased with the mandate at the border, because it does complicate things, but you have to live with it, you have to work with it. And that’s what we’ve seen in the last, I’d say, two months since the decision was made back in November.

Jordan What about that mandate? Do we know if it has contributed meaningfully to empty shelves, or can we just not differentiate it from so many other factors you’ve already spoken about?

Sylvain We can’t say that it actually has had an impact on food access, which is one of the three pillars to food security. So you have safety, access. Safety is not an issue. Access, I don’t think it is. It may actually be difficult for some companies to get ingredients or some products, and that’s why you may actually see empty shelves here and there. But overall access won’t be compromised. You will likely hear from companies saying that they can’t get an ingredient here, an ingredient there on both sides of the border. But I think we should be okay. We’re certainly concerned about affordability. Freight costs right now in the US for Canadian bound trucks has risen by anywhere between 25% to 100%, depending on what you buy, where you’re buying it and where it’s going. That will have an impact on food prices. Eventually it will catch up to consumers, for sure.

Jordan In terms of catching up to consumers, I went back and looked because I knew we’d spoken before, and we actually spoke in early 2020. So before the pandemic. And what we spoke about was that it was likely to be the highest year for grocery price increases in many years. Since then, just how bad has food inflation gotten? And I’m really curious about this because this is another thing that’s been politicized. Like politicians have been taking pictures of what a typical breakfast looks like, and here’s how much your various ingredients have gone up. So I’m trying to understand it objectively.

Sylvain Yeah. And some of those pictures actually have used some of our own data.

Jordan Oh, yeah?

Sylvain Absolutely. Food inflation is a problem, I think, right now in Canada, but it’s also a problem in the United States as well. I mean, it’s not just Canada. Right now in the G7, there are three countries where the food inflation rate is north of 5%. That would be the UK, Canada and the United States. And all three are dealing with a very different scenario. In Canada’s case, it boils down to commodity prices, which impacts everyone around the world. But logistics as well. The one thing that has helped us is the border. We are north of the United States. We have access to a very strong food economy, but we’re not immune to what goes on elsewhere and around the world. Transportation is costing more.

And this is the one argument that hasn’t been argued a whole lot in the media of late is predictability. Predictability is gold for the food economy. And because of the pandemic, market conditions have been anything but predictable. And so, of course, you got the natural disasters, as you guys went through over the last several months. But public health measures have been quite disruptive. And that’s why we’re seeing waste across the supply chain. We’re seeing labor being a problem, a much larger problem than it was before the pandemic. So those are things that really are problematic for the food industry, and it tends to increase costs overall. And that’s why I’m not surprised that food prices are going up, and I don’t think we’ve seen the end of it. We are expecting food prices to continue to rise for quite some time.

Jordan In terms of the protests that we were talking about in Ottawa, that was driven by well, supposedly at least, depending on who you listen to, was driven by the mandates. There’s another protest in the same vein going on right now as we speak in Alberta. It may end soon, it may not. But it is a blockade at the border. And I gather it’s a pretty big border crossing. What kind of impact could that have compared to the impacts of the mandates that they’re protesting?

Sylvain Well, I was never comfortable with the convoy in the first place. I actually do believe that we need to focus on not disrupting food distribution. I foresaw, I guess, the convoy creating bottlenecks, traffic jams. And of course, it really impacted the economy in Ottawa’s downtown, even affecting some food banks as well. So that was heartbreaking, to be honest, because those are the people that really need help and support. So I was very disappointed with that. But of course, the blockade at the border is quite concerning. I mean, I did state a couple of times that this convoy, these protests, could become way more disruptive than vaccine mandates themselves, really.

And so that blockade in Alberta specifically is blocking the way for trucks with food on them right now, going from Canada to the US specifically. And so there’s beef, and I believe there’s pork and other ingredients, but many of these ingredients are going to be used to process food, to manufacture food, which Canada will eventually buy. So this could actually hit us, and this could impact us eventually, notwithstanding the trucks that are on the US side trying to come in that do have food already. So it’s not great to see, frankly. And I do believe that it’s important to focus on making sure that supply chains work perfectly. And right now, what I’ve seen in the last I’d say five, six days, I don’t think it’s been helpful at all.

Because if the goal here, and I don’t think it is, but if the goal here is to end the vaccine mandate at the border, because I think there’s so many things that are being recovered by all sorts of groups. But if we focus on the vaccine mandate, I’ve always believed that protesters in Ottawa have the wrong address. They should actually lobby Washington because without reciprocity with the Americans, a reversal in Ottawa wouldn’t help. You need both sides. And in America, I’m not seeing a whole lot of movement there right now. I’m only seeing a few truckers being concerned. But the thing about America and about 125,000 truckers were impacted by the mandate in America. They have options. They can go to Mexico, they can go to other States. It’s a huge market of 360,000,000 people. Stakes are very different.

Jordan Why do you think that a few photos of empty shelves can make us so nervous? To your point, it’s not like stores are empty at all. We’re talking about some goods in some places being missing for a while, but it seems to feel like way more to us.

Sylvain Back in March of 2020, the shortages were demand induced. Canadians may not know this, but it was really much about an entire sector shutting down restaurants, that’s $90 billion worth of food by the way, that shifted overnight to retail. And, of course, you saw the panic buying. So it was all about demand. And things really got back to normal pretty quickly. I mean, within a couple of weeks. This time around it’s a bit different. It’s on the supply side that we’re seeing some challenges. But both times, as someone who studies food distribution and policy, I often find myself explaining to Canadians how things work, how supply chains work, and why they shouldn’t be worried. And I think it boils down to this acute under appreciation for what the food industry can do.

Let’s face it, empty shelves are bad for business. The last thing grocers want are empty shelves, and they’ll do everything in their power to move things along the supply chain. If you throw at them, a vaccine mandate, if you throw at them atmospheric Rivers, if you throw at them strikes, a snowstorm, they’ll figure something out. They’ll get food somehow because that’s how they do business. And the last thing they want is to see consumers walking away from their stores empty handed, that’s the economics and economics are very powerful in food.

Jordan When we covered the goods supply chain before Christmas, there was quite a worry of Christmas presents not getting to people and shipping being delayed and all of that. One of the things that our guests told us back then, was a lot of it had to do with just in time shipping, which is trying to make sure you’re not holding any extra inventory because that costs money. Is that also applicable in the food space, even with goods that have a relatively short shelf life, like dairy or produce?

Sylvain I guess there are two schools of thought, and I’m of the mind that the Justintime model actually helps. Without it, it would have made things much worse.

Jordan How so?

Sylvain It makes the supply chain way more efficient. Of course, you’ll run out of things faster, but you can actually get stuff faster as well up and down the food chain. I know some people think, well, you should store more in stores so you can replenish shelves, but you’ll end up wasting more, too. Because grocers have to contend with erratic consumers, all of us. When you walk into a grocery store, everything you’re buying, it was planned. But a lot of the times you buy on impulse, you buy because of the weather. The weather itself will impact how people behave in a grocery store. If it’s sunny out, people will think of a barbecue. And if the forecast wasn’t giving us some sun, but it is giving us some sun, all of a sudden you have to really shift things around for beverages, the meat counter, chips. We don’t realize that as consumers, but there’s a lot of things that can happen. And if you store too much in the back, you could actually end up wasting way more, which could, again, push prices higher. And that’s why I’m a big believer in the just in time model, because at the end of the day, it offers good pricing to consumers. And frankly, especially right now, food affordability is super important.

Jordan Speaking of food affordability, the last question I have for you, I want you to look forward a bit. And I should note our producer, Stef, just told me that she bought a single red onion for $2.50 the other day. Which, we’re in Toronto, but that’s pretty ridiculous. What lessons would you have Canadians learn from supply chain food inflation, everything that’s happened over the past few months. And what should they take away from that and apply going forward?

Sylvain Well, I mean, for the next several months, I think it would be unreasonable to expect perfection, to be honest. So I’ve been seeing empty shelves for months, and I think people should expect us to continue to see that. And I know that there are a lot of people out there saying, well, I mean, importing food is our problem. And so therefore, we need to produce everything we need. That’s another dangerous road. We have an open economy in Canada. We do sell a lot of food to the rest of the world, and we do create wealth by capitalizing on trades as well. And I’m thinking of beef, pork, canola, wheat, potash. I mean, there’s so much stuff we export that really creates jobs in this country. And we do wonderful things, maybe not in processing, not as much. I think we should do more in processing. But generally speaking, our open economy has served us well.

And this is what I’m seeing right now with different provinces, there’s been more attention given to food autonomy. To me, more food autonomy for provinces simply means to produce more of things we’re good at producing and importing the rest. So, for example, let’s say strawberries. Canadians love strawberries and they love to buy local strawberries. Well, what I’m seeing in some parts of the country are provinces that are trying to figure out ways to produce strawberries all year round using greenhouses, vertical farms. But at the same time, we have to be realistic. We’re not going to start producing lemons and oranges and pineapples and bananas. So becoming more strategic about things we can do well and import the rest, I think, is actually a great path forward. And that’s kind of what I’m seeing right now across the country.

Jordan Sylvain, thank you so much for this, really insightful, and I feel like I understand what I’m seeing in the grocery store a lot better.

Sylvain All right. Take care.

Jordan Sylvain Charlebois of Dalhousie University, cohost of the Food Professor podcast, which you can find wherever you get your podcasts, just like you can find this one at thebigstorypodcast.ca. Talk to us on Twitter at @TheBigStoryFPN. Email us anytime, thebigstorypodcast@rci.rogers.com [click here!].

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Thanks for listening. I’m Jordan Heath-Rawlings, we’ll talk tomorrow.

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