The food industry is eating your lunch.
By appealing to your need for convenience, food producers and retailers are getting you to spend extra on prepared foods and restaurant meals rather than cooking for yourself.
Grocery stores selling ready-to-go prepared foods are one example. Another is the meal-kit trend, where pre-portioned ingredients are delivered to your home so you can assemble them easily. And then restaurants run the gamut from food trucks to traditional fast food to casual and fine dining.
“All of these solutions cost more money for the same amount of calories,” said Sylvain Charlebois, a food expert and professor at Dalhousie University in Halifax.
When we talk about the challenges people face in managing their day-to-day finances, the rising cost of living plays a big part. Food, broadly speaking, has not been a big contributor to inflation lately. Statistics Canada most recently pegged the year-over-year increase in food prices at 1.6 per cent and the overall inflation rate at 2.2 per cent.
But the way you buy food has a big effect on how much you spend. The general rule is that buying raw ingredients at the supermarket and cooking them at home is the most economical way to feed yourself. Today’s busy lifestyle does not mesh well with cooking dinner every night and taking the leftovers to work for lunch the next day.
Prof. Charlebois’ research shows about 35 per cent of the average Canadian’s food budget is spent on meals bought and eaten outside the home, and that this rate is rising by one percentage point per year. He anticipates a 50-50 split in food budgets between food consumed in and out of the home by 2030, if not sooner.
“Your buying power is shrinking and it’s not because of economics,” he said. “It’s being reduced by your buying habits.”
The trend of eating out and consuming prepared foods when eating at home is a big win for the food industry. Prof. Charlebois said the business of selling traditional groceries is hypercompetitive now, which means profit margins are thin. Selling prepared foods is an opportunity to pad those profit margins.
That’s why a growing number of grocery stores offer cooked, ready-to-eat food that you can eat in-store or take home. You go into the store for bread, milk and bananas and come out with a freshly cooked pizza or butter chicken as well.
The genius of the meal-kit trend is how it creates a blend of home booking, foodie culture and the convenience of prepared foods. They supply recipes and pre-portioned ingredients, and you assemble/cook them. One company’s meal-kit menu for last week included Persian chicken thighs with Meyer lemon, and sumac-spiced salmon with pea-potato puree.
Prof. Charlebois said meal kits cost about $9 to $12. The CompareMealKit.ca website shows that the price of three meals for a family of four would range from $116 to $140. You are paying for the ingredients, but also the considerable overhead associated with portioning them out and getting them to customers.
The experience of the past four or five years shows Canadians have their limits on food spending. Prof. Charlebois said beef consumption plunged when prices shot up 20 per cent in 2014; likewise, grocery stores had trouble selling cauliflower after prices hit $5 or more a head in early 2016.
In response, the food industry has become more adept at hiding price increases. There’s shrinkflation, where prices remain the same while the size of a package shrinks. And supermarkets have learned to raise prices for produce or meat gradually to avoid shocking customers. There’s also the convenience factor: Making food quick and easy to consume dulls our appreciation of how much more it costs.
I could nag you at this point to improve your finances by cooking more of your own meals and spending less on prepared food, but convenience does have value when you lead a busy life. Instead, take this challenge when you subscribe to a meal-kit plan, buy something hot and ready at the grocery store, or take everyone out for dinner: Ask yourself, what can I cut back on to keep the household budget on track?
We are incrementally spending more all the time. Every now and then, try to find a compensating place to cut.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, November 21, 2018