The Great Grocery Gap: Why Canadians Pay 4.7% More While Americans Pay 1.9%

Executive Summary

In November 2025, Canadian grocery prices rose 4.7% year-over-year—the highest since December 2023—while American food-at-home inflation sits at approximately 1.9%. This disparity defies common sense: the United States initiated a global tariff war including 25% duties on Canadian goods, yet American consumers see minimal grocery inflation while Canadians face the highest food price increases in the G7.

The explanation lies not in tariffs but in deep structural problems unique to Canada: a grocery oligopoly with minimal competitive pressure, a weak Canadian dollar that inflates import costs, excessive dependence on imported fresh produce, and accumulated carbon tax costs throughout the supply chain.

The Statistical Anomaly

Canada (November 2025)

• Grocery store inflation: 4.7%
• Fresh/frozen beef: +17.7%
• Coffee: +27.8% (roasted/ground: +36.4%)
• Sugar and confectionery: +10%
• Fresh fruit: +4.4%

United States (2025)

• Food-at-home inflation: ~2.4% (forecast)
• Overall food inflation: 2.6%
• August 2025 grocery store CPI: 2.7% higher than August 2024

The G7 Picture

Canada has returned to near the top of G7 food inflation rankings:

1. Japan: 7.2%
2. United Kingdom: 5.1%
3. Canada: 3.8-4.7% (November)
4. Italy: 3.7%
5. United States: 3.2%
6. Germany: 2.9%
7. France: 1.7%

The gap between food inflation and overall inflation in Canada (+2.0%) is among the highest in the developed world, second only to Japan.

Factor #1: The Grocery Oligopoly

Market Concentration

Canada's grocery market is dominated by just four companies controlling 75% of all sales:

• Loblaws (also owns No Frills, Maxi, Real Canadian Superstore)
• Sobeys/Empire (also owns Safeway, FreshCo, Farm Boy)
• Metro (also owns Food Basics, Super C)
• Costco

This concentration ratio (CR4) of 75% is considered "highly concentrated with elevated risk of competitive concerns." In contrast, the US market features intense competition among Walmart, Kroger, Costco, Aldi, Lidl, Trader Joe's, Target, and numerous regional chains.

Record Profits Amid Rising Prices

In 2025, while grocery inflation spiked:

• Loblaw: $503 million profit in Q1 2025 (up 9.6%)
• Metro: $220 million profit Q4 2024-Q1 2025 (up 17.6%)
• Empire/Sobeys: $173 million profit Feb-April 2025 (up 16.1%)

Since 2020, Canadian grocery prices have risen 27%—outpacing general inflation.

The Price-Fixing Legacy

In 2017, Loblaw and parent company George Weston admitted to participating in an "industry-wide price-fixing arrangement" on packaged bread, ultimately paying out $404 million. The alleged participants included all major grocers: Loblaw, Sobeys, Metro, Walmart Canada, and Giant Tiger.

Missing Competition

As the Competition Bureau noted: "Loblaws owns No Frills and Maxi, Sobeys owns FreshCo, and Metro owns Food Basics and Super C. This is different from other countries where large grocers compete against lower-priced options, like Aldi and Lidl."

Factor #2: The Competition Gap

US Discount Retailer Impact

In the United States, discount grocers exert powerful downward pressure on prices:

• ALDI's prices: 36% lower than the all-store average
• Lidl's prices: 21% lower than the all-store average
• ALDI vs. Walmart: ALDI was cheaper on 24 out of 29 items compared

When Lidl entered new US markets, the competitive ripple effect was dramatic:

• Aldi cut prices by 15%
• Walmart cut prices by 9%
• Costco cut prices by 8.3%
• Stop & Shop cut prices by 5.3%

Research shows: "Lidl's competitive price-cutting effect is continuing to pressure other retailers to drop their prices. The data shows the effect is greater than Walmart's entry in a new market."

Canada's Missing Discounters

Canada has no meaningful Aldi or Lidl presence. The "discount" options (No Frills, FreshCo, Food Basics) are all owned by the same oligopolists, eliminating genuine competitive pressure.

Factor #3: The Weak Loonie

Currency Impact

The Canadian dollar has fallen significantly against the US dollar in 2024-2025, functioning as a "silent tax on every grocery bill."

• Canada imports roughly $70 billion in food annually
• A weaker loonie means imports cost more
• The Bank of Canada estimates a 10% currency depreciation adds ~0.25% to inflation

Import Dependency

Canada imports approximately:

• 60% of fresh fruits and vegetables
• 75% of fruits consumed domestically
• 50% of vegetables (excluding potatoes)
• Nearly 90% of leafy greens from California

US states supply 67% of Canada's vegetable imports and 36% of fruit imports.

Factor #4: Carbon Tax Pass-Through

The Cumulative Effect

The carbon tax accumulates costs at every stage of the food supply chain:

1. Farmers: Pay carbon tax on fuel, fertilizers, equipment (compounded by GST)
2. Transportation: Trucking companies pay carbon tax, passed on through shipping fees
3. Processing: Mills and processors incur costs for electricity and operations
4. Distribution: Additional fuel costs
5. Retail: Final layer before consumer

By the time a loaf of bread reaches the consumer, multiple layers of carbon tax have been applied.

Cost Estimates

• The Parliamentary Budget Officer estimates the "second carbon tax" costs the average household an extra $573/year without rebate
• Canada's Food Price Report 2023 stated a farm could pay $150,000 in carbon tax annually when fully implemented
• Annual carbon tax increases of $15/ton scheduled through 2030 (target: $170/ton)

Contrasting View

Some economists argue the direct impact is minimal—the Bank of Canada estimates carbon tax adds only 0.15% to overall inflation. However, critics argue this doesn't capture cumulative supply chain effects.

Factor #5: Tariff Dynamics (The Surprise)

Why US Tariffs Haven't Hurt US Consumers Much

The United States is largely food self-sufficient:

• Only imports 20% of its food
• One of the world's largest food exporters
• Domestic production capacity exceeds domestic demand

Why Tariffs Hurt Canada More

Canada imports $65 billion worth of food annually, with the US as the dominant supplier:

• 55% of Canada's agri-food imports come from the US
• 75% of baked goods
• 50% of fresh vegetables
• 90% of leafy greens

Retailers like Loblaw have identified 6,000 products that could see price increases of 25% or more due to US tariffs.

Reciprocal Tariffs Backfire

Canada's retaliatory tariffs on US goods also raise prices for Canadian consumers—particularly on American meat and dairy products that Canada lacks the domestic capacity to replace.

The Family Impact

2025 Spending

The average Canadian family of four is expected to spend $16,833.67 on food in 2025—an increase of up to $801.56 from 2024.

2026 Forecast

Food prices are projected to rise another 4-6% in 2026, with meat prices increasing 5-7%. The average family of four will likely spend $17,571.79 on food—an additional $994.63 more than 2025.

Public Sentiment

81% of Canadians are worried about food costs.

The Bottom Line: Canada's Self-Inflicted Wounds

The counterintuitive reality is that Canada's grocery inflation crisis is largely self-inflicted:

Factor	Canada	USA
Grocery market concentration	75% (4 companies)	Highly fragmented
Discount competition	Minimal (owned by oligopolists)	Strong (Aldi, Lidl, Walmart)
Currency strength	Weak (import costs rise)	Strong (imports cheap)
Food import dependency	High (60%+ of produce)	Low (20% of food)
Carbon tax on supply chain	Yes (cumulative)	No
Domestic production capacity	Limited by climate	Abundant

What Can Be Done?

Immediate Actions

1. Enforce competition law: Break up vertical integration of "discount" brands
2. Facilitate market entry: Remove barriers for Aldi, Lidl, and other discounters
3. Address currency policy: Consider intervention to stabilize the loonie

Medium-Term Solutions

1. Expand domestic production: Investment in greenhouses and vertical farming
2. Diversify import sources: Reduce reliance on US for fresh produce
3. Review carbon tax structure: Exempt or rebate food supply chain costs

Long-Term Strategy

1. Increase food self-sufficiency: Target moving from 70% to 95% domestic production
2. Invest in agricultural innovation: Cold-climate growing technologies
3. Strengthen food security: Strategic reserves and supply chain resilience

Conclusion

The grocery price gap between Canada (4.7%) and the United States (1.9%) is not primarily about tariffs—it's about structural failures in Canada's food system. A concentrated grocery oligopoly faces no real competition, a weak dollar makes imports expensive, excessive import dependency leaves Canada vulnerable to external shocks, and carbon taxes accumulate throughout the supply chain.

Until Canada addresses these structural issues—rather than blaming external factors like US tariffs—Canadian families will continue to pay a premium that has nothing to do with international trade and everything to do with domestic policy choices.