Canada groceries: Wheat price is dropping, so why is cereal still so expensive? Expert explains hidden costs
With Canadians feeling the inflationary crunch on many grocery staples, you might be wondering why your favourite morning breakfast cereal is so pricey.
With Canadians feeling the inflationary crunch on many grocery staples, you might be wondering why your favourite morning breakfast cereal — or CEO-approved dinnertime meal — is more expensive now too. After all, isn't the price of wheat — the main ingredient in many cereals — way down this year?
While food manufacturers have been paying 16.2 per cent less for raw wheat, it's not what's inside the box that's hiking prices. In fact, it's the box itself, one expert tells Yahoo Canada.
Andre Magnan, a professor of sociology and social studies at the University of Regina, says the cost of food products like breakfast cereal is determined by many aspects of the supply chain.
“One of the interesting things is that the cost of the grain to make that box of cereal is only a small part of the retail price,” Magnan tells Yahoo Canada. “Some research suggests that the packaging, like the box and bag that cereal comes in, is higher input cost than the cost of the grain that goes into the cereal.”
While prices for breakfast cereal, and other cereal products, were down 2.7 per cent, the price for the paper containers that held the cereal were up 14.1 per cent, while manufacturing wages spiked 6.9 per cent in 2023.
Frosted Flakes doesn't grow on farms after all
Magnan says the cereal box sold in your favourite store comes a long way from where the wheat or corn to make the food staple is grown.
“There’s transportation of the grain, food processing, marketing, labour at the food processing plant, transportation to a wholesale distributor and ultimately to the store shelf,” he says.
There are also costs behind where that box of cereal is placed on store shelves.
“These food manufacturers are also paying grocery stores for shelf space, which turns out to be a big chunk of the cost of the cereal,” Magnan says.
So while the price of wheat can be going down, as it has been for last couple of years, the price of the cereal varieties we buy in grocery stores can continue to go up.
“In essence, there’s not a very tight connection between the raw material, wheat or corn, and the box of cereal we’re buying on the supermarket shelf,” he adds.
Not just inflation causing higher prices on cereal in stores
Another factor contributing to the high price of cereal is the margins taken by retailers and food manufacturers.
According to Statistics Canada, in 2023, wholesale food margins rose by 7.5 per cent, while retail grocery store margins grew by 9.9 per cent.
Magnan says there have clearly been big jumps in the price of cereal and it’s not only related with the rising costs of inputs for the product. While inflation is driven in part by the rising cost of what goes in to making the product, retailers, wholesalers and food manufacturers will take advantage of that to raise prices even more.
Canadians react to price of cereal: Shoppers say they're not buying cereal anymore
On a thread posted to the Loblaws Is Out Of Control subreddit, many Canadians users unloaded about the cost of cereal, with some sharing they paid nearly $7 for a box
“I gave up on buying cereal,” user pistoffcynic wrote. “All I eat now are whole grain oats with fruit.”
“So many cheaper healthier alternatives,” MyNameIsSkittles wrote. "Canadians need to stop buying overpriced garbage.”
These food manufacturers are also paying grocery stores for shelf space, which turns out to be a big chunk of the cost of the cereal.