Inflation in grocery prices picked up in 2025, largely due to rising cost pressures that emerged in late 2024 and worked their way through supply chains. Compared with the cost pressures experienced during the COVID‑19 pandemic, these have been more limited, narrower in scope and more commonly tied to imported items.

Many Canadians walking down grocery aisles these days have been struck by how much prices seem to have gone up.

They’re not wrong. Since 2022, grocery prices have risen by about 22% while other consumer prices have gone up on average by 13%. And in 2025, food inflation—the year-over-year increase in prices for food purchased at stores—was elevated. In December, food inflation reached 5%, the highest since late 2023.

Rising food prices have a large and immediate effect on households—who spend around 11% of their budget on groceries—and on total inflation.

So it’s important for both households and the Bank of Canada to understand what affects food inflation and how long these effects may last.

The food supply chain is long and complex

The path that food takes to end up on your plate is a long one. Food is farmed, processed, packaged, transported and sold wholesale before you see it in the grocery aisle. So how much does each of these production stages matter for food prices?

To answer this question, I created a detailed framework to assess each category of costs in a systematic way.

I start by using detailed data on the economy’s supply chains from Statistics Canada to break down retail food prices. The analysis excludes fruits and vegetables because their prices tend to be quite volatile, reflecting weather conditions which can change a lot.

Food sold in grocery stores is either directly imported—meaning it is ready to be sold without any other production steps—or it’s made in Canada using domestic or imported inputs.

Based on this, I put the costs that go into producing food into eight broad categories:

• direct imports, such as ready-to-sell products like olive oil
• imported inputs, such as foreign-sourced ingredients, fertilizers and machinery
• domestically produced goods, such as wheat and eggs
• international shipping costs
• energy costs, such as for diesel, electricity or natural gas
• business services, such as rent, marketing fees and domestic transport
• wages
• profits and taxes

Chart 1 shows how much each category contributes, on average, to the final retail price of food (excluding fruits and vegetables).