I compared value grocers in U.S. and Canada. One discount chain won – even with a weak loonie | Canada Voices

Social media was once flooded with videos of Canadian shoppers proudly showcasing how much they saved buying groceries in the United States. (Search #CrossBorderShopping on TikTok and see for yourself). But with the loonie plummeting to four-year lows against the greenback, I figured those savings were long gone.

On a recent trip to the U.S., I decided to find out – and was proven wrong, at least when it came to budget grocers.

My experiment began three weeks ago en route to Maryland to spend the holidays with family. The road through New York and Pennsylvania is dotted with Aldi stores, a German discount chain known for its low prices and which does not appear to have significant interest in entering the Canadian market.

Last year, it was reported that Canada’s Industry Minister François-Philippe Champagne listed Aldi as one of the foreign grocers he intended to court in a bid to increase competition and lower food prices. Recent data from coupon site Bravo Deal calculated that a US$185.18 shopping trip at Aldi in the U.S. would cost US$225.22 even at Walmart, another store known for its cheap grocery prices.

Curious to see how America’s top discount grocer stacked up to Canada’s, I compared prices at Aldi in Pennsylvania and Maryland with those at No Frills in Ontario. Surprisingly, Aldi came out ahead in key categories like meat and vegetables – even with the painful exchange rate of C$1.44 per U.S. dollar.

Fresh lean ground beef, which was priced around US$3.29 per pound at Aldi, or C$4.74, currently costs about C$6.79 at No Frills. Meanwhile, chicken thighs cost US$1.69 or C$2.44 per pound versus C$3.99 at No Frills. A pack of boneless, skinless chicken breasts was as low as US$2.49 per pound or C$3.59 versus C$6.49 at No Frills.

In Aldi’s vegetable aisles, potatoes were especially cheap. Red potatoes were priced at about 70 US cents per pound, or roughly C$1, compared with C$2.49 at No Frills. Spinach was priced the same or less at Aldi at the equivalent of around C$2. Tomatoes and cucumbers were similarly priced or slightly more expensive at Aldi.

To my surprise, items that weren’t cheaper at Aldi included milk and eggs. A U.S. gallon (about 3.8 litres) of milk there was priced at US$4.81 or about C$6.93, while a four-litre bag cost C$6.08 at No Frills. Eggs were US$3.97 or C$5.72, versus $3.93 at No Frills.

These two items tend to be more expensive in Canada because of supply management – a system whereby farmers across provinces have production quotas and prices are set and regulated. A pricing formula guarantees that farmers don’t lose money and that prices don’t fluctuate significantly for consumers, but carries with it the potential drawback of less competitive pricing, according to Sylvain Charlebois, the director of the Agri-Food Analytics Lab at Dalhousie University.

Mr. Charlebois said that U.S. milk prices are actually cheaper than what they are, on average, in Canada. No Frills likely boasted a lower price as a “loss leader” – a product priced below market value to get consumers through the door, he said.

“Here in Quebec or Halifax, a gallon of milk is $8.50 or close to $9,” Mr. Charlebois said.

Eggs are also generally more expensive in Canada. Mr. Charlebois suspects that higher prices at Aldi were the result of U.S. prices being more susceptible to fluctuations based on consumer demand – and demand for eggs is higher during the holidays. A bout of Avian flu in the U.S. has also been potentially pushing up prices.

James Vercammen, a professor of food and resource economics at the University of British Columbia, said his hunch is that food prices are still “uniformly lower in the U.S. than in Canada.” He highlighted examples of lower prices (taking into account exchange rates) for potatoes and salmon in the U.S. versus Canada today.

“This cannot be blamed on recent inflation since the rate of food price inflation over the past five years has been similar for the two countries,” he said. But he reasons that because the country has a much bigger population, there are much larger economics of scale, and therefore cost savings.

He also points to lower labour costs, lower corporate taxes, less worker benefits and less regulation as contributing to America’s lower food costs. He isn’t convinced that less competition between retailers in Canada – five grocers control about 80 per cent of the market – is the biggest reason food is more expensive.

But Canada’s own competition watchdog suggests otherwise. A 2023 report by the Competition Bureau discussed Aldi and Lidl when recommending that Canada mitigate barriers to draw in discount foreign grocers to lower food prices.

The report highlighted that strategies like harmonized unit pricing – showing the cost of products through standard units to simplify price comparison – and limiting property controls that affect where and how supermarkets operate are needed to encourage new competition and lower costs.

Audrey Milette, a spokesperson for Mr. Champagne said the government is taking a series of actions to promote the stabilization of grocery prices.

“Maintaining and enhancing healthy competition in the grocery sector is paramount to stabilizing food prices,” said Ms. Milette, adding that Mr. Champagne had discussions with foreign grocers about making investments in Canada.

But for now, Mr. Charlebois said foreign discounters aren’t eager to enter a country with an exclusive club of long-time players known for manipulating markets. “They’re the gatekeepers,” he said.