Discount grocery stores are expected to outshine their conventional counterparts in 2023 as shoppers seek out cheaper food to cope with staggering price increases, a new report released Monday said.

The DBRS Morningstar commentary said surging inflation and interest rates are shaping consumer behaviour and increasing sales at lower-cost grocery stores.

Consumer efforts to curtail spending are expected to encourage more home cooking, benefitting the grocery industry in general as people forgo restaurant dining to cut costs, it said.

Yet discount grocers are expected to see the biggest increase in sales, the report said.

Efforts to curb spending 91裸聊视频渟hould favour discount grocers over their conventional peers, as consumers seek promotional discounts on individual items, substitute branded offerings with private-label products, and trade down to more affordable offerings within the same product category,91裸聊视频� it said.

Grocery prices were up 11 per cent in December compared with a year ago, Statistics Canada reported last week. Overall, grocery prices in Canada were up 9.8 per cent in 2022 compared with a year earlier 91裸聊视频� the fastest pace since 1981.

In the U.K., where food inflation has surpassed Canada, discount grocery stores have reported strong sales growth.

Discount grocer Aldi, for example, recorded year-over-year sales growth of about 23 per cent, 24 per cent, and 27 per cent in October, November, and December of 2022, respectively, the report said.

Discount store Lidl reported similar growth during the same period ranging from 22 per cent to 24 per cent year over year, it said.

91裸聊视频淭his is significantly above the sales growth of their traditional competitors, including Tesco, Sainsbury91裸聊视频檚, and Asda, which all saw growth of no more than 6.4 per cent during the same months,91裸聊视频� the report said.

The expected growth in discount in Canada the opposite of what occurred during the COVID-19 pandemic.

Stay-at-home orders, health and safety concerns, the desire for convenient 91裸聊视频渙ne-stop shops91裸聊视频� and the growth of online grocery all drove sales at conventional or 91裸聊视频渕arket91裸聊视频� supermarkets.

For example, Loblaw Cos. Ltd.91裸聊视频檚 market division recorded same-store sales growth of 10 per cent, seven per cent and nine per cent during the last three quarters of 2020, the report said. In comparison, the company91裸聊视频檚 discount division reported growth of five per cent, five per cent and seven per cent during the same period.

The strength of the market grocery stores began to ebb as the cost of living began increasing, the report said.

91裸聊视频淎lthough discount grocery stores91裸聊视频� volumes were mostly outpaced by conventional stores during the 91裸聊视频� pandemic, given the changes in consumer behaviour following surging levels of inflation and rising interest rates, we expect the reverse during this continued period of economic distress,91裸聊视频� Moritz Steinbauer, vice-president of consumer and retail at DBRS Morningstar, said in a statement.

Sales trends between discount and conventional stores are expected to gradually return to historic levels as economic conditions stabilize, the report said.

Still, discount grocery could see some 91裸聊视频渟tructural benefit91裸聊视频� if they can hold on to new customers, it said.

This could 91裸聊视频渁mplify discounters91裸聊视频� existing long-term growth and market share gains,91裸聊视频� the report said.

Brett Bundale, The Canadian Press

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