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Low prices, large selection lure Canadian shoppers to American supermarkets

As Lisa Aulbrook pushed her cart across the parking lot at Sam’s Club in Niagara Falls, she passed several vehicles with Ontario license plates. At one SUV, a Canadian family unloaded a cart filled with groceries, including four gallons of milk. Inside the store, Aulbrook chatted up a fellow Canadian whose cart contained three rotisserie chickens and a five-pound bag of mozzarella cheese.

Aulbrook, who crosses the border from Niagara Falls, Ont., to buy her groceries in the states once a week, loaded her own cart with rib-eye steaks, milk, Kraft cheese, hamburger patties, dog treats, butter and Minute Rice.

The prices are so much better here, she said, it’s well worth the trip.

“This would cost $75 at home,” she said, pointing to a giant pork loin priced at $19.48. “It’s like a rich man’s food over there.”

She pointed to a two-pack of Frank’s RedHot sauce, priced at $5.88.

“We pay that much for one bottle,” she said. “And Canadians love their Frank’s just as much as you do.”

Western New Yorkers are well aware the region’s shopping malls and restaurants are filled with Canadian visitors, but a significant segment of Canadian consumers cross the border to visit our grocery stores, too.

Just as someone from West Seneca might make the 30-minute trip to Trader Joe’s in Amherst to find the prices and varieties of food they like, consumers along the Ontario border make similarly short treks to Buffalo Niagara to do the same.

Cross-border shoppers are attracted by the lower prices and the broader selection of products available south of the border. But as the value of the Canadian dollar has recently fallen to about 76 cents U.S., border-crossing numbers also have declined, a fact that worries American grocers who have enjoyed a built-in consumer buffer at their border stores.

Email requests

Spokespeople from Western New York’s two largest supermarkets said Canadian shoppers make up a sizable portion of their clientele at stores near the Canadian border.

The Tops store on Niagara Falls Boulevard in Niagara Falls flies a Canadian flag alongside an American one. A giant sign out front says, “Welcome, Canadians!,” and its gas pumps display prices per liter as well as per gallon.

It’s no wonder stateside grocers want Canadians to feel welcome: They make up as much as 10 percent of the store’s customers on weekends, and spend 20 percent more than the average American Tops shopper.

Dozens of customers have the email address of Tops’ Niagara Falls store manager Sam Qureshi, and they send him special requests for large-quantity orders. He keeps Canadian favorites – Bush’s Baked Beans, Bugles, Coca-Cola, organic foods – in end-cap displays to ensure he’ll have enough stock to meet demand. He rolls out his Thanksgiving promotions more than a month early to coincide with Canadian Thanksgiving, and he puts out special signs acknowledging Canadian holidays.

Gas and milk

Tops’ gas-points program, which lets users earn discounts on fuel, is a big draw. The lowest gas price in Fort Erie last week converted to $4.04 per gallon. On the same day in Buffalo, the highest price was $2.69. Canadian shoppers tend to cross the border on an empty tank and fill up before going back.

But at the top of Canadian shopping lists are inexpensive dairy products – especially milk, butter, cheese, yogurt and ice cream. While Canadians can pay $6.47 for a three-liter bag of milk at home, they’ll pay $2.39 for a gallon at Wegmans. That’s $2.15 per liter at home, 60 cents per liter here. Even with the loonie trading much lower than the Canadian dollar, it still comes out to more than $1 saved per liter.

Canadian stores charge $10.15 for a 48-slice package of Kraft cheese singles, while shoppers can get a 75-slice package for about $5 here. And while a single pound of butter costs $5 north of the border, it’s just $2.54 per pound at Sam’s Club here.

Government controls

So why are prices so much higher north of the border?

Food prices in general are volatile, affected by everything from weather conditions, livestock diseases and gas prices to feed prices, labor costs, taxes and currency fluctuations.

But Canada has some very specific other factors at play – particularly government market controls. Since the 1970s, Canada’s dairy market has been tightly controlled and regulated by the Canadian Dairy Commission. Under its “supply-management” program, prices are determined by the costs of production rather than by what the market is willing to pay, and supply is determined not by demand but by a regulated quota system that limits how much each farm is allowed to produce.

Dairy imports from other countries are tightly restricted, and whatever imports do make it onto the shelves of specialty retailers are slapped with high tariffs meant to discourage outside competition. When all those factors combine, Canadians face dairy prices that are up to three times higher than ours, even while selection is greatly reduced.

The same supply-management system is applied to poultry and eggs, and adds from $339 to $554 to Canadian families’ grocery bills per year, according to a study from the University of Manitoba.

Poultry and eggs have long been favorites on cross-border shopping lists. Per pound, chicken breast is more than $7 Canadian – more expensive than premium organic chicken breast here. Because of Avian flu concerns, however, there is a temporary ban on taking eggs and uncooked poultry back across the border.

Other things drive up prices across the board, according to Adam Grachnik, a spokesman for Food & Consumer Products of Canada, a food industry association. Canada’s smaller and widely dispersed population adds transport costs, and the country faces higher energy and labor costs. Fewer manufacturers also means there is less competition and less pressure to discount products.

Wider selection

Canadians routinely cite the wider selection in varieties, flavors, brands and sizes on American shelves, especially when it comes to things like crackers, cereal, protein bars and salad dressings, as well as natural foods and organics. Some even swear identical varieties sold in Canada taste different than those sold here.

“Every time I go over there, I buy my daughter this Post cereal that she likes,” said Sara Snyder, who crosses the border from Niagara Falls, Ont., about three times a month to shop. “They sell it in Canada, but she doesn’t like it. She says it tastes too sweet.”

That could be because certain ingredients regularly used in American foods – such as bromate in bread – are banned in Canada, so companies are forced to change the formulations of certain foods exported there.

There are several reasons for the differences in variety.

Canada has far fewer food manufacturers than the U.S., and they are producing food for a population about one-tenth of the size of the United States’. They face shorter production runs to satisfy smaller market volume needs, and naturally produce fewer varieties, according to Arlene White, principal at Cross-Border Business Experts, a private consulting firm in Crystal Beach, Ont.

“That’s why we have the best of both worlds, living in our cross-border region and being able to select what works best for our budgets on a year-round basis,” she said.

And though supply management was created to protect family farms, Canada’s quota system actually makes it cost-prohibitive for small dairy farmers to break into the business. The permit to produce milk from just one cow costs $25,000. The high costs have contributed to an increase in factory farms owned by wealthy corporations, according to data from the Queen’s University School of Policy Studies.

Compare that to the United States, where there has been a demand-driven boom in niche, small-batch, artisan cheeses, yogurts and ice cream. In fact, demand for a greater variety of imported and domestic cheeses and other gourmet dairy products has prompted grocery stores to rearrange their entire sales floors in order to devote more space to them. Tops has increased its number of cheese cases. Wegmans even opened its own cheese cave in order to domestically age certain gourmet cheeses.

Exchange concerns

American grocers say the falling Canadian dollar is concerning, but have not yet seen a measurable drop in Canadian sales. The loonie has been falling steadily since 2011, when it was trading above par and increasing Canadian consumer purchasing power by as much as 5 percent. It peaked at $1.05 American in 2011, but is worth just 75 cents American now.

Border-crossing numbers have been falling, too. There were 535,442 crossings at the Peace Bridge in June 2011. Last month, they were down to 484,922.

But experts speculate the drop in cross-border trips may be due to a dip in recreational travel, not routine grocery trips. With food prices sometimes as much as 75 percent cheaper here, and the slew of grocery products unavailable at home, Canadians say American supermarkets are still worth crossing the border for – even if their spending power continues to drop.

That’s certainly the case for Snyder. She shops regularly at home, but keeps a list of things to pick up in the states. With her Nexus pass, she breezes across the Whirlpool bridge as quickly as if she were crossing Grand Island. Canadian citizens are allowed to bring back up to $200 in food without having to pay additional duty, and she is rarely hassled or pulled over by border agents for further inspection. She said she has been crossing the border for dinner or shopping since she was a child with her parents and that it’s an ingrained habit she can’t imagine will change any time soon.

“I think of the states as an extension of my neighborhood,” she said.