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Stem Announces Second Quarter 2021 Financial Results – Yahoo Finance

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Revenue at high end of guidance

Company reaffirms 2021 financial guidance

SAN FRANCISCO, August 11, 2021–(BUSINESS WIRE)–Stem, Inc. (“Stem” or the “Company”) (NYSE:STEM), a global leader in artificial intelligence (AI)-driven clean energy storage services, announced today its financial results for the second quarter ended June 30, 2021.

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Second Quarter 2021 Financial and Operating Highlights

Financial Highlights

  • Revenues of $19.3 million, up from $4.4 million (+339%) in the same quarter last year

  • Gross Margin (GAAP) of (1)% versus (40)% in the same quarter last year

  • Non-GAAP Gross Margin of 11%, up from 5% in the same quarter last year

  • Net Loss of $(100.2) million versus $(19.0) million in the same quarter last year

  • Adjusted EBITDA of $(8.6) million vs. $(7.5) million in the same quarter last year

  • Ended the second quarter with $474 million in cash and zero debt

Operating Highlights

  • 12-month Pipeline of $1.7 billion, up from $1.4 billion (+21%) at end of the first quarter

  • Contracted Backlog of $250 million, up from $221 million (+13%) at end of the first quarter

  • Contracted Assets Under Management (AUM) of 1.2 gigawatt hours (GWh), up from 0.5 GWh in the same quarter last year

John Carrington, Chief Executive Officer of Stem, commented, “We are pleased to announce a solid second quarter of execution, building on our strong first-quarter results. Revenue was at the high end of our guidance range, which, coupled with our gross margin and operating expense performance, keeps us on track to meet our full-year revenue and Adjusted EBITDA targets. Our sales team continued to leverage our partner channel in multiple geographies increasing our contracted backlog to $250 million (13% sequential growth), providing us with increased visibility into 2022 revenue. As the first pure-play publicly traded smart energy storage company, our experience, industry-leading Athena® software platform, robust service offerings, and strong balance sheet will continue to differentiate Stem in this rapidly expanding market.”

Key metrics

$ millions unless otherwise noted

Three Months Ended

June 30,

2021

2020

Financial metrics

Revenue

$19.3

$4.4

Gross Margin (GAAP)

$(0.1)

$(1.7)

Gross Margin (GAAP, %)

-1%

-40%

Non-GAAP Gross Margin***

$2.1

$0.2

Non-GAAP Gross Margin (%)***

11%

5%

Net Loss (GAAP)

$(100.2)

$(19.0)

Adjusted EBITDA***

$(8.6)

$(7.5)

Key Operating metrics*

12-Month Pipeline ($ billions)

$1.7

**

Contracted Backlog

$250

**

Contracted AUM (GWh)

1.2

0.5

* at period end

** not available

***Non-GAAP financial measures. See the section below titled “Use of Non-GAAP Financial Measures” for details and page 9 for reconciliations.

Second-Quarter 2021 Financial and Operating Results

Financial Results

Second quarter revenue increased 339% to $19.3 million, versus $4.4 million in the same quarter last year. Higher hardware revenue from Front of the Meter (“FTM”) partnership agreements drove most of the year-over-year increase, in addition to higher services revenue from host customer arrangements.

Gross Margin (GAAP) was $(0.1) million, or (1)%, versus $(1.7) million, or (40)% in the same quarter last year. Non-GAAP Gross Margin was $2.1 million or 11% versus $0.2 million or 5% in the same quarter last year. The year-over-year increases in Gross Margin (GAAP) and Non-GAAP Gross Margin resulted from an increased mix of software service revenues and higher-margin hardware deliveries.

Net Loss increased to $(100.2) million versus $(19.0) million in the same quarter last year. This was primarily due to $76.4 million of non-cash charges recorded in the quarter from the revaluation of warrants tied to an increase in the value of the underlying stock, along with higher operating expenses.

Adjusted EBITDA was $(8.6) million compared to $(7.5) million in the same quarter last year. The lower Adjusted EBITDA results were primarily driven by higher operating expenses, due to increased personnel costs reflecting continued investment in our growth initiatives.

The Company ended the second quarter with $474 million in cash and no debt.

Operating Results

The Company’s 12-month forward Pipeline was $1.7 billion as of June 30, 2021, representing significant year-over-year growth. The 21% increase in the 12-month pipeline from $1.4 billion at March 31, 2021 is a result of increased FTM project opportunities and the seasonal nature of the pipeline.

Contracted Backlog increased 13% sequentially, from $221 million as of March 31, 2021 to $250 million as of June 30, 2021. The increase in Contracted Backlog resulted from strong bookings of $45 million tied to increased commercial activity. Bookings grew 18% year-over-year from $38 million in the quarter ended June 30, 2020.

Contracted AUM more than doubled year-over-year to 1.2 GWh, driven by increased commercial activity and the addition of the 345-megawatt hour (MWh) Electrodes Holdings LLC portfolio. Contracted AUM increased sequentially by 9%, driven by new contracts and new systems that came in service.

The following table provides a summary of current backlog compared to prior quarter backlog:

$ millions

Period ending 1Q21

$221

$45

($19)

$3

Period ending 2Q21

$250

Business Highlights

Since mid-June 2021, Stem has consistently dispatched more than 500 MWh daily in multiple markets across the United States and Canada in response to heat waves, increased grid interconnections from renewables and wildfires that have caused widespread stress on power grids. Stem’s demand response and grid services programs are designed to use virtual power plants powered by the Athena software platform to flatten electricity usage peaks and deliver power to the most constrained parts of the grid.

Stem has grown rapidly in ISO New England since the system operator expanded market participation activities for Front-of-the-Meter (“FTM”) storage in 2020. As of the end of June, Stem-directed systems comprised 52% of Massachusetts and 19% of ISO-NE of the operational continuous storage facilities active in the wholesale energy, ancillary services and forward capacity settlement markets, as reported by the system operator.

On June 25, 2021, Stem entered into an agreement to exchange 7.2 million private warrants for 4.7 million shares of common stock. The transaction closed on June 30, 2021. As of August 11, 2021, 12.8 million public warrants remain outstanding, which are redeemable by the Company beginning August 20, 2021.

On June 2, 2021, Stem announced that it had partnered with Ameresco, a leading cleantech integrator, whereby it will provide 15 MWh of battery storage for Holy Cross Energy, an electric cooperative in western Colorado. Stem and Ameresco plan to further collaborate to provide enhanced returns in electric cooperative markets and beyond. The Company is currently pursuing projects with cooperatives in 26 states and expects this end market to represent a significant component of its FTM business.

Outlook

The Company reaffirms its guidance of full-year 2021 revenue of $147 million and full-year 2021 Adjusted EBITDA of $(25) million. Consistent with prior guidance, the Company reaffirms that it expects to recognize 20-30% of total 2021 revenue in Q3, and 50-60% of total 2021 revenue in Q4.

The Company believes that it has contracted for sufficient supply chain commitments to meet its 2021 revenue goal and will continue to diversify its supply chain, adopt alternative technologies, and deploy its balance sheet to meet the significant growth in customer demand.

Use of Non-GAAP Financial Measures

In addition to financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we use the following non-GAAP financial measures: non-GAAP gross margin and Adjusted EBITDA. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. See “Reconciliations of non-GAAP Financial Measures” on page 9 of this release. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate our operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our operating performance, such as stock-based compensation and other non-cash charges, as well as discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because they (1) allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) are used by our institutional investors and the analyst community to help them analyze the health of our business.

We define Adjusted EBITDA as net loss before depreciation and amortization, including amortization of internally developed software, net interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including the change in fair value of warrants and embedded derivatives.

We define non-GAAP gross margin as gross margin excluding amortization of capitalized software, impairments related to decommissioning of end-of-life systems, and adjustments to reclassify data communication and cloud production expenses to operating expenses.

About Stem, Inc.

Stem Inc. (NYSE: STEM) provides solutions that address the challenges of today’s dynamic energy market. By combining advanced energy storage solutions with Athena®, a world-class AI-powered analytics platform, Stem enables customers and partners to optimize energy use by automatically switching between battery power, onsite generation and grid power. Stem’s solutions help enterprise customers benefit from a clean, adaptive energy infrastructure and achieve a wide variety of goals, including expense reduction, resilience, sustainability, environmental and corporate responsibility and innovation. Stem also offers full support for solar partners interested in adding storage to standalone, community or commercial solar projects – both behind and in front of the meter.

For more information, visit www.stem.com.

Notes

Stem will hold a conference call to discuss this earnings press release and business outlook on Wednesday, August 11, 2021 at 5:00 p.m. Eastern Time. The conference call may be accessed via a live webcast on a listen-only basis on the Events & Presentations page of the Investor Relations section of the Company’s website at https://investors.stem.com/events-and-presentations. The call can also be accessed live over the telephone by dialing 877-705-6003, or for international callers, 201-493-6725 and referencing Stem. A replay of the webcast will be available shortly after the call on the Events & Presentations page in the Investor Relations section of the Company’s website and will remain available for approximately one month.

Forward-Looking Statements

This second-quarter 2021 earnings release, as well as other statements we make, contain “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “forecast,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “think,” “should,” “could,” “would,” “will,” “hope,” “see,” “likely,” and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as the reduction of greenhouse gas (“GHG”) emissions; the integration and optimization of energy resources; the business strategies of Stem and those of its customers; the global commitment to decarbonization; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; our ability to manage our supply chains and distribution channels and the impact of natural disasters and other events beyond our control, such as the COVID-19 pandemic and the Delta variant; and future results of operations. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon assumptions and estimates that, while considered reasonable by Stem and its management, depend upon inherently uncertain factors and risks that may cause actual results to differ materially from current expectations, including our inability to help reduce GHG emissions; our inability to seamlessly integrate and optimize energy resources; our inability to achieve our financial and performance targets and other forecasts and expectations; our inability to recognize the anticipated benefits of our recent business combination with Star Peak Energy Transition Corp. (“Star Peak”); our ability to grow and manage growth profitably; risks relating to the development and performance of our energy storage systems and software-enabled services; the risk that the global commitment to decarbonization may not materialize as we predict, or even if it does, that we might not be able to benefit therefrom; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; our inability to secure sufficient inventory from our suppliers to meet customer demand, and provide us with contracted quantities of equipment; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; our inability to attract and retain qualified personnel; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties set forth in the section entitled “Risk Factors” in the registration statement on Form S-1 filed with the SEC on July 19, 2021, and our most recent Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. Statements in this second-quarter 2021 press release are made as of the date of this release, and Stem disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

Source: Stem, Inc.

STEM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)

June 30, 2021

December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

474,138

$

6,942

Accounts receivable, net

17,833

13,572

Inventory, net

27,167

20,843

Other current assets (includes $206 and $123 due from related parties as of June 30, 2021 and December 31, 2020, respectively)

19,199

7,920

Total current assets

538,337

49,277

Energy storage systems, net

118,216

123,703

Contract origination costs, net

11,668

10,404

Goodwill

1,786

1,739

Intangible assets, net

12,387

12,087

Other noncurrent assets

15,945

8,640

Total assets

$

698,339

$

205,850

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$

17,798

$

13,749

Accrued liabilities

9,177

16,072

Accrued payroll

4,565

5,976

Notes payable, current portion

33,683

Convertible promissory notes (includes $— and $45,271 due to related parties as of June 30, 2021 and December 31, 2020, respectively)

67,590

Financing obligation, current

15,336

14,914

Deferred revenue, current

37,056

36,942

Other current liabilities (includes $880 and $399 due to related parties as of June 30, 2021 and December 31, 2020, respectively)

1,910

1,589

Total current liabilities

85,842

190,515

Deferred revenue, noncurrent

18,648

15,468

Asset retirement obligation

4,178

4,137

Notes payable, noncurrent

1,719

4,612

Financing obligation, noncurrent

74,496

73,128

Warrant liabilities

303,798

95,342

Lease liability, noncurrent

880

57

Total liabilities

489,561

383,259

Commitments and contingencies (Note 13)

Stockholders’ equity (deficit):

Preferred stock, $0.0001 par value; 1,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020

Common stock, $0.0001 par value; 500,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 130,418,055 and 40,202,785 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

13

4

Additional paid-in capital

799,918

230,620

Accumulated other comprehensive loss

(543

)

(192

)

Accumulated deficit

(590,610

)

(407,841

)

Total stockholders’ equity (deficit)

208,778

(177,409

)

Total liabilities and stockholders’ equity (deficit)

$

698,339

$

205,850

STEM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Revenue

Services revenue

$

5,153

$

3,670

$

10,035

$

7,062

Hardware revenue

14,184

709

24,723

1,427

Total revenue

19,337

4,379

34,758

8,489

Cost of revenue

Cost of service revenue

5,809

5,510

12,715

10,255

Cost of hardware revenue

13,655

614

22,286

1,365

Total cost of revenue

19,464

6,124

35,001

11,620

Gross margin

(127

)

(1,745

)

(243

)

(3,131

)

Operating expenses:

Sales and marketing

3,913

4,242

6,580

8,646

Research and development

4,827

3,619

9,234

7,032

General and administrative

15,014

2,404

17,706

5,383

Total operating expenses

23,754

10,265

33,520

21,061

Loss from operations

(23,881

)

(12,010

)

(33,763

)

(24,192

)

Other income (expense), net:

Interest expense

(3,929

)

(5,192

)

(10,162

)

(9,561

)

Loss on extinguishment of debt

(5,064

)

(5,064

)

Change in fair value of warrants and embedded derivative

(67,179

)

(1,918

)

(133,577

)

(909

)

Other income (expenses), net

(163

)

139

(203

)

(1,790

)

Total other income (expense)

(76,335

)

(6,971

)

(149,006

)

(12,260

)

Loss before income taxes

(100,216

)

(18,981

)

(182,769

)

(36,452

)

Income tax expense

Net loss

$

(100,216

)

$

(18,981

)

$

(182,769

)

$

(36,452

)

Net loss per share attributable to common shareholders, basic and diluted

$

(1.00

)

$

(0.48

)

$

(2.59

)

$

(1.14

)

Weighted-average shares used in computing net loss per share, basic and diluted

100,611,965

39,801,379

70,684,750

40,209,877

STEM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Six Months Ended June 30,

2021

2020

OPERATING ACTIVITIES

Net loss

$

(182,769

)

$

(36,452

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

10,315

7,918

Non-cash interest expense, including interest expenses associated with debt issuance costs

7,119

4,570

Stock-based compensation

1,784

932

Change in fair value of warrant liability and embedded derivative

133,577

909

Noncash lease expense

334

286

Accretion expense

112

160

Impairment of energy storage systems

1,275

947

Issuance of warrants for services

9,183

Changes in operating assets and liabilities:

Accounts receivable

(4,219

)

2,212

Inventory

(6,323

)

(6,340

)

Other assets

(16,924

)

(2,691

)

Contract origination costs

(1,650

)

(1,383

)

Accounts payable and accrued expenses

3,292

412

Deferred revenue

3,294

12,308

Lease liabilities

(289

)

(310

)

Other liabilities

56

25

Net cash used in operating activities

(41,833

)

(16,497

)

INVESTING ACTIVITIES

Purchase of energy storage systems

(5,603

)

(7,555

)

Capital expenditures on internally-developed software

(2,693

)

(2,628

)

Purchase of property and equipment

(300

)

Net cash used in investing activities

(8,596

)

(10,183

)

FINANCING ACTIVITIES

Proceeds from exercise of stock options and warrants

2,933

54

Net contributions from Merger and PIPE financing, net of transaction costs of $58,061

550,322

Proceeds from financing obligations

4,929

8,391

Repayment of financing obligations

(4,609

)

(4,267

)

Proceeds from issuance of convertible notes, net of issuance costs of $8 and $911 for the six months ended June 30, 2021 and 2020, respectively

1,118

14,050

Proceeds from issuance of notes payable, net of issuance costs of $101 and $1,502 for the six months ended June 30, 2021 and 2020, respectively

3,940

23,498

Repayment of notes payable

(41,446

)

(19,665

)

Net cash provided by financing activities

517,187

22,061

Effect of exchange rate changes on cash and cash equivalents

438

(176

)

Net increase (decrease) in cash and cash equivalents

467,196

(4,795

)

Cash and cash equivalents, beginning of period

6,942

12,889

Cash and cash equivalents, end of period

$

474,138

$

8,094

STEM, INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

(unaudited)

The following table provides a reconciliation of net loss to Adjusted EBITDA:

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

(in thousands)

(in thousands)

Net loss

$

(100,216

)

$

(18,981

)

$

(182,769

)

$

(36,452

)

Adjusted to exclude the following:

Depreciation and amortization

5,236

3,924

10,315

7,918

Interest expense

3,929

5,192

10,162

9,561

Loss on extinguishment of debt

5,064

5,064

Stock-based compensation

1,024

476

1,784

932

Vesting of warrants

9,184

9,184

Change in fair value of warrants and embedded derivative

67,179

1,918

133,577

909

Provision for income taxes

Adjusted EBITDA

$

(8,600

)

$

(7,471

)

$

(12,683

)

$

(17,132

)

Adjusted EBITDA as used in connection with the Company’s 2021 outlook is a non-GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company is unable to reconcile Adjusted EBITDA to net loss, its most directly comparable forward-looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty its change in fair value of warrants expense for 2021. In addition, the Company may incur additional expenses that may affect Adjusted EBITDA, such as stock-based compensation expense and other items. The unavailable information could have a significant effect on the Company’s full year 2021 GAAP financial results.

The following table provides a reconciliation of gross margin (GAAP) to non-GAAP gross margin:

$ millions, unless otherwise noted

Three Months Ended

June 30,

2021

2020

Revenue

$19.3

$4.4

Cost of Goods Sold

($19.4)

($6.1)

Gross Margin (GAAP)

($0.1)

($1.7)

Gross Margin (GAAP) (%)

-1%

-40%

Adjustments to Gross Margin

Amortization of Capitalized Software

$1.3

$0.9

Impairments of Storage Systems

$0.3

$1.1

Other Adjustments(1)

$0.6

($0.1)

Non-GAAP Gross Margin

$2.1

$0.2

Non-GAAP Gross Margin (%)

11%

5%

(1) Consists of certain operating expenses including communication and cloud service expenditures reclassified to cost of revenue.

Key Definitions:

Item

Definition

12-Month Pipeline

Total value of uncontracted, potential hardware and software revenue from opportunities currently in process by Stem direct salesforce and channel partners which have a reasonable likelihood of contract execution within 12 months

Gross Pipeline

Total value of uncontracted, potential hardware and software revenue from opportunities currently in process by Stem direct salesforce and channel partners

Bookings

Total value of executed customer agreements, as measured during a given period (e.g. quarterly booking or annual booking)

Contracted Backlog

Total value of bookings in dollars, as reflected on a specific date

Contracted AUM

Total MWh of systems in operation or under contract

View source version on businesswire.com: https://www.businesswire.com/news/home/20210811005842/en/

Contacts

Stem Investor Contacts
Ted Durbin, Stem
Marc Silverberg, ICR
IR@stem.com
(847) 905-4400

Stem Media Contacts
Cory Ziskind, ICR
stemPR@icrinc.com

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Canadians won’t escape food inflation any time soon.

Food prices in Canada will continue to escalate in the new year, with grocery costs forecast to rise up to seven per cent in 2023, new research predicts.

For a family of four, the total annual grocery bill is expected to be $16,288 — $1,065 more than it was this year, the 13th edition of Canada’s Food Price Report released Monday said.

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A single woman in her 40s — the average age in Canada — will pay about $3,740 for groceries next year while a single man the same age would pay $4,168, according to the report and Statistics Canada.

Food inflation is set to remain stubbornly high in the first half of 2023 before it starts to ease, said Sylvain Charlebois, lead author of the report and Dalhousie University professor of food distribution and policy.

“When you look at the current food inflation cycle we’re in right now, we’re probably in the seventh-inning stretch,” he said in an interview. “The first part of 2023 will remain challenging … but we’re starting to see the end of this.”

Multiple factors could influence food prices next year, including climate change, geopolitical conflicts, rising energy costs and the lingering effects of COVID-19, the report said.

Currency fluctuations could also play a role in food prices. A weaker Canadian dollar could make importing goods like lettuce more expensive, for example.

Earlier this year the loonie was worth more than 80 cents US, but it then dropped to a low of 72.17 cents US in October amid a strengthening U.S. dollar. It has hovered near the 74 cent mark in recent weeks, ending Friday at 74.25 cents US.

“The produce section is going to be the wild card,” Charlebois said. “Currency is one of the key things that could throw things off early in the winter and that’s why produce is the highest category.”

Vegetables could see the biggest price spikes, with estimates pegging cost increases will rise as high as eight per cent, the report said.

In addition to currency risks, much of the produce sold in Canada comes from the United States, which has been struggling with extremely dry conditions.

“The western U.S., particularly California, has seen strong El Nino weather patterns and droughts and bacterial contaminations, and that’s impacted our fruit and vegetable suppliers and prices,” said Simon Somogyi, campus lead at the University of Guelph and professor at the Gordon S. Lang School of Business and Economics.

“The drought is making the production of lettuce more expensive,” he said. “It’s reducing the crop size but it’s also causing bacterial contamination, which is lessening the supply in the marketplace.”

Prices in other key food categories like meat, dairy and bakery are predicted to soar up to seven per cent, the researchers found.

The Canadian Dairy Commission has approved a farm gate milk price increase of about 2.2 per cent, or just under two cents per litre, for Feb. 1, 2023.

“The increase for February is reasonable but it comes after the unprecedented increases in 2022, which are continuing to work their way through the supply chain,” Charlebois said of the two price hikes of nearly 11 per cent combined in 2022.

Meanwhile, seafood is expected to increase up to six per cent, while fruit could increase up to five per cent, the report said.

Restaurant costs are expected to increase four to six per cent, less than supermarket prices, the report said.

Rising prices will push food security and affordability even further out of reach of Canadians a year after food bank use reached a record high, the report said.

The increasing reliance on food banks is expected to continue, with 20 per cent of Canadians reporting they will likely turn to community organizations in 2023 for help feeding their families, a survey included in the report found.

Use of weekly flyers, coupons, bulk buying and food rescuing apps also ticked up this year and is expected to continue growing in 2023, the report said.

“We’re in the era now of the smart shopper,” said Somogyi, also the Arrell Chair in the Business of Food.

“For certain generations, it’s the first time that they’ve had to make a list, not impulse buy, read the weekly flyers, use coupons, buy in volume and freeze what they don’t use.”

Last year’s report predicted food prices would increase five to seven per cent in 2022 — the biggest jump ever predicted by the annual food price report.

Food costs actually far exceeded that forecast. Grocery prices were up 11 per cent in October compared with a year before while overall food costs were up 10.1 per cent, according to Statistics Canada.

“We were called alarmists,” Charlebois said of the prediction that food prices could rise seven per cent in 2022. Critics called the report an “exaggeration,” he said.

“You’re always one crisis away from throwing everything out the window,” Charlebois said. “We didn’t predict the war in Ukraine, and that really affected markets.”

This report by The Canadian Press was first published Dec. 5, 2022.

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