Canada's food and beverage manufacturers experienced strong sales growth despite a challenging environment according to a report by Farm Credit Canada (FCC).
Food and beverage manufacturing sales increased 10.6 per cent to $156 billion in 2022, with gains predominately coming from higher export values and strength in the grain and oilseed milling industry. Modest sales growth is expected in 2023 at 2.2 per cent, with the major protein industries of dairy, meat and seafood expected to outperform that forecast. Margins were tighter last year as manufacturers navigated increases in prices of raw materials, labour shortages, and supply chain disruptions.
“It is difficult for food and beverage manufacturers to pass on those increased labour and material costs,” says J.P. Gervais, FCC’s chief economist. “Gross margins as a per cent of sales fell to their lowest level in over 20 years in 2022. While margin trends vary based on industry, we do anticipate an overall improvement to gross margins in the coming year.”
“Consumers cut back on discretionary spending last year as they faced higher inflation, depleted savings and higher costs of servicing debt,” Gervais notes. “Inflation led to changes in food consumption decisions which resulted in fewer purchases of locally made or higher-value foods that consumers supported in mass during pandemic lockdowns.
Shifts in consumer spending resulted in a decline in the market share of domestic-made foods, reverting to the consumption mix of domestic vs foreign foods observed prior to the pandemic. That statistic also reflects an increasingly diverse Canadian population that is looking to put different kinds of food on their tables.
“We all know money doesn’t have the same buying power it once did, and consumers are being careful with their grocery budgets. Despite inflationary pressures, we continue to see Canada’s food and beverage sector adapt and innovate to meet the changing market demands,” said Gervais. “The sector remains healthy and has a positive long-term outlook.”
Global demand for Canadian-produced food is growing rapidly. Promising innovations and technology in food manufacturing can position Canada favourably to expand its reach into new, growing and profitable food industries. There is also opportunity to grow the sector by meeting the consumer demand for affordable, convenient, and sustainably produced foods.
“How businesses adapt to changing consumer needs and economic conditions will determine their success going forward,” adds Gervais. “There have been many tests of resiliency and adaptability in recent years and the strength of the sector proves that despite challenges, there are opportunities Canadian food and beverage manufacturers are eager to take advantage of.”
The annual FCC Food and Beverage Report features insights and analysis on grain and oilseed milling; dairy, meat, sugar, confectionery, bakery and tortilla products; seafood preparation; and fruit, vegetable and specialty foods, as well as soft drinks and alcoholic beverages.