Canadian food and beverage manufacturing sales increased 10.6 per cent to $156 billion in 2022, the Farm Credit Canada (FCC) Food and Beverage Report said. Gains predominately came from higher export values and strength in the grain and oilseed milling industry with manufacturers navigating increases in prices of raw materials, labour shortages, and supply chain disruptions. For 2023, modest sales growth is expected at 2.2 per cent.
“It is difficult for food and beverage manufacturers to pass on those increased labour and material costs,” J.P. Gervais, FCC’s chief economist, said in a news release about the report. “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 noted. “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 compared to foreign foods observed prior to the pandemic, the release said. That statistic also reflects an increasingly diverse Canadian population who’s 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,” Gervais said. “The sector remains healthy and has a positive long-term outlook.”
The report noted 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’s 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,” Gervais said. “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.”
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