Food and beverages sales increased in Canada last year, even as margins hit an historic low and consumers chose Canadian less.
According to the latest FCC Food and Beverage Report, released Tuesday, sales increased 11 per cent to $156 billion in 2022. These gains came largely from higher export values and strength in the grain and oilseed milling industry.
On the manufacturing side, margins were tighter last year as companies navigated increases in the prices of raw materials, labour shortages and supply chain disruptions.
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“Gross margins as a percent of sales fell to their lowest level in over 20 years in 2022,” FCC’s chief economist J.P. Gervais said.
“While margin trends vary based on industry, we do anticipate an overall improvement to gross margins in the coming year.”
FCC projects a modest two per cent growth in sales in 2023. However, dairy, meat and seafood are expected to outperform that forecast.
“Consumers cut back on discretionary spending last year as they faced higher inflation, depleted savings and higher costs of servicing debt,” Gervais said.
Domestically-produced food faced a decline, reverting to the pre-pandemic consumption mix of domestic versus foreign foods. However, that’s partly the result of an increasingly diverse Canadian population looking to put different kinds of food on their tables.
“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,” Gervais said.
“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.
“The sector remains healthy and has a positive long-term outlook.”
Global demand for Canadian-produced food is growing rapidly, he said. Promising food manufacturing innovations and technology can position Canada to expand its reach into profitable emerging industries.
There is also opportunity to grow the sector by meeting 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.”
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. — Glacier FarmMedia Network
