Higher demand and higher prices help Canada’s food manufacturing industry grow its sales despite 2021 challenges.
By Andrew Joseph, Farms.com; Image via www.pixabay.com
According to the latest FCC (Food Credit Canada) Annual Food Report, Canada’s food manufacturing sector performed well thanks to higher demand from Covid-relieved consumers and higher prices.
The report said that in 2021, Canadian food manufacturing sales increased by 14.8 percent—over $125-billion, and projects that it will increase again in 2022 by 7.4 percent in 2022.
In year-over-year growth, 2021 over 2020 was the strongest year of sales recorded since 1992.
“Consumers appeared to unleash strong disposable incomes and accumulated savings during the pandemic in 2021,” said J.P. Gervais, the FCC Chief Economist noted in the report. “This resulted in increased foodservice volumes that more than offset volume declines at grocery stores.”
A strong export market also contributed to the volume of sales—some 36.8 percent, according to the FCC report, which also stated that Canada’s food manufacturing exports grew by 16.9 percent in 2021, driven by higher prices and strong demand for healthy and high-quality foods.
This strong export growth came mostly from the US, Mexico, Philippines, and South Korea, while exports from China dropped by more than 16 percent based on lower pork demand.
Canadian food imports slightly increased in 2021 over 2021 at 3.6 percent. Most imports came from US suppliers, but also from a diversity of other countries, led by China, Brazil, and Italy.
The share of domestic consumption of Canadian manufactured food rose by almost two percent in 2021, a modest increase after seeing after declining the two previous years. This increase was largely due to a combination of a “buy local” approach by many, as well as increased investments in marketing and operational efficiency by manufacturers.
“The strong growth we’ve seen in Canada’s food sector is largely a reflection of innovation, resiliency and the ability to quickly adapt to the changing economic environment,” Gervais said. “This has enabled most food manufacturers to overcome significant challenges posed by the pandemic, such as higher input costs, amplified labour shortages and shifting consumer consumption trends.
While gross margins improved slightly in 2021, food manufacturers continued to struggle to fully pass on higher labour and material costs. Inflation is also expected to be above the Bank of Canada’s target rate for most of 2022, which will drive interest rate increases.
“Inflation is beginning to diminish the purchasing power of many households and the growth in 2022 will depend on several other factors, such as the evolution of the pandemic and how businesses adapt to interest rate increases and elevated input costs,” stated Gervais. “But if the past is any indication of the future, Canada’s food processors will continue to take advantage of the many opportunities that exist amid the many challenges.”
The FCC Annual Food 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. FCC Economics will be releasing a separate report on Canada’s beverage manufacturing sector later this year.
For more economic insights and analysis, visit FCC Economics at https://www.fcc-fac.ca/en/knowledge/economics.html.