Major Jump in Canadian Food Manufacturing Sales

The Canadian food manufacturing industry posted its biggest sales increase in nearly three decades in 2021.

Released Wednesday, Farm Credit Canada’s latest Annual Food Report showed food manufacturing sales jumped 14.8% to more than $125 billion in 2021, buoyed by higher prices as well as pent-up demand. It was the sharpest year-over-year sales growth recorded since 1992.

“Consumers appeared to unleash strong disposable incomes and accumulated savings during the pandemic in 2021,” FCC chief economist J.P. Gervais said in a release. “This resulted in increased foodservice volumes that more than offset volume declines at grocery stores.”

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. The full report is available here: https://www.fcc-fac.ca/en/knowledge/economics/food-and-beverage-report.html

A robust export market contributed to an estimated 36.8% of food manufacturing sales. Overall, Canadian food manufacturing exports grew by 16.9% in 2021, driven by higher prices and strong demand for healthy and high-quality foods, the release said. Export growth came from the US, Mexico, Philippines and South Korea. Conversely, exports to China declined over 16% on lower pork demand.

Food imports also increased in 2021, albeit at a more modest pace of 3.6%. 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 climbed by almost 2% in 2021, 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 report noted that although gross margins improved slightly in 2021, food manufacturers continue 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.

The gains in food manufacturing sales are expected to moderate in 2022, rising by estimated 7.4%, according to FCC.