FCC finds moderate sales, improved margins for Canadian food and beverage manufacturers

Canada's food and beverage manufacturers face a mix of obstacles and optimism for profit margin improvements in the year ahead, according to the latest Farm Credit Canada’s FCC Food and Beverage Report.

After hitting a record $165 billion in food and beverage manufacturing sales last year, 2024 is expected to see sales moderate in sync with slowing inflation and tighter household budgets.

Despite sector-specific headwinds and changing consumer shopping habits, the overall outlook is more positive. Population growth and stabilizing input costs are two reasons margin improvement is expected in 2024.

"High inflation and interest rate increases over the past two years have put pressure on household budgets, leading to changes in consumer spending habits," says FCC chief economist, J.P. Gervais in highlighting the evolving consumer landscape. "As a result, Canadians spent less on average on food and beverages in 2023. While changing shopping habits may pose challenges, they also present opportunities for food and beverage manufacturers. Taste remains the top consideration for consumers, but price sensitivity has increased, leading processors to innovate and meet evolving consumer demands.

"FCC Economics is projecting a slight decrease of 1.4% food and beverage manufacturing sales for 2024. However, we anticipate gross margins to improve by 1.7% on average. One wildcard in our forecasts is the resilience of the U.S. economy, which could lead to growth in exports," adds Gervais.

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Many commodity prices have declined which will work their way through the supply chain. These trends are anticipated to continue, boosting margins in 2024.

The report forecasts a decrease in the inflation rate for food purchased at grocery stores, falling below 2% spring and stabilizing around pre-pandemic levels thereafter.

"While challenges persist, 2024 holds promise for Canadian food and beverage manufacturers," says Gervais. "By adapting to changing consumer preferences and leveraging opportunities presented by population growth, the industry can navigate the year ahead with cautious optimism."

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.