F&B manufacturing to grow 15 per cent in five years: BDC

In the wake of the pandemic, food and beverage manufacturers are forging ahead, taking advantage of the opportunities created since the spring of 2020. There’s no denying the COVID-19 crisis created challenging times; the industry has been tested like never before, having faced everything from production disruptions and labour shortages to a sharp decline in demand from restaurants. Yet, it managed to rebound fairly quickly after the first few months, fully recovering to pre-pandemic levels by the fall of 2020.

Food and beverage manufacturing output is expected to grow 15.6 per cent over the next five years.

According to BDC’s latest Food and Beverage Manufacturing Outlook, things are only likely to get better from here for Canada’s second largest manufacturing industry. Despite having been hit hard during the first few months of the crisis, the industry is now anticipated to grow by 2.4 per cent in 2021 and a further 4.5 per cent in 2022. One of the big economic drivers behind this surge has been the consumer shift to buying more groceries, as restaurants have been forced to bear the brunt of pandemic restrictions. Case in point: by November 2020, grocery spending was still 20 per cent higher than the previous year, a trend that is anticipated to remain toward the end of 2021.

Rajaa El Oualid is not only capitalizing on this shift by getting her product onto more store shelves, she is also working on expanding her product line. El Oualid is the founder of Sooo Ketolicious, makers of premium ketogenic pizza crusts. The company launched mid-2018 and had all the right ingredients for success. But then COVID struck, effectively shutting down their primary distribution channels—niche independent stores in Ottawa and Toronto and local mom-and-pop pizza shops.

“The pandemic threw a huge wrench in our plans and sales, but we adapted quickly by improving our e-commerce offering while maintaining our focus on long-term growth,” explained El Oualid. “In fact, our 2021 sales growth is already shaping up to exceed pre-COVID levels. We’re adding new distribution channels, continuing to make changes to our e-commerce experience and developing new products that we put on the backburner last year.”

Sooo Ketolicious will now be expanding distribution into independent stores nationally and is planning new leadership hires in sales and production to help prepare for their next stage of growth.

Four post-pandemic trends

If the industry wasn’t already challenging enough, the pandemic has added rising global protectionism and commodity price volatility, a rethink of supply chain operations, evolving food preferences and a fast-changing labour market to the mix. However, there are many ways manufacturers like Sooo Ketolicious are turning these trends into opportunities.

Tight supplies for commodities like grain and corn have seen prices go up drastically over the last year, while lumber is at an all-time high. Manufacturers concerned about the heightened volatility in commodity prices could consider bringing more of the production process or supply chain in-house. Another solution is to use mobile technology to get more accurate real-time oversight on product shipments and to better predict customer demand. Both can result in reduced expenses by preventing food and ingredient waste.

Exporting, while it can be intimidating, can also be a key contributor for growth when the initial market research is done right. Calgary’s FTG Foods Canada sells authentic Filipino food products. While continuing to expand their distribution across Canada, the company also has plans to begin exporting to the U.S. this year. They have their eyes set specifically on California as their breakthrough market, home to the largest Filipino community in North America at 1.7 million people.

As the pandemic has lingered on, there have also been significant changes in consumer behaviour and preferences. Not only are more people shopping online, they are more conscious of what they buy. The ‘shop local’ message has been heard loud and clear, for example. Since the start of the pandemic, one in five Canadians increased their consumption of local products while three-quarters say they want to buy even more local products. In addition to supporting local, consumers want to make better sustainable choices and expect higher quality ingredients. These consumption trends are likely here to stay and have prompted many manufacturers to rollout new products or make existing products healthier to meet demand.

Time to press ahead with changes

Sooo Ketolicious engaged BDC to help them prepare for national distribution and potential export opportunities. Together they developed the company’s food safety system, ensuring best practices are incorporated, labeling and packaging meet industry standards and that Sooo Ketolicious is properly certified for each region they will be expanding to. In addition to these advisory services, BDC provides financing and capital to more than 60,000 small and medium-sized businesses in all industries and stages of growth, helping identify ways businesses can work more efficiently and designing tailored growth strategies. It is clear that no one is going back to “business as usual” but it is never too late for manufacturers to make the changes necessary to better protect their companies and the industry at large for what’s next.

Paula Cruickshank is senior vice-president, Ontario region for BDC. She can be reached at paula.cruickshank@bdc.ca.