Canadian Processors Close Margin Gap with U.S.
By Food in Canada staffBusiness Operations Food Trends Study
Study reveals U.S. processors no longer enjoying wider operating margin on food and beverage products
A new North American benchmarking study of the food and beverage industry shows that Canadian processors have closed the long-standing operating margin gap with U.S. processors. The study, Benchmarking for Success 2009, was prepared by Deloitte, and analyzed 76 processors to measure performance for the fiscal year ending in 2008.
According to the study, the dramatically changed economic landscape is one reason for the change in operating margins. In 2008, Canadian and U.S. processors both performed equally on EBITA, at about 10 per cent of sales revenue. In 2001, there was a seven per cent margin advantage for U.S. processors.
Profitability is Down
While closing this gap is good news for Canadian producers, the downside is lower profitability for food and beverage processors on both sides of the border. In 2008 ROI for Canadian processors fell to 14 per cent, from 20 per cent in 2006, due to the cost of raw materials, labour and other inputs.
The study also noted a difference in the types of companies achieving success in the U.S. compared to those in Canada. Top U.S. processors tended to be large companies with significantly higher levels of profitability, while Canadian performers were much smaller with less debt than their peer group. The opposite was true in terms of sales growth – the fastest-growing U.S. companies tended to be smaller than their peer group, yet fast-growing Canadian companies tended to be larger than the Canadian industry average.
Achieving Future Success
As well as analyzing sector performance, the report looked at consumer concerns such as food safety, and issues such as remaining competitive in a global industry, the food retail environment and merger and acquisition activity. In particular, it noted that future success will be based on consumer insights, brand management, product development and innovation.
Print this page