Food In Canada

Strong growth in F&B manufacturing, despite inflation challenges

By Food in Canada Staff   

Food In Canada Food Trends Editor pick Farm Credit Canada

Sales for Canada’s food and beverage sector are forecast to surpass $164 billion, exceeding initial projections by 3.2 per cent, according to the 2023 Food and Beverage Report: Mid-year update from Farm Credit Canada (FCC). While positive news, a number of considerations continue to weigh on the sector.

Both food and beverage manufacturers saw a strong increase in nominal sales in the first half of 2023, with an increase of 8.4 per cent for food manufacturing and 7.3 per cent for beverage manufacturing. Grain and oilseed milling, and bakery and tortilla products led in growth with increases of more than 15 per cent year-over-year. However, the growth rate in the sector is more modest when accounting for inflation.

“Many of our food and beverage sectors have experienced double-digit sales growth, but much of that growth comes from increased selling prices due to inflation,” said J.P. Gervais, FCC’s chief economist, in detailing the mid-year report. “We expect slower growth in the second half of the year as consumers are careful with their grocery budgets.”

A decline in consumer spending caused by inflation is putting pressure on food and beverage margins, which have been compressed since 2019. For the beverage industry, gross margins are nearly 50 per cent lower. In the food sector, margins are on average 11 per cent below the pre-pandemic level.


Meanwhile, food and beverage manufacturers continue to face labour shortages and strong wage growth.

“In the last two years, average weekly wages have grown by 4.6 per cent per year for food manufacturers, compared to 0.8 per cent per year between 2015 and 2019,” Gervais explained. “This accelerated growth remains an issue for employers, but we anticipate growth to slow as job vacancy rates for food wholesalers, food manufacturers and food services operations decline in the short-term. Availability of labour over the long-term remains an issue to monitor for food and beverage manufacturers.”

For the first time earlier this year, spending on food services, adjusted for inflation, returned to pre-pandemic levels, exceeding $17 billion in sales in the second quarter of 2023. While a positive sign for food service operations, sales continue to be below the pre-pandemic trend.

“With an economic slowdown, we anticipate discretionary spending will struggle to grow further,” Gervais said. “The same can be said for our exports. Exports are still strong in 2023, but any global slowdown will impact Canada’s export sales opportunities. Overall, the trends to watch are the slowing of global economic growth, food service demand and softening labour markets.”

The FCC Food and Beverage Report: Mid-year update features insights and analysis on grain and oilseed milling; dairy, meat, sugar, confectionery, bakery and tortilla products; seafood preparation; fruit, vegetable and specialty foods; and soft drinks, breweries, wineries and distilleries.

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