Boosted by pent-up demand and higher prices, Canada’s food manufacturing industry performed well in 2021, according to the latest FCC Annual Food Report.
Food manufacturing sales increased 14.8% to more than $125 billion in 2021 and are expected to increase 7.4% in 2022. Last year was the strongest growth in food manufacturing year-over-year recorded since 1992.
“Consumers appeared to be freeing up strong disposable incomes and accumulating savings during the pandemic in 2021,” said FCC chief economist JP Gervais. “This drove an increase in restaurant volumes that more than offset volume declines in grocery stores.”
Additionally, a robust export market contributed approximately 36.8% of sales. Overall, Canadian food exports increased by 16.9% in 2021, boosted by higher prices and strong demand for healthy, high-quality foods. Export growth came from the United States, Mexico, the Philippines and South Korea. Conversely, exports to China fell by more than 16% due to lower demand for pork.
Food imports increased in 2021, although growth was more modest at 3.6%. Most imports came from US suppliers, but also from a variety of other countries, led by China, Brazil and Italy.
The share of domestic consumption of Canadian manufactured food also increased by nearly 2% in 2021, after declining in the previous two years. This increase is largely due to a combination of a “buy local” approach by many, as well as increased investment in marketing and operational efficiencies by manufacturers.
“The strong growth we’ve seen in the Canadian food sector is largely a reflection of innovation, resilience and the ability to quickly adapt to changing economic environments,” said Gervais. . “This has enabled most food manufacturers to overcome significant challenges posed by the pandemic, such as rising input costs, amplified labor shortages and changing consumer trends. consumers.
The report notes that although gross margins improved slightly in 2021, food manufacturers continue to struggle to fully pass on rising labor and material costs. Inflation is also expected to be above the Bank of Canada’s target rate for most of 2022, leading to interest rate hikes.
“Inflation is starting to erode the purchasing power of many households and growth in 2022 will depend on several other factors, such as the evolution of the pandemic and how businesses adjust to interest rate hikes. and high input costs,” Gervais said. “But if the past is any indication of the future, Canada’s food processors will continue to take advantage of the many opportunities that exist among the many challenges.
FCC’s annual food report features information and analysis on grain and oilseed milling; dairy products, meat, sugar, confectionery, bakery and tortillas; seafood preparation; and fruits, vegetables and specialty foods. FCC Economics will release a separate report on the Canadian beverage manufacturing sector later this year.