Gross sales for Canada’s meals and beverage sector are forecast to surpass $164 billion, exceeding preliminary projections by 3.2 per cent, in accordance with the 2023 Meals and Beverage Report: Mid-year replace from Farm Credit score Canada (FCC). Whereas constructive information, a variety of issues proceed to weigh on the sector.
Each meals and beverage producers noticed a powerful enhance in nominal gross sales within the first half of 2023, with a rise of 8.4 per cent for meals manufacturing and seven.3 per cent for beverage manufacturing. Grain and oilseed milling, and bakery and tortilla merchandise led in development with will increase of greater than 15 per cent year-over-year. Nonetheless, the expansion price within the sector is extra modest when accounting for inflation.
“A lot of our meals and beverage sectors have skilled double-digit gross sales development, however a lot of that development comes from elevated promoting costs because of inflation,” stated J.P. Gervais, FCC’s chief economist, in detailing the mid-year report. “We anticipate slower development within the second half of the yr as shoppers are cautious with their grocery budgets.”
A decline in shopper spending attributable to inflation is placing stress on meals and beverage margins, which have been compressed since 2019. For the beverage trade, gross margins are practically 50 per cent decrease. Within the meals sector, margins are on common 11 per cent under the pre-pandemic degree.
In the meantime, meals and beverage producers proceed to face labour shortages and powerful wage development.
“Within the final two years, common weekly wages have grown by 4.6 per cent per yr for meals producers, in comparison with 0.8 per cent per yr between 2015 and 2019,” Gervais defined. “This accelerated development stays a problem for employers, however we anticipate development to gradual as job emptiness charges for meals wholesalers, meals producers and meals companies operations decline within the short-term. Availability of labour over the long-term stays a problem to observe for meals and beverage producers.”
For the primary time earlier this yr, spending on meals companies, adjusted for inflation, returned to pre-pandemic ranges, exceeding $17 billion in gross sales within the second quarter of 2023. Whereas a constructive signal for meals service operations, gross sales proceed to be under the pre-pandemic development.
“With an financial slowdown, we anticipate discretionary spending will wrestle to develop additional,” Gervais stated. “The identical will be stated for our exports. Exports are nonetheless robust in 2023, however any international slowdown will impression Canada’s export gross sales alternatives. Total, the developments to look at are the slowing of worldwide financial development, meals service demand and softening labour markets.”
The FCC Meals and Beverage Report: Mid-year replace options insights and evaluation on grain and oilseed milling; dairy, meat, sugar, confectionery, bakery and tortilla merchandise; seafood preparation; fruit, vegetable and specialty meals; and tender drinks, breweries, wineries and distilleries.