Canada’s food and beverage manufacturers face a mix of obstacles and optimism for profit margin improvements in the year ahead, according to the latest FCC Food and Beverage Report.
After hitting a record $165 billion in food and beverage manufacturing sales last year, 2024 is expected to see sales moderate in sync with slowing inflation and tighter household budgets, said the report which was released on Tuesday.
Jean-Philippe Gervais
“High inflation and interest rate increases over the past two years have put pressure on household budgets, leading to changes in consumer spending habits,” said FCC chief economist, J.P. Gervais. “As a result, Canadians spent less on average on food and beverages in 2023.
“While changing shopping habits may pose challenges, they also present opportunities for food and beverage manufacturers. Taste remains the top consideration for consumers, but price sensitivity has increased, leading processors to innovate and meet evolving consumer demands.
“FCC Economics is projecting a slight decrease of 1.4 per cent in food and beverage manufacturing sales for 2024. However, we anticipate gross margins to improve by 1.7 per cent on average. One wildcard in our forecasts is the resilience of the U.S. economy, which could lead to growth in exports.”
Despite sector-specific headwinds and changing consumer shopping habits, the overall outlook is more positive. Population growth and stabilizing input costs are two reasons margin improvement is expected in 2024, said FCC/
“Many commodity prices have declined which will work their way through the supply chain. These trends are anticipated to continue, boosting margins in 2024,” said the organization.
“The report forecasts a decrease in the inflation rate for food purchased at grocery stores, falling below 2.0 per cent this spring and stabilizing around pre-pandemic levels thereafter.”
The annual FCC Food and Beverage Report features insights and analysis on grain and oilseed milling; dairy, meat, sugar, confectionery, bakery and tortilla products; seafood preparation; and fruit, vegetable and specialty foods, as well as soft drinks and alcoholic beverages.
“While challenges persist, 2024 holds promise for Canadian food and beverage manufacturers,” said Gervais. “By adapting to changing consumer preferences and leveraging opportunities presented by population growth, the industry can navigate the year ahead with cautious optimism.”
FCC, a Crown corporation, is Canada’s leading agriculture and food lender.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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