Food manufacturing industry to see record profits in 2016

Rising demand from developing countries is boosting the industry's exports.

October 4, 2016   by PLANT Staff

OTTAWA — Despite a sluggish Canadian economy, the outlook for Canada’s food manufacturing industry is sunny thanks to the increasing global appetite for Canadian products from the US and other foreign markets, and are expected to push industry profits to a record $4.3 billion this year, according to the Conference Board of Canada.

Food manufacturers are also benefitting from Canadians’ renewed interest in natural ingredients and nutritious foods. Between 2011 and 2015, the number of new food and drink products launched containing the terms superfood, superfruit or supergrain has more than tripled. Demand for chia seeds has increased 70%, while demand for teff and quinoa has grown by 31 and 27%, respectively.

Dampening the outlook for Canada’s food manufacturing industry, however, is the fact that Canadian consumer spending is stretched thin. Many consumers are being more price conscious at grocery stores, keeping an eye out for affordable food options and items on sale. Growth in consumer spending on food and alcoholic beverages is expected to slow to a mere 0.5% this year, or half the average growth rate of the previous five years.

The stronger US economy is a key driver behind the industry’s positive export outlook over the coming years. The US represents the largest export destination for Canada’s food products, accounting for more than 70% of the industry’s exports in 2015. Rising food demand from developing countries will also support the industry’s exports. Developing countries generally have higher population growth rates and greater potential for increases in per capita food consumption than developed countries.

After declines in four of the previous five years, Canadian food manufacturers will see their margins improve to 4.4% in 2016.

Going forward, industry exports are forecast to grow by an average of 2.6% per year between 2016 and 2020, and account for a rising share of industry sales.

Beyond 2016, however, industry costs will increase, which will result in a dip in profit margins.

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