Foreign Appetite for Canadian Food Products Supporting Growth in Food Manufacturing Industry

Despite weak Canadian consumer spending, the outlook for Canadian food manufacturing remains bright thanks to rising demand from the U.S. and other foreign markets, according to The Conference Board of Canada's latest Canadian Industrial Outlook: Canada's Food Manufacturing Industry. Canada's food manufacturing's industry is forecast to grow by 2.1 per cent in 2016.

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"Faced with weak disposable income gains and rising household debt, Canadians will be more frugal when it comes to how they spend their food budget," said Michael Burt, Director, Industrial Economic Trends. "Luckily for food manufacturers, Canada's new trade era of lower commodity prices, a weaker Canadian dollar, and strengthening demand from south of the border will open up new opportunities for the food manufacturing industry."

HIGHLIGHTS

• Despite weak Canadian consumer spending, Canada's food manufacturing industry is expected to post solid growth in 2016, thanks to record high export levels.
• Weak consumer confidence, moderate wage growth and rising household debt means Canadians will be more price-conscious in 2016.
• Labour costs are forecast to be the largest contributor to industry costs, growing by an annual average of 5 per cent over the next two years.

Weak consumer confidence, moderate wage growth and rising household debt means Canadians will be more price-conscious and more likely to choose generic brand products and items on sale. And, although food manufacturers will still benefit from increased demand for private-label products, the margins they make on these are likely to be smaller than the ones associated with brand-name goods.

One segment of the industry that can expect to see strong growth is seafood manufacturing. With a growing number of Canadians trying to curb their red meat consumption due to various health-related concerns, Canadians' appetite for seafood products is increasing. Likewise, the rising number of baby-boomers is expected to support growth in demand for seafood and fish products. Foreign markets' demand for Canadian manufactured seafood products is also expected to continue to grow robustly, as improving incomes in emerging markets support demand from high-quality sources of protein. 

Export growth is expected to remain a bright spot for food manufacturers. Industry export levels are at record highs and the combination of a weaker Canadian dollar and stronger U.S. economy is expected to continue to support export growth going forward. According to a recent Conference Board of Canada report, Canada's food manufacturing is among the very few manufacturing industries ready to benefit from the U.S. recovery and able to ramp up production to meet this rising demand.

With cost growth outstripping revenues, pre-tax profits fell to $3.6 billion in 2015. This year, pre-tax profits are forecast to reach $3.9 billion as cost growth moderates and revenue growth is projected to remain healthy. Follow The Conference Board of Canada on Twitter

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SOURCE Conference Board of Canada