Dispute many disruptions, it posted a 3.5 per cent sales increase in 2020.
Ottawa—In spite of a year of pandemic-induced turmoil, the food and beverage manufacturing sector posted a 3.5 per cent increase in sales in 2020 and should reap 4.8 per cent growth this year, says Farm Credit Canada.
Profitability for food and beverage manufacturers in 2021 will be closely tied to the pandemic’s evolution and the social distancing measures governments will require until vaccines make a difference, said Kyle Burak, FCC’s Senior Economist. As well, the sector faces significant competitive pressures.
The positive outlook for this year stems from increases in disposable income and savings in 2020 that will be supportive of domestic food purchases, he said. Robust export markets will also boost food and beverage exports, which represent an estimated 32 per cent of overall sales. “The food and beverage sector should continue to outperform the overall economy.”
Buoyed by these factors, the sector’s outlook “remains favourable and the re-opening of foodservice and pent-up consumer demand could provide an immediate boost to the sector and make up for, at least in part, declines in profitability in 2020.”
On the production line, “fewer social distancing measures will lower personal protective equipment costs and increase production capacity,” he said. Capital expenditures and employment in food and beverage fell less in percentage terms than all industries combined last year. Continuing low interest rates offer the manufacturers an opportunity to address productivity challenges arising from chronic labour shortages that hobbled the industry in recent years.
As well, investment in capital, “along with mergers and acquisitions, can help address the challenge by creating production efficiencies,” he said.
Last year, the manufacturers faced abrupt restaurant and food services shutdowns, which forced manufacturers to re-evaluate their business strategies and sometimes move production away from foodservice to the grocery store.
Food and beverage manufacturing sales reached $122.9 billion in 2020. The GDP for food and beverage manufacturing fell 1.0 per cent due to lower investment and higher costs.
The FCC analysis covered grain and oilseed milling, sugar and confectionery products, fruit, vegetable and specialty foods, dairy products, meat products and seafood preparation.