Domestic demand for processed food shows 'modest' improvement: report

Saturday, March 24, 2012

by DAVE PINK

Prices and profits in Canada’s manufactured food industry will remain largely unchanged in the coming year, according to the 2012 industry forecast prepared by the Conference Board of Canada.

Industry profits were down 0.8 per cent over 2011, largely because of competition from imported food products.

“Modest improvements in domestic demand and rising exports will drive gains in the industry’s volume of production this year. However, revenue growth is expected to be modest at 2.3 per cent, one of the weakest performances in recent years,” the report said. “Flat prices will be the main culprit.”

Consumers will continue to seek out lower-priced alternatives, and along with increased competition from imports, and aggressive pricing and heavy promotional practices among the food stores, industry prices will be virtually unchanged from last year.

“It will not be until 2013 that industry revenues will begin to experience more robust growth, seeing gains of 3.2 per cent annually from 2013 to 2016. These will be driven by modest gains in both production and pricing.”

Commodity prices remain strong worldwide, which will continue to put an upward pressure on the cost of food ingredients,  the report says, with industry costs expected to rise by about 2.4 per cent over the year. “The consensus is that high agricultural commodity prices are here to stay. In addition, rising oil prices mean increased costs for plant operations and transportation.”

The report noted there are increasing marketing opportunities for the manufacturers of products tailored for ethnic consumers, and demand continues to rise for healthier foods. BF