Food and beverage manufacturing sales projected to moderate this year after record high in 2023: Report

Food and beverage manufacturing sales are expected to moderate this year after hitting a record $165 billion in 2023, according to new research.

In its latest Food and Beverage Report, FCC (Farm Credit Canada) projects sales to decline by 1.4% in sync with slowing inflation and tighter household budgets. 

Despite sector-specific headwinds and changing consumer shopping habits, the overall outlook is more positive, FCC said. Gross margins are expected to improve by 1.7% on average.

The report also forecasts a decrease in the inflation rate for food purchased at grocery stores, falling below 2% this spring and stabilizing around pre-pandemic levels thereafter.

"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 in a release. "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."

One “wildcard” in FCC’s forecast is the resilience of the U.S. economy, Gervais explained, which could lead to a growth in exports.