Bakers Journal

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Economic uncertainty limits growth in food industry


November 25, 2011
By Bakers Journal

November 25, 2011 – An uncertain economic environment will restrain growth in Canadian industries that rely on consumer willingness to open their wallets, including the foodservice and food and beverage industries, the Conference Board of Canada reports.

The Canadian Industrial Profile, published by the Conference Board of Canada and the Business Development Bank of Canada, provides a five-year production, revenue, cost and profitability forecast for six industries each quarter.

"Several industries profiled in this outlook have recovered from the 2008-09 recession. But the prospects for continued growth are muted because of weak consumer and business confidence, as well as high household debt levels," said Michael Burt, associate director of industrial economic trends.

The report found that the foodservice industry is on track for a profit of $1.6 billion this year – its best performance on record. But high household debt levels and consumer concern about the economic outlook are expected to limit growth.

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In the medium term, the industry is projected to enjoy a modest but steady increase in revenues. Costs will be a challenge to manage, as the highly-competitive nature of the industry leaves little room for businesses to absorb cost increases.

In particular, rising food prices will be a concern, but the Conference Board of Canada expects the industry will maintain its profit margins.

In the food and beverage industry, higher industry prices are largely responsible for a 15 per cent increase in profitability among food manufacturers this year. However, cost pressures – including the effects of higher agricultural and energy prices – are expected to limit profit growth through 2015.

Nevertheless, the Conference Board of Canada reports that the industry's fundamentals remain sound, supported by population and income growth in the medium term.