A new industry outlook report by the Conference Board of Canada finds Canada’s food manufacturers “largely recession-proof,” as people still have to eat, recession or not.
Even with a worldwide economic slowdown limiting growth, food firms’ profits are predicted as nearing the record highs seen in 2008, the board said in a release Wednesday.
“Demand for everyday products such as food is not particularly sensitive to economic conditions, so the food manufacturing industry in Canada is expected to come through the economic turmoil without suffering too much,” economist and report author Valerie Poulin said.
Often overlooked for their role in Canada’s economy, food and beverages are the “single largest component of retail sales” while food processing is the largest component of Canada’s manufacturing sector in terms of jobs, the board said.
Total food consumption is “not expected to drop significantly” as recession sets in, although processors may be affected by changing tastes and diets and consumers may choose cheaper products over premium ones.
Production of food products is expected to decrease by less than one per cent in 2009, the board said, while also expecting processors’ profits to fall off their peak of $4.6 billion in 2008 to $4.3 billion this year, and to remain “close to that level throughout the next four years.”
The Ottawa-based board, a non-profit research organization focused on economic trends, public policy and “organizational performance,” noted that food companies “have been able to attract consumers to new higher-value-added products with higher margins by providing increased convenience or food with greater health benefits.”
That said, as disposable income growth powers down and job losses continue, consumers “will tend to substitute high-margin products for lower-priced goods” such as in-store or “no-name” brands, as opposed to national brand names, the board predicted.