Food Industry Trends Canada - 2022

Canadian food & beverages value added output is forecast to grow by about 2.5% in 2022, after a 4.4% increase in 2021 and a 2.0% contraction in 2020. Retailers recorded high sales in 2020 and 2021, but this surge could slow down in this year as consumers return to pre-pandemic habits, spending more for dining and drinking out of home. Main subsectors like beverages, dairy, meat, and fruit and vegetables record robust domestic demand. Additionally, larger players benefit from robust export sales.  

We expect that profit margins of food businesses will increase along the value chain in the coming months. High commodity, electricity and fuel prices currently affect food producers and processors, but it seems that they can pass them on to retailers and end-customers. Households’ purchasing power has increased, and consumers are willing to pay higher prices for food. The premium and healthy/organic food segments are expected to record robust growth rates. However, labour shortage and higher wage costs have become an issue for producers and processors, while the food retail segment is facing growing competition among grocery chains and the market expansion US retailer Walmart. Any price wars would mainly affect the margins of smaller retailers. 

The financial situation of most food companies is sound, and high leverage of businesses is not an issue. Banks are generally willing to provide loans to food companies. Payments in the industry take 40 days on average, and payment behaviour has been good over the past couple of years, due to good operating results and ongoing support from the government and banks. We expect that the low level of payment delays and insolvencies seen in 2021 will remain unchanged this year.

Due to the benign credit risk situation and good growth prospects, our underwriting stance is generally open for food & beverages businesses across all segments, in particular for established companies  that are operating for at least 2-3 years. Besides the financial situation of individual businesses, we also assess trading experience, trading levels and bank support.