FCC report points to shifting Canadian beverage market
By Canadian PizzaNews Business and Operations Finance Trends
Regina – Canada’s beverage sector has shown strength amid a shifting market of increasing costs and changing consumer behaviour, according to a new FCC report.
In 2021, consumers started to return to the service industry for their beverage purchases after favouring retail in the previous year due to the pandemic.
“Consumer behaviour is playing an important role in how beverage manufacturers adapt to a new economic environment,” said J.P. Gervais, FCC’s chief economist. “Where Canadians buy their beverages and what they are looking to purchase matter a great deal. On top of that, rising interest rates, raw material inflation and increasing labour costs that all need to be accounted for, making this a key period for the beverage industry.”
While total beverage manufacturing sales increased by 11.3 per cent in 2021 compared to 2020, a one per cent decline is anticipated in 2022 as consumers are expected to buy more at restaurants and bars where they tend to drink fewer alcoholic beverages than at home.
‘While the beverage market is very competitive, there are growth opportunities. Businesses should look for data-driven ways to boost margins, and manage inventory, product mix and pricing strategies.’– J.P. Gervais, chief economist, FCC
“While we anticipate declining sales for larger alcoholic businesses that focus on retail, the opposite is true for smaller operations that will benefit from selling direct to their customers and the reopening of the food and beverage service providers,” Gervais said.
Beer sales remain strong in Canada with an estimated 36 per cent alcoholic sales market share, a decline of two per cent from the previous year. Canadian breweries have taken market share from internationally produced beer, while sales of distilled beverages are up due to growing demand for hard seltzers, which many breweries are now making to offset declines in the beer market. Distilled beverage market share grew by 2.7 per cent to 30.2 per cent. Wine saw a slight 0.6 per cent decline to 33.8 per cent market share.
“Low retail inflation relative to rising input costs is a trend to monitor,” Gervais said. Strong competition in the alcoholic beverage sector have made it difficult to pass on higher costs compared to the ability of non-alcoholic beverage manufacturers. Businesses also faced higher costs due to a challenging labour market. In 2021, despite growing topline sales, gross margin rates struggled to regain 2019 levels, however they are expected to improve in the coming year. Gervais added, “While the beverage market is very competitive, there are growth opportunities. Businesses should look for data-driven ways to boost margins, and manage inventory, product mix and pricing strategies.”
For more economic insights and analysis on the top trends to watch for in Canada’s agriculture and food industry in 2022, visit FCC Economics at fcc.ca/Economics.
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