Food and beverage industry is poised for change
The food and beverage industry is entering a new phase in a world of evolving consumer demands and global challenges. Following a series of declines, the industry is finding itself at a crossroads and poised to transform in the months and years ahead, according to the 2024 Trend Report from Nourish Food Marketing.
All indications point to renewed growth in 2024 and beyond. Circana’s 2024 food and beverage outlook reports the industry will bring modest growth following three consecutive years of decline brought on by the pandemic and high inflation. It notes that the growth will be fuelled by the easing of inflation and increased mobility on retail food and beverage consumption, as well as an improving macroeconomic environment and growing promotional investments.
Statista confirms this trend, estimating that the market in Canada is expected to grow at a compound annual growth rate of 5.41% from 2024 to 2028.
Canada’s food and beverage processing landscape
According to data from Agriculture Canada, the food and beverage processing industry ranks as the largest manufacturing industry in Canada in terms of value production. In 2022, sales reached $156.5 billion, accounting for 18.2% of total manufacturing sales, and for 1.7% of the national GDP. Exports of processed food and beverage products stood at a record value of $54.3 billion, an increase of 14.1% over 2021, and account for 7% of Canada’s total exports.
FCC (Farm Credit Canada) reports that the sector saw a 10.6% increase in the food and beverage manufacturing sector in 2022. The largest food and beverage processing industry by dollar sales is meat product manufacturing, followed by grain and oilseed milling, and dairy product manufacturing.
The beverage category is anticipated to outperform overall food and beverage unit sales in 2024 as new products continue to be introduced to market, including protein, energy, and low-alcohol options, says Circana.
Turnkey options continue to draw the interest of consumers on the go, and frozen products are ripe for product innovation to meet increasingly eclectic consumer preferences and their quest for solutions that offer convenience, quality, and value.
One looming challenge that could impact the industry for years to come is a significant labour shortage. Food Processing Skills Canada recently reported that the industry will need 142,000 new workers by 2030 (equating to 50% of the current workforce), largely due to anticipated industry growth and accelerated retirement numbers. This could have significant financial impact on profitability. Estimates show that a single unfilled position in the food and beverage manufacturing industry costs businesses as much as $190 per day in lost net revenue.
A changing consumer mindset
The industry is also hard-pressed to keep up with rapidly evolving consumer demand. Today’s values-based consumers are becoming increasingly diverse, adventurous, and health conscious. Sustainability, animal welfare, and environmental stewardship play an important role in their purchasing decisions, particularly for younger generation consumers.
More than ever, shoppers are scrutinizing labels more carefully, seeking simpler ingredient lists, reduced fats/sugars/salt menu offerings (also known as “reductionism”), and sustainable ingredients. Young and old alike are making healthier lifestyle choices, moving away from highly processed foods, and scaling back on their meat consumption in favour of plant-based alternatives.
The protein-based food movement has extended well beyond vegan and vegetarian circles. The hype around processed meat alternatives has now given way to more versatile plant-based options, reflecting the demand on the part of meat- and non-meat-eaters alike seeking a more balanced approach to their consumption habits.
The move to healthier products is reflected in the fact that the organic food industry has tripled since 2006 according to Alliance experts.
A study by Grand View Research predicts that the global brain health functional food and beverage market will be worth US$40.34 billion by 2030 with a CAGR of 10.5%.
It adds that both younger generation and aging consumers are also reducing alcohol, coffee, and energy drink consumption. Instead, they are opting for lower-caffeine alternatives and are attracted to products featuring ingredients such as B vitamins and Omega-3s and other supplements to support brain health. They are also gravitating towards smaller portion sizes in lieu of weight management-specific products.
Globalization and the immigration surge have also vastly expanded consumers’ palates, opening the doors for innovative product development and marketing opportunities in all aspects of consumption – from grocery items to food service.
Where technology fits
Technological advancements will play a key role in the future of the industry, says the Nourish report. It speculates that Artificial Intelligence (AI) could potentially change the landscape in a broad range of areas, from marketing and consumer insights to optimizing supply chains to make systems more efficient and responsive.
It states, “AI, with its versatility and ease of accessibility, is a true game-changer. Much as the pandemic accelerated many consumer food trends, like online shopping, AI will catapult several trends.”
AI can potentially play a role in identifying patterns in data, maximizing crop yields and water efficiency, reducing environmental impact, spurring new product and menu innovation, shortening development cycles, and mitigating risk. At the grocery level, it could be used to enable dynamic pricing to maximize returns and minimize waste.
Other potential avenues include determining how consumers make their food choices and enabling real-time adjustments and recommendations based on user preferences and dietary restrictions.
A future of opportunities
According to experts, there is every reason to be optimistic moving forward. Not only does the industry serve a wide consumer base and a thriving multicultural population, but it also boasts a strong – and growing – export pipeline, as well as a wealth of product development opportunities to offer Canadian consumers.
However, there is much that needs to be done in this increasingly competitive market, from more effective communications strategies to adopting innovative technologies within daily production, manufacturing, and logistics processes, according to the Nourish report.
“With shifting priorities for consumers, producers, and retailers…It’s a time of expanded choices, fresh thinking, and new perspectives,” says the Nourish report. “Innovating and staying ahead of consumer trends will be more critical than ever as companies chase a shrinking pie.”
We have wide knowledge and deep-rooted expertise in the food and beverage industry, including retail, wholesale, distribution, and food processing. If you have any questions or need further information, please feel free to reach out to the Food and Beverage group at Fuller Landau.