Canadian food manufacturers and retailers seem to enjoying an above-average year, and this feature provides detailed statistics to prove the point. Backed up with data and tables from Statistics Canada, the George Morris Centre provides analysis. Kevin Grier comments from Canada.

Each month, Statistics Canada releases data on a wide variety of industry and economic measures. Included within these measures is food industry data. The general data is published in the business press but the food industry data is rarely isolated. This section of GTR is uniquely designed, each quarter to highlight the food industry statistical data and present it in an historical context and/or in relation to other sectors. The source of the data is Statistics Canada, graphics and analysis are by the George Morris Centre.

Canadian food manufacturers appear to be enjoying an above average year with regard to sales. Year over year to the end of June (latest data available), 2001 sales are nearly 7% greater than the first half of 2000. Over the past five years, the average first half sales gains have been just over 5%.

Food Manufacturer Shipments

Quarter to quarter sales gains have also been above average this year. In food manufacturing, second quarter sales usually exceed first quarter sales. Over the last five years, second quarter sales have been about 12% more than first quarter sales. This year, second quarter sales have exceeded first quarter sales by 13%.

With regard to all manufacturer sales, there is now evidence of an economic slowdown. All manufacturer sales actually declined from January through June on a year over year basis. First and second quarter sales declined by 2% on a year over year basis. As with the food industry, there is a normal seasonal increase in sales between the first and the second quarter. The normal seasonal increase is about 8%. This year the quarter to quarter increase was just 6%.

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The decline in sales for all manufacturing combined with the increase in sales for food means that the food industry has increased its share of overall manufacturing activity. As of the first half of this year, food manufacturing has 11.5% of all manufacturing sales. That compares to 10.9% for all of 2000 and 13.4% in 1993.

According to Statistics Canada, grocery store sales have increased by about 4.5% during the first half of this year compared to the same period last year. As with food manufacturing, the grocers are experiencing above average sales increases. Normal year over year increases during the first half of the year is just 2.6%. The first to second quarter growth rate this year was 8.3% compared to the five year average of 7.3%.

On a deflated basis, taking away the effects of inflation, real grocery store sales increased about 1.2% in the first half of 2001 compared to the first half of 2000. By comparison, real food manufacturer sales increased by 3.5% in the first half of 2001 compared to the same period in 2000.

Supermarket Sales

While food retail sales have increased at above average rates, all retail (department stores, hardware etc.) sales have been just average. First half year over year sales have increased by 5.2% which is just normal (compared to the five year average).

Wholesale food prices as shown on the Industrial Product Price Index (IPPI) continued to move modestly higher during the summer. All wholesale prices on the other hand saw a notable decline during the summer month. The following graph shows the trend in wholesale prices for the past three years. The steady increase in food wholesale prices combined with the flat to declining prices in the entire economy is in contrast to the performance of the last three years.

Wholesale Prices (IPPI)

With regard to consumer prices, again there looks to be a material change in trend line performance. During the past few years, the price increases for food purchased from stores has tended to lag the price increases at restaurants and all other items. This year, the price increases of all items have started to slow or even decline. Restaurant price increases have continued their slow steady increase. Food purchased from stores on the other hand have been rapidly increasing. The following graph shows the performance of the CPI for restaurants, food purchased from stores and all items.

In addition to sales, the second quarter was also a good month with regard to profitability. The George Morris Centre receives a specially tailored data set from Statistics Canada that isolates food manufacturer and retailer profitability. The firms included in the data set are those with assets greater than $10 million and revenues greater than $25 million. The following graph shows the net profit margins for food manufacturers each quarter since 1999.

Consumer Price Index

As can be seen, there is a tendency for food manufacturer profits to increase in the second quarter. Nevertheless, the second quarter of this year saw an exceptional margin increase.

Food Manufacturer Profit Margins

While there are many possible explanations for the profit improvement, it is of interest to note that inventory levels are decreasing despite the increase in sales.

Food Store Profit Margins

Food store profit margins also improved in the second quarter compared to the first but at a much slower rate than the manufacturers. The following graph shows grocer net profit margins.

This article first appeared in the Grocery Trade Review, which is published by the George Morris Centre in Guelph, Canada.

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