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Fall 2020 bakery outlook – moving back to normal

Reference: FCC

Bakeries and tortilla manufacturing companies are an essential component of Canada’s food manufacturing industry. Employing over 49,000 Canadians and generating $5 billion in GDP annually, bakeries represent the second largest food manufacturing sector, only behind meat product manufacturing. Furthermore, bakeries are the fastest growing food sector, with an average annual GDP growth rate of 5.4% since 2015.

Most bakeries can be considered small businesses, and the average net margin was 4.2% in 2018. So small shifts in costs or demand can significantly impact financial health. COVID-19 has created significant opportunities and challenges for Canadian bakeries. Future growth in sales depends on Canadian foodservice rebound, export growth, and labour availability.

Canadian bakery industry trends
The industry has performed relatively well since the 08-09 Great Recession. 2020 started on the right foot. Nielsen data reveals bread sales jumped 21% over last year in March as customers flocked to grocery stores and purchased lower-priced at-home food.

Simultaneously, foodservice demand fell as much as 61% in April, dragging down bakery manufacturing after a strong Q1. Food service has begun a slow recovery and is still down over last year. Despite all the disruptions, bakery manufacturing sales are up 6.7% through July.

Population growth is a major factor behind the demand for bakery products. With low birth rates and an older population, immigration is the key driver of population growth in Canada. In the summer of 2020, we saw a steep decline in immigration due to COVID-19 border restrictions, which influence the strength in demand and labour availability... Read More