Manufacturers discover ways to manage costs

Posted by Isobel Drake on 22nd September 2008

In spite of rising food prices Canadian manufacturers have been able to remain profitable, with innovation and size reductions among the methods to counter the issue. Seafood, fruit and vegetable processors have also seen strong gains, as the health and wellness boom continues, the Conference Board of Canada reports.

The industrial outlook from the Conference Board, “Canada’s Food Manufacturing Industry – Summer 2008”, discovered that, by creating innovative new products, manufacturers could shield themselves from the rising input costs by more easily passing on the higher cost of food ingredients. Manufacturers have also been able to pass on some of their higher costs to consumers, but the Conference Board of Canada noted that power in the supply chain had been shifting. The growing influence of large retailers has had an impact, with Canadian retailers placing additional pressure on manufacturers to contain costs.

“Higher prices for wheat, corn and rice are increasing material costs for food manufacturers,” said Michael Burt, Associate Director, Industrial Outlook. “But manufacturers have been able to pass some of their costs on to consumers, which is maintaining the industry’s profit growth.”

The report suggested the economic slowdown would ensure some consumers switched to lower-priced food products, while also highlighting that diet changes represented a longer-term trend that is now shaping the industry. Fruit and vegetable processors and seafood processors, in particular, are benefiting from this trend that sees some consumers prepared to pay a premium for foods that are healthier and taste better.