Food Manufacturing Profits Continue Growth

September 11, 2008- Despite the rising cost
of agricultural products and a slowdown in production growth,
profits in Canada’s food manufacturing industry are expected to grow
steadily over the next four years, according to the Conference
Board’s

Canadian Industrial Outlook: Canada’s Food Manufacturing Industry –
Summer 2008.

“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.”

Although the industry is passing some cost
increases onto consumers, its pricing power is being limited by the
growing influence of large food retailers. Wal-Mart’s expansion into
food retailing has prompted Canadian retailers to place additional
pressure on manufacturers to contain costs.

The slowdown in the Canadian economy is
expected to limit growth in consumer demand over the short-term, as
some consumers respond by shifting to lower-priced food products.
Changing diets is a longer-term trend shaping the industry, one
which is helping certain industry segments. 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.

The recent listeria outbreak is not expected
to affect the forecast. Although consumers may respond by altering
their spending habits, any changes will result in a shift in market
shares within the industry.

Following two years of significant profit
increases, profit growth will moderate starting in 2008. Profits
will surpass $3.1 billion in 2008 and steadily increase over the
next four years.