2022 FCC Beverage Report

Demand shifting from retail to service

The annual FCC Beverage Report highlights opportunities and risks for Canadian beverage manufacturers. It includes an annual sales forecast for 2022, product sales performance and a gross margin rate index.

Industries featured in the report are:

• Breweries

• Wineries

• Distilleries

• Soft drinks and other non-alcoholic beverages

Three key observations from this year’s report:

1. Beverage manufacturing sales increased in 2021

Increased foodservice volumes and continued retail growth boosted total sales 11.3% YoY to $14.5 billion in 2021.

Beverage manufacturing sales are projected to decrease 1.0% in 2022, driven by:

• Broad inflation shifting consumers’ choices • Elevated wholesale/retail inventory levels limiting downstream sales

• Shift towards service-based sales where consumers tend to drink fewer alcoholic beverages than at home

2. Industry gross margins expected to improve

Despite growing topline sales, gross margins struggled to regain 2019 levels. Strong competition in the alcoholic beverage sector makes it difficult to pass on higher costs, resulting in beverage inflation lagging food inflation.

We expect margins to improve in 2022 as consumers are willing to pay higher prices for beverages, assuming costs don’t continue to rise. Bar, taproom, wine tasting rooms and restaurant sales are also often at a higher margin than retail.

3. Beer remains the number one alcoholic choice among

Canadians but also faces pressure

Beer sales at the retail level for the 2020-21 year declined 1.4%, with total litres sold falling 2.3%. Total beer volumes have now declined for five consecutive years. Canadian breweries have taken market share from internationally produced beer over that timeframe, although their volume has also declined, just at a smaller rate. Overall, beer’s market share compared to wines and liquor fell by two percentage points to 36%.

The bottom line

Low retail inflation relative to rising input costs is a trend to monitor. Look for data-driven ways to boost margins, manage inventory, product mix and pricing strategies. Find ways to maintain or grow market share by connecting with Canadian consumers, through tourism or capitalizing on their desire for niche and “locally produced.” The alcoholic beverage market is competitive; however, product innovations, including seltzers, pre-mixed drinks, non-alcoholic drinks and other beverages, are supporting growth.

Read the full report at fcc.ca/BeverageReport

Kyle Burak, FCC Senior Economist

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