Thank you, Ms. Hendricks.
Food and beverage manufacturing revenues grew over 10% in 2022. This growth was almost entirely due to price increases in the face of higher costs. Profit margins in the sector are thin and even thinner for small businesses. This makes it difficult to avoid trying to pass on cost increases.
There were multiple pressures on costs. The 2021 drought in North America reduced crop production and lifted the prices of key commodities. The war in Ukraine impacted grain movement in that region, causing global supply shortages and global commodity prices to rise. For example, the price of wheat and canola, two vital inputs in food, more than doubled in price from the beginning of 2020 to mid-2022.
Cost pressures have not only affected raw materials. The labour market tightened in 2021 and 2022, pushing the unemployment rate to unprecedented lows and driving up wages. The labour market tightening was even more pronounced in the food manufacturing sector. Wages rose faster in this sector than in the economy as a whole, even though employment growth there was lower than generally seen in the economy.
For that matter, the entire food supply chain is facing increased labour-related pressures. This affects input suppliers in primary production, primary producers themselves, manufacturers, food service, as well as related industries, such as trucking.
Despite every effort to contain costs and prices, pressure on profit margins has forced companies to raise prices. Historically, manufacturers have struggled to pass on cost increases to their customers, and 2022 has proven no different. The bottom line is that gross margins as a percentage of sales for the processing industry saw a significant decline in 2022. If manufacturers had passed on all the cost increases experienced in 2022 to their customers, food prices would likely be even higher today.
Consumers have cut back on discretionary spending as they face higher inflation, depleted savings and higher costs of servicing debt. Inflation led to changes in food consumption decisions, which resulted in fewer purchases and different sources for purchases. For example, Canadians are estimated to have increased their consumption of imported food in 2022. This is after spending a higher share of their food purchases on local foods during the pandemic in 2021.
While trends vary based on industry volatility, we are, in fact, optimistic that gross margin rates and cash flow will improve for struggling food manufacturers as cost pressures now begin to subside. We've already seen commodity prices come back from recent highs, but it is common for these lower prices to not immediately translate into lower food prices for consumers. It can take up to a year for industrial prices to reflect recent spot commodity prices and raw material cost declines. Energy, labour and packaging materials are all inputs that can account for a significant share of food manufacturers' costs. In the meantime, lower agricultural commodity prices may create profitability challenges for Canadian farmers.
Go ahead, Justine.