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An employee of Sanagan's Meat Locker works in their Kensington Market location in Toronto on Friday, May 17, 2013.Brett Gundlock/The Globe and Mail

Canadians are losing their taste for meat, a change driven by an aging population and immigration that's expected to pinch profits at Canada's food manufacturers.

Profit margins in the food-making industry will drop slightly this year, to 4.2 per cent from 2014's 4.8 per cent, amid shifting tastes and a weak economy that are outweighing the benefits of a soft dollar and low commodity prices, said a Conference Board of Canada report released on Tuesday. Overall revenue growth in the sector will be just 1 per cent in 2015, and profit margins will remain at 4.5 per cent for the years 2016 to 2019, the report said.

Annual per-capita meat consumption has declined since 1999, led by a 31-per-cent drop in pork and a 19-per-cent reduction in beef, even though disposable incomes rose steadily in the same period. Meanwhile, consumption of chicken rose more than 11 per cent, Statistics Canada says.

The shift is caused by short-term factors that include price increases and economic recessions, as well as the growing number of people whose religion forbids or restricts meat consumption, and aging diners forgoing red meat for health reasons, said Michael Burt, an economist with the Conference Board of Canada.

The food industry is Canada's largest manufacturing sector by number of jobs, employing 260,000 people – half of those in Ontario. But Canada's food makers, led by such companies as Saputo Inc., McCain Foods Ltd. and Maple Leaf Foods Inc., operate in a low-growth domestic market.

The answer to boosting sales and profits lies overseas and in the United States, where new and emerging markets promise more opportunities, Mr. Burt said by phone.

"The domestic market is mature. Canadians are generally well-fed, population growth is fairly modest," he said. "The growth potential is very limited in the domestic market. You can only eat so much. The big driver for growth for the industry going forward is its ability to tap into new markets."

Canadian exporters have been helped by a low dollar that makes their goods more affordable to foreign buyers. The global drop in prices for such commodities as sugar and energy has also helped limit their costs.

Flour millers and canola oil makers, which sell most of their products abroad, are expected to lead the food industry in growth in 2015 at 7.2 per cent, followed by candy makers at 6 per cent, and seafood producers and bakers at more than 4 per cent.

The Canadian candy and sugar sector has benefited from a drop in global sugar prices not enjoyed by their rivals in the United States, where the cane and beet sugar industry is protected by price floors. This means Canadian candy plants have been able to manufacture at cheaper costs and export to the U.S. at competitive prices, Mr. Burt said.

"This means that when the global price of sugar falls relative to the U.S. price, we have a cost advantage in Canada. And that's what's been happening in the past year or two, and that's been helping to support exports of sugar products to the United States."

For meat producers, which account for 27 per cent of the sector's output, it's been a grimmer story. Pork and beef prices have recently hit records, prompting consumers to buy less or switch to cheaper cuts, said Mr. Burt, pointing to the per capita decline in meat consumption that began with the recession of 2007-08.

Trade agreements being negotiated with European and Pacific countries could open new export markets, but also more competition for Canadian food producers. However, Canada's recent victory in its meat labelling battle with the United States is expected to provide a boost to exporters, Mr. Burt said.

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