8 Best Food Stocks In Canada 2022: An Evergreen Business

As per the numbers from Statistics Canada, Canadian households spend roughly 10.4% of their annual expenditure on food, including both home-cooked and restaurant food. Investing in a market segment on which every Canadian household spent a tenth of their income (on average) seems like a no-brainer.

Food businesses are evergreen because no matter the economic condition, people still need to eat, which translates to reliable revenues.

And even though food stocks are not completely immune to poor market conditions, the best food stocks in Canada may offer more resilience thanks to the timeless relevance of the underlying business.

Best Food Stocks In Canada

Food Stocks In Canada

Investing in evergreen businesses is a pre-requisite to success for a long-term investor that follows the buy-and-forget approach for the bulk of their portfolio.

And since food is considered an evergreen business segment, it’s an easy pick. However, you need to understand the food sector as a whole and its relative strengths and weaknesses.

The sector which we can classify as food is highly diverse. Even though it’s dominated by grocery store chains and restaurant chains (to some extent), it also includes food processing companies, distributors, specialized food manufacturers, etc.

As for strengths, in a country like Canada, where the bulk of the population gets their groceries from major grocery stores, farmer’s markets (a fragmented part of the food industry) don’t pose a serious threat.

Also, consumer staple food stocks offer significant resilience and financial stability.

Ironically, a major con of the food industry is also its stability, especially if you are more interested in capital appreciation than reliable dividends.

Many food stocks don’t see a lot of routine capital appreciation and are better buys for capital preservation and dividends. However, there are exceptions, and they can be found among the best food stocks in Canada.

Eight Best Food Stocks In Canada (Plus seven Honorable Mentions)

8 Best Food Stocks In Canada (Plus seven Honorable Mentions)

For the following list, we haven’t included:

  • Tobacco and alcohol stocks
  • Pure restaurant chains like RBI and MTY Foods

Stocks are arranged in the order of the market capitalization at the time of writing this.

Unless otherwise specified, all the stocks trade on the TSX. Any ten-year performance or CAGR mentioned in the details below is between mid-April 2012 and mid-April 2022.

1. Loblaw Companies Stock

Loblaw Companies

Ticker: L
Industry Niche: Food and pharmacy retail

With over a hundred years of operations, Loblaw has emerged as the clear industry leader when it comes to food and pharmacy retailing in Canada.

It has a network of over 2,400 stores across Canada, and 90% of the Canadians live within 10 kilometres of a Loblaw store.

The company is also responsible for 850 private label food products, and a decent percentage of its total revenue already comes from its e-commerce business, which shows that the company is making great strides in the digital space.

While the stock’s performance has not been linear, it has mostly gone up in the last ten years and has a ten-year CAGR of 17.8% (a bit skewed due to post-pandemic rapid growth).

It’s a dividend aristocrat with a stellar payout growth history but a relatively small yield.

2. George Weston Stock

George Weston Stock

Ticker: WN
Industry Niche: Holding company

George Weston is basically a holding company that owns two separate publicly traded companies: Loblaw and Choice Properties. Its ownership of Loblaw, the retail food leader in the country, allows it to be a part of this list.

Two diversified business segments, even though the revenues skew mostly towards Loblaw, give George Weston a slight edge over the underlying businesses individually.

Its capital appreciation potential is less potent compared to Loblaw, and the yield is much lower than its REIT. Still, it’s a stable food stock worth considering.

3. Metro Stock

metro Stock logo

Ticker: MRU
Industry Niche: Food and pharmacy retail

With 950 food stores and 650 pharmacies, Metro is another food giant in the country. It operates through seven different brands, each with its own regional presence and client base.

Most of its grocery stores and other food-related retail locations are in Quebec and Ontario.

The company has been around since 1947, and most of the underlying chains that it has acquired over the years have their own roots and histories, which translate to a loyal consumer base and steady financials.

The company grew its market value by roughly 300% in the last decade. It’s also a dividend aristocrat with a modestly low yield, but it’s the consistency and reliability of its capital appreciation potential that attracts most investors.

4. Empire Company Stock

Empire Company Stock

Ticker: EMP.A
Industry Niche: Food retail conglomerate

The Nova Scotia-based Empire Company is the proud owner of Sobeys, the second-largest grocery chain in Canada, with over 1,500 stores across the country.

Sobeys has a long and proud history, and it has been in the food business since 1907. Empire bought the company in 1987, and since then, it has been the core of the conglomerate.

But Empire is in the process of diversifying its business model. It has taken a 51% stake in Longo’s grocery gateway, an e-commerce grocery business serving GTA.

It’s also expanding its e-commerce presence and will soon have stores in almost all provinces that offer curbside pickup and e-commerce delivery services.

Since its inception, the stock has mostly gone up apart from the massive dip between 2015 and 2017, but it has grown past that and has a decent and sustainable 10-year CAGR of 10%. The yield is usually low, but dividends are reliable.

5. Saputo Stock

Saputo Stock

Ticker: SAP
Industry Niche: Dairy giant

Milk is one of the most important food groups, and Saputo is the Canadian giant when it comes to milk and dairy products.

It’s the ninth-largest dairy company in the world and the second-largest in North America. It cates to four specific market segments (Regional): US, Canada, Europe, and international.

North America makes up the bulk of its revenues. The company processes about 11 billion litres of milk every year and converts it into a variety of products for its different markets (60 countries).

Saputo stock has been on a steady decline since 2017, but this pattern is unlikely to continue for long.

As soon as it becomes undervalued and starts turning the tide, it may become a decent holding for its capital appreciation potential. It’s already a decent dividend stock with a modestly high yield.

6. Premium Brands Holdings

Premium Brands Holdings

Ticker: PBH
Industry Niche: Specialty foods and distribution

Premium Brands is the specialty food leader in the country. It caters to about 22,000 B2B customers across the country, and the largest portion of its revenue comes from its protein-based products.

It has accumulated numerous brands under its banner in both its business segments (Sociality food and distribution), and they cover everything from sandwiches and premium meats to seafood.

The PBH stock is a bit different from the B2C businesses on this list since its revenues are tied to a variety of other food businesses, including restaurants which fall under discretionary spending and might not do well under certain market conditions.

Still, it offers decent cyclical growth (if you buy the dip) and a modestly high yield.

7. Maple Leaf Foods

Maple Leaf Foods

Ticker: MFI
Industry Niche: Packaged meats 

The Mississauga-based Maple Leaf has always been about meat-based protein. It caters to 20 global markets, primarily Canada and the US, and has six major and several minor brands under its name, including the Maple Leaf brand, which focuses on packaged meat products.

It’s also into premium meats, organic/natural (untreated with antibiotics) meat, and halal foods.

Many Maple Leaf brands have a strong regional presence and roots, which results in a loyal consumer base.

However, the company’s overreliance on meat-based protein at a time when more people are looking at alternatives is probably why it has been underperforming the market in the last five years.

But its dividends are solid, and its long-term growth potential might be decent enough.

8. North West Company

North West Company

Ticker: NWC
Industry Niche: Grocery stores

North West is all about serving the underserved. It primarily targets rural communities in Canada, the US, and even the Caribbean.

And while this may result in higher overhead costs, it also gives the company a distinct competitive advantage in markets that few, if any, major brands and grocery chains cater to.

It has six primary brands under its name (and several smaller ones) and a network of 230 stores (184 in Canada, the rest international).

The stock has seen incredible growth since its inception, and though it has slowed down a bit in recent years, the long-term growth potential is still powerful. It also offers a much healthier yield compared to other food stocks on this list.

Honourable Mentions

There are four Canadian and three US-based Food stocks that you should also look into:

SunOpta Stock: It’s a Brampton-based company and a mid-cap stock. It focuses on a variety of plant-based products like milk/beverages, snacks, and frozen fruits.

It has shown cyclical growth in the last ten years, and three growth phases appreciated the value by roughly 140%, 160%, and 1,000%, respectively. It doesn’t pay dividends.

Rogers Sugar Stock: Rogers Sugar is the largest refined sugar company in Canada and the largest maple syrup company in the world, though it doesn’t translate well to its capital appreciation potential.

It’s primarily a dividend stock with a healthy yield. It’s a relatively resilient stock and offers decent capital preservation stock.

High Liner Foods Stock: High Liner Foods processes and markets frozen seafood. It has been around since 1899, is based in Nova Scotia, and has two business segments (food service and retail).

The stock is capable of offering decent cyclical growth, but only if you buy the dip or as close to its as possible. It also offers dividends at a generous yield.

Goodfood Market Stock: It’s an online grocery store that offers meal kits and has accumulated a decent subscriber base. The stock saw modest growth before the pandemic and explosive growth after it.

And if you can buy it right after a correction phase, it can be held for the long-term for its capital appreciation potential.

The four US food stocks to consider (all trade on NYSE):

Kroger Stock: It’s the 7th largest food retailer in the world and has over 2,750 grocery retail locations, 35 food production facilities, and over 2,250 pharmacies.

It’s an incredibly stable business, and the stock offers decent growth potential with a low dividend yield.

General Mills Stock: General Mills is a 150-year-old company with over 100 brands to its name, many of which are the top-selling ones in their respective food groups. It’s a steady growth stock that comes with a relatively high yield.

Kellogg’s Stock: Kellogg’s is a food manufacturing giant that makes several things, from corn flakes to world-famous Pringles and pop-tarts.

The growth potential of the stock has lost its credibility since the 2016 spike, but it offers a very healthy yield.

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Among the best food stocks in Canada, the grocery stores stand out for their evergreen nature, decent growth potential, and reliable dividends.

But almost all the stocks on this list have their merits and are likely to be a good fit for certain investors.

And if you want an even wider pool of food-related stocks to choose from, consider these restaurant stocks as well.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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