Amid U.S. trade disruptions, Canada's food and beverage sector's 2025 sales growth forecast has dropped even lower.
The Canadian food and beverage manufacturing sector has experienced slower-than-expected growth in the first half of 2025, with sales and profit margins under pressure due to a challenging trade and economic environment.
According to Farm Credit Canada’s (FCC) Food and Beverage Report mid-year update, the sector recorded a modest 0.8 per cent sales increase in the first six months, but growth is expected to slow, with a projected 0.3 per cent decline in the latter half of the year.
After a strong start to 2025, manufacturers are now feeling the impact of trade disruptions. FCC Economics forecasts overall sales growth for 2025 to reach only 0.2 per cent, down from the 0.6 per cent projected in April. If realized, this would mark the sector’s lowest annual growth since 2005.
Although most Canadian food and beverage products continue to enter the U.S. tariff-free, exporters face increasing challenges. Businesses must ensure detailed documentation to comply with CUSMA regulations, adding complexity to cross-border trade. Consequently, overall food exports to the U.S. have declined, creating uncertainty that affects investment decisions.
Much of the current sales growth is driven by price increases, rather than volume. Products sold primarily to domestic markets, such as dairy and meat, performed relatively well early in 2025, whereas export-reliant sectors like grain and oilseed milling faced significant challenges due to tariffs and biofuel policy uncertainty.
“The first half of 2025 has been a test of resilience for our industry,” said Amanda Norris, FCC senior economist. “Despite the challenges, we have seen some sectors show remarkable strength, driven by sales diversification.”
Looking ahead, there is cautious optimism for 2026, supported by stabilising or falling input prices, particularly for grains and oilseeds. The job vacancy rate in food and beverage manufacturing fell to 2.8 per cent in the second quarter, the lowest for the same period since 2015, signalling a larger pool of available workers.
A positive trend is the increase in per capita household spending on food and non-alcoholic beverages in both the first and second quarters of 2025. Demand for non-alcoholic beverages, including energy drinks with new flavours and functional ingredients, is expected to continue into 2026.
“Looking ahead to 2026, we are optimistic about the potential for recovery,” said Norris. “A modest rebound in sales, paired with stabilizing or even falling input prices are positive signs that we can build on to drive growth and profitability.”
Photo Credit: Farm Credit Canada