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By Pattison Media

Food and beverage manufacturers face an uncertain future

Apr 1, 2026 | 1:39 PM

Canada’s food and beverage manufacturers are expected to see modest sales growth in 2026, but weak demand continues to challenge the sector. 

Canada’s food and beverage manufacturing sector includes more than 11,000 businesses and employs roughly 318,000 people, making it the largest manufacturing employer in the country and a critical link between Canadian farms and consumers. 

In the Farm Credit Canada (FCC) Food and Beverage report, economists forecast sales will increase 0.8 per cent in 2026, driven by higher prices, while sales volumes are expected to decline by 0.7 per cent.  

FCC chief economist Craig Johnston said this marks the fourth consecutive year of falling volumes, continuing a trend where higher prices support revenues while underlying demand remains weak.    

“The gap between modest sales growth and declining volumes highlights the demand challenge facing food manufacturers,” Johnston said. “Weak volume growth shows the sector is still adjusting to tighter consumer spending and slower population growth.”    

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Input costs have risen sharply in recent years as supply disruptions pushed prices higher across the agricultural supply chain. Events such as avian influenza, drought in cocoa-producing regions, and tight livestock supplies increased costs for many manufacturers.     

Looking ahead to 2026, prices for key inputs including cattle, hogs, canola, and cocoa are expected to ease, providing some relief for processors. It should be noted that the outlook is subject to uncertainty, as the conflict in the Middle East has introduced new risks to energy and commodity markets.     

Gross margins for food and beverage manufacturers are forecast to improve in 2026 and 2027. In 2026, the improvement is expected to come mainly from easing raw material costs. As market conditions stabilize, margin gains in 2027 are expected to reflect a combination of improved cost conditions and stronger revenue growth.     

Margins are expected to improve in meat processing, seafood preparation, bakery products, grain and oilseed milling, and sugar and confectionery manufacturing. However, fruit and vegetable processing and beverage manufacturing are expected to face renewed pressure.    

Johnston said trade uncertainty continues to influence the outlook. Tariffs, supply chain disruptions, and geopolitical tensions are affecting export markets, input costs, and creating uncertainty for businesses planning future investments.  

“Demand conditions remain uneven across product categories, and that will shape performance across the industry,” he said. “Businesses that improve productivity, manage input costs and adapt to changing consumer preferences will be better positioned as conditions evolve.”    

Investment trends reflect the cautious environment with capital spending in the food and beverage manufacturing sector down 5.3 per cent in 2025, and early indicators suggest investment may weaken further in 2026. Sustained declines in capital spending could limit productivity growth, reduce capacity expansion, and slow the adoption of new technologies across the sector.    

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alice.mcfarlane@pattisonmedia.com