Canadian food and beverage sector sees sluggish growth amid trade headwinds: FCC
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Canada’s food and beverage manufacturing sector is facing slower-than-expected growth in 2025 as trade disruptions and economic pressures weigh on sales and margins, according to Farm Credit Canada’s (FCC) Food and Beverage Report mid-year update.
The sector posted a modest 0.8 per cent increase in sales during the first half of 2025, but FCC now expects a 0.3 per cent decline in the latter half of the year. Overall, sales growth for 2025 is projected at just 0.2 per cent, down from April’s forecast of 0.6 per cent, which would mark the weakest annual growth since 2005.
While most Canadian food and beverage products still enter the U.S. tariff-free, exporters are facing new hurdles due to heightened documentation requirements under the Canada-U.S.-Mexico Agreement (CUSMA). FCC said the added complexity is dampening food exports and curbing business investment.
Much of this year’s growth has been driven by higher prices rather than stronger demand, with the volume of goods sold declining. Domestic-focused sectors such as dairy and meat processing have fared better than export-reliant industries like grain and oilseed milling, which continue to grapple with 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.”
There are signs of optimism for 2026, with expectations of stabilizing or even falling input prices, particularly for grains and oilseeds. The job vacancy rate in the sector dropped to 2.8 per cent in the second quarter, its lowest mid-year level since 2015, indicating a larger pool of available workers.
FCC also highlighted an increase in household spending on food and non-alcoholic beverages during the first half of the year, noting strong demand for energy drinks and other functional beverages is likely 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.”
FCC noted that expanding interprovincial trade and capitalizing on Canadians’ appetite for domestic products could further strengthen the industry, echoing recommendations from its report The $12-billion trade shift: Canada’s opportunity to diversify food exports beyond the U.S.
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