REGINA, SK, Oct. 7, 2025 /CNW/ - The Canadian food and beverage manufacturing sector has faced slower-than-expected growth in the first half of 2025, with sales and margins experiencing pressure given the challenging trade and economic environment. According to Farm Credit Canada's (FCC) Food and Beverage Report mid-year update, the sector saw a modest sales increase of 0.8 per cent in the first half of the year, but this momentum is not expected to hold, with a projected 0.3 per cent decline in the second half.
After a promising start to 2025, food and beverage manufacturers are beginning to feel the pinch of trade disruptions. FCC Economics now forecasts overall sales growth for 2025 to be restricted to just 0.2 per cent, down from the April projection of 0.6 per cent. If this holds, it will mark the lowest annual growth for the sector since 2005.
While the vast majority of Canadian food and beverage products continue to enter the U.S. market tariff-free, it's far from business as usual for Canadian exporters. Canadian businesses must ensure thorough documentation to demonstrate compliance with CUSMA regulations, adding complexity to the trade landscape. As a result, overall food exports to the U.S. are down in 2025 and uncertainty is hurting businesses investments.
Much of the sales growth seen so far is price-driven: sales are slowly trending up because of price increases, while the volume of goods sold is declining. Sectors with higher reliance on export markets faced more headwinds than those selling primarily into the domestic market. For example, dairy products and meat product manufacturing showed positive sales early in the year while grain and oilseed milling faced significant challenges early on 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."
There is cautious optimism for 2026, with expectations of stabilizing or even 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 of 2025, the lowest for the same period since 2015, indicating a larger pool of available workers.
There is also one potential bright spot so far this year and that is an uptick in per capita Canadian household expenditure on food and non-alcoholic beverages in both the first and second quarter of 2025. This is a positive development given the earlier concern that slower population growth would cap demand for food and beverages.
A continued strong demand for non-alcoholic beverages including energy drinks with new flavour profiles and functional ingredients is a longer-term trend and that momentum 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."
Building a stronger Canadian economy can open up interprovincial trade opportunities for food and beverage and capitalize on Canadians' appetite for domestic products, as mentioned in an FCC report titled The $12-billion trade shift: Canada's opportunity to diversify food exports beyond the U.S.
About FCC
FCC is proud to be 100 per cent invested in Canadian agriculture and food. The organization's employees are committed to the long-standing success of those who produce and process Canadian food. FCC provides flexible financing and capital solutions, while creating value through data, knowledge, relationships and expertise. FCC offers a complement of financial and non-financial products and services designed to support the complex and evolving needs of the industry. As a commercial Crown corporation, FCC is a stable partner that reinvests profits back into the industry and communities it serves. For more information, visit fcc.ca.
SOURCE Farm Credit Canada
For more information, photos or interviews, please contact: Éva Larouche, FCC Media Relations, 1-888-780-6647, [email protected]
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