Beverage manufacturing: 2026 FCC Food and Beverage Report

The following information is from the 2026 FCC Food and Beverage Report, which highlights the opportunities and challenges for Canadian food manufacturers by sector. To get the big picture, read the full report.

2026 margins under pressure amid soft sales

The beverage manufacturing sector includes businesses producing soft drinks, ice, bottled water and alcoholic beverages including beer, wine and spirits. Nationally, the industry comprises more than 2,800 establishments, over 95% of which employ fewer than 100 workers. Production is geographically concentrated in Ontario, British Columbia and Quebec. Downstream markets include wholesalers, foodservice and retail.

Beverage manufacturing sales: 2026 forecast

Beverage manufacturing sales increased 0.6% in 2025 to reach $15.8 billion, driven entirely by higher selling prices. Sales growth was restrained by ongoing volume (that is, sales adjusted for inflation) weakness as the sector adjusts to shifting consumer preferences and a retreat from pandemic highs (Figure 9.1).

Figure 9.1: Beverage manufacturing sales restricted by lower volumes

Total sales and volumes (in $, billions) are on the vertical axis and shown by the height of each bar. The number above each bar is the year-over-year growth as a percent. Volumes are sales deflated by a price index (January 2020 = 100).

Sources: FCC Economics, Statistics Canada

Soft drink manufacturers faced the greatest pressure to sales in 2025. Domestic demand for non-alcoholic beverages continued to grow, with retail sales up 2.8% and volumes up 0.3%. However, this demand was increasingly met through imports. Import volumes rose 12.5%, intensifying competitive pressures for domestic producers. Despite ongoing pressure from imports, domestic producers could still perform well in 2026 as there are opportunities to capitalize on – for example, the strong consumer demand for innovative non-alcoholic beverages.

Distillery sales were a notable bright spot last year, increasing 13.2%. Demand for ready-to-drink beverages remained strong in 2025, while Canada’s retaliatory tariffs and the removal of U.S. distillery products from provincial liquor stores and some restaurants significantly reduced import competition. Import volumes from the U.S. fell 53.7% in 2025, contributing to stronger domestic market performance.

Similarly, winery sales were supported by increased consumer preference for Canadian wine and declining import volumes. In fact, the sector increased its share of domestic wine sales by 2%. The industry drew down wine inventories in 2025, reflecting the lagged impact of the grape losses in the 2024 growing season, particularly in British Columbia.

In contrast, breweries continued to struggle amid falling beer consumption and a declining share within the alcohol category. Sales in 2025 fell 2.2% and volumes were down 6.4% following a 12.6% decline in 2024.

The downtrend in beverage sales is set to continue, with volumes expected to fall to a decade low in 2026. Strength in distillery and winery sales, supported in part by the “Buy Canadian” sentiment and lingering trade-related effects, are expected to be offset by continued softness in soft drinks and breweries.

Ingredient insights: Packaging

Packaging accounts for roughly one-third of raw material costs, making it a major driver of margins in beverage manufacturing. Container type – whether glass bottles, plastic bottles or aluminum cans – plays a critical role in product safety, transportation efficiency, shelf appeal and brand recognition. Packaging prices increased across the board in 2025. The cost of packaging as measured by the Industrial Product Price Index (IPPI) for glass products rose 4.1%, light gauge metal containers increased 2.5% and plastic bottle prices rose 1.3%. Unlike agricultural inputs, which are affected by weather or biological conditions, packaging costs are most vulnerable to supply chain and trade disruptions. In 2025, these disruptions were largely policy driven.

Steel and aluminum tariffs between Canada and the U.S. increased costs for materials used in aluminum cans. Given Canada’s reliance on U.S.-produced aluminum packaging, higher costs faced by American can manufacturers were passed through to Canadian beverage producers, leaving breweries and soft drink manufacturers particularly exposed. While experience from the 2018-19 steel and aluminum tariff period suggests that higher costs can eventually be passed on through pricing, today’s environment is less forgiving. Weaker demand, thinner margins and more price-sensitive consumers limit pricing power, increasing margin risk.

At the same time, regulatory change is adding structural cost pressure. The expansion of provincial extended producer responsibility (EPR) programs and Canada’s Strategy on Zero Plastic Waste are shifting recycling and reporting costs onto producers and driving packaging redesigns. Together, trade and regulatory pressures reinforce packaging as a key cost risk for beverage manufacturers heading into 2026.

Beverage manufacturing margins: 2026 forecast

Margins in beverage manufacturing improved in 2025 for the second year in a row. That, however, masks underlying structural challenges and uneven performance across sub-sectors.

For instance, breweries recorded margin gains in 2025, largely through lower cost of goods sold, driven by reduced wage expenses for hourly employees amid declining sales. Winery and distillery margins also improved, supported by higher revenues and stronger domestic demand. In contrast, soft drink margins declined as weaker revenues outweighed cost savings, reflecting continued pressure from imports.

Labour costs were a key contributor to margin improvement in 2025. Total wage costs declined as businesses reduced hourly employees. In fact, soft drink manufacturers and breweries each cut hourly staff by around 10%. The same declines in wage costs are not expected to repeat in 2026.

Despite lower labour costs, raw material pressures intensified as costs for packaging inputs such as glass, aluminium cans and plastic bottles rose in response to tariffs and domestic regulatory changes.

In 2026, cost pressures for raw materials are expected to persist and sales growth is expected to weaken, resulting in a 12.4% decline in gross margins (Figure 9.2). As demand continues to soften and the industry re-structures, businesses will need to focus on operational efficiencies to protect profitability.

Other trends to monitor in 2026

• Margin pressure and rising compliance costs are accelerating consolidation. Smaller producers may exit or sell, while larger firms use mergers and acquisitions to gain scale and efficiency, especially in fast-moving new consumer trend segments.

• Nine provinces and one territory have committed to enabling direct-to-consumer alcohol sales by May 2026. If implemented, this would help boost internal trade, although it remains constrained by long-standing barriers (for example, beverages have been left out of the Canadian Mutual Recognition Agreement that was brought forth in 2025).

Figure 9.2: Beverage manufacturing margins expected to decline in 2026

Sources: FCC Economics, Statistics Canada

B.C. wine grape production rebounded in 2025

Wine production is shaped by a natural lag: grapes are harvested in one calendar year, but wine often reaches the market in the following year. While some white and sparkling wines are released within a few months, red wines typically require one year or more of aging, meaning supply shocks affect inventories and sales with a delay.

The 2024 growing season in British Columbia marked a sharp contraction in grape production (tonnes), which declined 84% as a result of a deep freeze (Figure 9.3). This was on the heels of a 25% reduction in the prior year due to wildfires. With limited grapes, wineries drew down inventories to meet demand. Ending inventories declined 15.5% in 2024 and a further 12.9% in 2025.

The 2025 growing season was relatively good, allowing grape production to bounce back and positioning wineries to begin replenishing inventories. However, supply remains constrained in B.C. In the province, acreage of bearing fruit in 2025 was still almost 1,100 acres short of 2023 levels as growers contended with damaged vines. The BC Grape Growers Association and Wine Growers BC estimate production fell 10,000 tonnes short of market needs in 2025. To bridge the gap, the province has extended the temporary vintage replacement measures into 2026.

Figure 9.3: B.C. vinifera grape production rebounded in 2025 on good weather

Source: Statistics Canada

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