2026 Food and Beverage Report: Are higher selling prices enough to support the industry?

The annual FCC Food and Beverage Report reviews last year’s economic environment and highlights opportunities and risks for Canadian food and beverage manufacturers for 2026. The report includes projections of annual industry sales and gross profit margins by sector.

Industries featured in the report are:

• Grain and oilseed milling

• Sugar and confectionery products

• Fruit and vegetable preserving and specialty foods

• Dairy product manufacturing

• Meat product manufacturing

• Seafood preparation

• Bakery and tortilla products

• Beverage manufacturing

Key takeaways

Canada’s food and beverage manufacturing sector faced another challenging year in 2025 as tariffs, elevated input costs, and constrained household spending weighed on performance for many sub-sectors. Tariffs on products moving between Canada and the U.S. and Canada and China directly affected oilseed, seafood, pork, and alcoholic beverage sectors, while even tariff-free products going to the U.S. faced higher compliance costs, elevated packaging prices due to steel and aluminium tariffs, and operational complexity under CUSMA requirements. At the same time, Canada’s population began to slow but encouragingly, real per capita spending on food and non-alcoholic beverages stabilized after several years of decline and overall, a higher percentage of Canadian food and beverage manufacturers’ sales were sold in domestic markets in 2025 than in 2024 (Figure 1).

Figure 1: Overall, a higher percent of food and beverage manufacturing sales coming from domestic market in 2025

Source: FCC Economics

For 2026, the industry will have to grapple with uncertainties related to trade yet again, but also heightened uncertainty around cost pressures stemming from the conflict in the Middle East. It is unclear how long the surge in commodity prices will last and the extent to which that will affect food and beverage manufacturers. Our forecasts of cost of goods sold were produced before the Middle East crisis unfolded, meaning that if the commodity price surge persists beyond just a few months, there would be upside risks to those estimates. We will get more clarity about costs, but also about sales, over the coming months, and will share updated forecasts (if any) in our 2026 Food and Beverage mid-year update in September.

Higher selling prices support sales for another year

Sales are influenced by both the quantity of goods that are sold (that is, the volume) and the price at which those goods are sold. By holding prices constant using a price index, we can isolate volumes and help separate price effects from demand.

Historically, volumes and sales moved together but since 2021, higher selling prices have been the primary driver of growth for food and beverage manufacturing sales. Between 2016 and 2020, sales grew at an average annual rate of 3.8%, and volumes at 2.6%. That relationship shifted following the onset of the pandemic and since 2023, volumes have declined each year while sales remain positive. In 2026, volumes are forecast to fall by another 0.7% while sales increase 0.8% (Figure 2).

Figure 2: Sales and volumes diverge in the food and beverage manufacturing sector since 2021

Source: FCC Economics

This divergence reflects both supply and demand side challenges that have simultaneously pushed up selling prices and pressured consumers to cut back. Pandemic-related plant shutdowns, Russia’s war against Ukraine, drought and frost conditions, labour disruptions at ports and railways, or the obstruction of the Suez Canal in 2021 are just a few of the challenges that impeded the supply of goods over the last six years. At the same time consumers are being deliberate about their spending on food and beverages as household budgets remain under pressure and food prices continue to increase. Rather than any single commodity or sub‑sector, it has been the cumulative impact of repeated disruptions across complex supply chains that has sustained price growth and lowered volumes.

While higher prices have kept sales growth positive and supported near-term financial performance, persistently declining volumes pose longer-term challenges. Volumes underpin economies of scale, investment and productivity growth, all of which are essential to the sector’s long run health. As a result, the 2026 sales outlook highlights a key tension: revenues may continue to grow modestly, but without a stabilization or rise in volumes, the foundations of future growth remain under pressure as the ability of processors to pass additional cost increases on to consumers, without eroding demand, is limited.

Uncertainty casts a shadow over improving margins

Gross margins for food and beverage manufacturers are expected to improve, following several years of pressure. After sharp declines in 2022 and 2023 and little movement in 2024 and 2025, the gross margin rate index is forecast to rise by 4.3% in 2026 (Figure 3). Five out of the eight food and beverage manufacturing sub-sectors are forecast to experience margins higher than 2025. However, dairy is expected to remain stable while beverage and fruit and vegetable preserving look to have lower margins in 2026. These differences reinforce that outcomes of each sector depend heavily on the input mix, exposure to trade, and market demand. That said, surging commodity prices stemming from the Middle East crisis, depending on duration, could translate to higher costs, and therefore lower margins than projected.

Figure 3: Gross margin rate index expected to rise in 2026 for most sub-sectors

Source: FCC Economics

It’s unclear how long the above-mentioned commodity price surge will last and what other shocks will emerge over the course of the year. What is evident is that uncertainty has become a defining feature of the operating environment. Businesses cannot control global events, but they can focus on incorporating adaptability into their processes whether by diversifying input sources, simplifying product lines, exploring product reformulations, or looking at efficiency improvements in day-to-day operations. No forecast can anticipate every disruption, but what this report can do is provide the data and insights to think critically about the forces shaping each food and beverage manufacturing sub-sector.

Bottom Line

Higher selling prices continue to support sales for Canada’s food and beverage manufacturers, but that strategy is increasingly constrained by a stretched consumer and persistent global uncertainty. While easing raw material costs offer some margin relief in 2026, risks around trade, geopolitics and energy prices remain elevated. Long term success will depend less on pricing power alone and more on adaptability, efficiency and resilience across an increasingly complex operating environment.

Amanda Norris

Senior Economist

Amanda joined FCC in 2024 as an Economist. She has expertise in the food and beverage industries, but also does research on supply management and consumer trends. Amanda comes from Agriculture and Agri-Food Canada where she amassed a wealth of economic, technical and industry knowledge through various positions including policy advisor, project lead and Economist.

Amanda holds a master’s degree in Food, Agricultural and Resource Economics from the University of Guelph. She is also a Board member of the Canadian Agricultural Economics Society where she promotes outreach and the importance of agriculture and food research.