The 2026 FCC Food and Beverage Report states sales among food and beverage manufacturers are predicted to rise by 0.8 per cent while volumes fall by 0.7 per cent, the fourth straight year of decline. It notes sales growth will likely be driven by higher prices, not higher consumption.

WHY IT MATTERS: With trade tensions still disrupting global supply, prices could fluctuate this year, affecting consumers’ choices.

FCC chief economist Craig Johnston said this disparity speaks to the issue of consumer purchasing power.

“Higher food prices over the past several years are really weighing on households’ budgets,” he said in an interview. “They’re making more cost-conscious decisions.”

“This is actually a headwind for consumption and a headwind for volumes.”

He said any upstream changes will no doubt filter down to Canadian producers. Some challenges are shared across sectors.

“When we think about common elements, you can think about the tariffs, the elevated input costs, generally,” he said.

Margins are tight across the sector, including for farmers.

“We’re not seeing massive improvements on margins within the food and beverage manufacturing sector to pre-COVID levels, and we’re not necessarily seeing that filter through to a broad-based increase in margins for primary ag.”

“The industry in general is still going through this adjustment period” he said, “and we do expect that to continue to 2026.”

Trade tensions still a factor

Canada will continue to grapple with trade uncertainty this year, including the recent instability caused by the conflict in the Middle East.

Forecasts for costs of goods in the Food and Beverage Report were made before the crisis, “meaning that if the commodity price surge persists beyond just a few months, there would be upside risks to those estimates.”

FCC had expected pressures on some inputs, such as cattle and hogs, to ease from 2025 highs, but surging energy prices due to the conflict make that less likely.

Costs of production up

Production costs for food and beverage manufacturers increased by two per cent in 2025, driven mostly by raw material costs.

“The increase in raw material costs was driven by disruptions that constrained availability and raised prices,” the report states.

“Some examples from 2025 include avian influenza impacts on poultry … tariffs that increased the cost of imported aluminum packaging and historically low cattle herd sizes across North America.”

Costs across sectors

The report also breaks down costs associated with sub-sectors of food and beverage processing.

In grain and oilseed milling, sales were uneven in 2025 but improved by the fourth quarter. 2026 shows signs of a rebound in sales and volumes.

Large carryover of canola stocks is expected to keep prices under pressure in 2026. Canola prices are expected to fall by 3.1 per cent in 2026.

The report suggested demand for Canadian maple syrup and honey has continued to increase in the global market.

In the dairy sector, 2026 will likely see a 3.6 per cent increase of product manufacturing sales over 2025. Processors are also expected to pass along costs from the producer price increase for unprocessed milk to consumers.

In the meat manufacturing sector, FCC forecasts sales up 1.6 per cent and volumes down by 5.6 per cent.

Tight supplies of live animals, due largely to disease outbreaks, drove prices up in 2025. According to the report, “2026 will likely see another year where price, not volume, drives sales upward.”

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Protein Industries Canada (PIC) announced the project on March 31. PIC will provide $1.4 million toward the projects’ $3.9 million price tag.

AGT Foods and Sweet Nutrition will develop pulse ingredients derived from peas, lentils and faba beans for use in food products like cereals, baking mixes and high-protein snacks, PIC said in a news release.

The project will also advance new processing and post-fractionation techniques, including heat-moisture treatment and blending and extrusion. Other goals include increased efficiency and throughput at AGT’s Regina extrusion facility and the expansion and automation of Sweet Nutrition’s Saskatoon, Sask. baking and packaging operations.

“This project is a strong example of how food production and value-added agriculture can unlock new markets for Canadian crops and create new economic value for Canada,” said PIC CEO Tyler Groeneveld in the news release,

PIC is one of Canada’s five, federally-established Global Innovation Clusters, which fund and advance research and development in different industries.

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Faced with higher living costs and changing lifestyles, consumers are eating out less, cooking more at home, replacing meals with snacks and putting a sharper focus on value and nutrition.

And for Canada’s farmers and agri-food sector, the changes bring both risks and opportunity.

Canada’s restaurant and food service sector is a $124-billion industry, which sources approximately 68 per cent of its food and beverage from domestic suppliers. When restaurant traffic slows, the impact is felt throughout the supply chain.

At the same time, experts say that evolving consumer habits are creating new demand for the products, production methods and innovation that the Canadian agri-food industry is uniquely positioned to offer.

Current trends

The most immediate change is happening in restaurants.

According to a recent report, three quarters of Canadians are eating out less often. The primary reason for this is economics, says Sara Hamdy, research analyst with Restaurants Canada.

“More than 40 per cent of Canadians just can’t afford to dine out month to month as much as they’d like to,” she says.

According to the same report, even higher-income households are cutting back.

“Canadians who are dining out once a week or more are shifting to … maybe two or three times a month rather than four times or more,” says Hamdy.

At the same time, restaurant operators are facing their own cost pressures, with food costs cited as a top concern for the year ahead, Hamdy says.

Another emerging trend for Canadian consumers is a rise in snacking. About 65 per cent of Canadians report replacing full meals with snacks at least once a month, according to the Restaurants Canada report — a trend driven by both rising food costs and busier lifestyles, says Hamdy.

“This is a trend that we noted in a way that Canadians are adjusting to the increase of cost. They’re just not able to afford a full meal anymore, so they’re cutting back into snacks.”

Younger consumers in particular are gravitating toward portable, lower-cost options that fit a “grab-and-go” routine, she says.

But these changing eating patterns have not affected consumers’ desire for value, which dominates Canadian food choices today, says Ashley Kanary, director of Global Agri-Food at Export Development Canada.

After the pandemic, many consumers returned to simpler eating habits and became more conscious of prices, he says.

“When people looked at ways to save money, food was one of the first things that came out pretty hot.”

However, at the same time, consumers didn’t want to cut back on quality or health, he says.

These factors combined helped fuel strong growth for private-label grocery products, which now rival or outperform national brands in quality while offering savings of 15-20 per cent.

“When I look at those trends, that has not slowed down at all,” Kanary says. “If anything, globally, private-label products are outpacing all branded product growth, no matter where you go.”

But value shopping also doesn’t mean consumers have stopped treating themselves, he says.

“Even as people tighten their budgets, the indulgence factor is still there. In private label, everybody’s raised their game, and those products are as good, or even sometimes better than the national brand themselves. People are saying: ‘If I can get something that tastes better for 20 per cent less, I’m absolutely okay with that.’”

Beyond affordability, nutrition trends also continue to shape consumer behaviour, he says, with one of the strongest long-term shifts favouring higher-protein foods.

The challenge now, he says, is raising the taste profile in high- and added-protein products. “The desire … is to get things to taste great,” Kanary says. “People have always struggled getting around the added taste and or bitterness that protein-added causes.”

One final trend with long-term implications is sustainability, Kanary says.

Retailers and food companies are increasingly expecting suppliers to meet environmental standards, from emissions reductions to compostable packaging, but without charging more for the associated products.

“Sustainability expectations are rising, but consumers aren’t willing to pay a premium for it,” he says.

“They’re actually saying: ‘I want you to become sustainable and don’t charge me extra for that. We just need you to get better and raise your game.’”

Canada’s advantages

Despite the constraints these evolving eating habits cause for food supplies and producers, Canada is well positioned to meet many evolving consumer expectations for food, specifically around protein, sustainability, value and convenience.

“We feel that protein overall is where it’s at and Canada has amazing strengths in protein,” Kanary says, mentioning Canada’s pulse, poultry, seafood and beef industry as examples of high-quality protein sources.

He also believes Canada could have a competitive advantage in terms of rising sustainability expectations — provided companies can deliver results without higher costs.

“There’s an opportunity for Canadian companies to be leaders in sustainability on a global scale and I believe Canada is really strong in this area,” he says. “The key is to keep that momentum going, but not at any cost.”

Changing eating habits are also driving demand for portable, convenient options that still deliver quality and nutrition, another area where Canada is gaining ground as our food manufacturing sector expands its role in value-added products.

Food and beverage processing is now Canada’s largest manufacturing industry, with shipments topping $156 billion in 2023, according to Statistics Canada. Much of that growth is coming from ready-to-eat and snack categories, while Agriculture and Agri-Food Canada reports rising exports of consumer-oriented products such as processed foods. This points to growing opportunity for Canada to capture more value beyond the farm gate while supplying the convenient, high-value foods today’s consumers want.

Going forward

Some of the current eating trends for Canadians — fewer restaurant visits and more snacking — may ease as household budgets recover.

But several underlying shifts appear more durable, including greater price sensitivity, demand for convenience and flexibility, stronger interest in protein and functional foods, and rising sustainability expectations.

For Canadian farmers and processors, the key takeaway is that demand is not shrinking, but it is changing. Growth opportunities are increasingly tied to value-added processing, efficient production. and the ability to supply ingredients that fit portable, affordable and nutritious food formats.

At the same time, Canada’s strengths in high-quality protein production, strong environmental performance and an expanding food manufacturing sector position the industry to compete in both domestic and export markets.

The pressure, however, will be on cost competitiveness. Consumers and retailers are expecting better performance on price, quality and sustainability at the same time, putting greater emphasis on efficiency and innovation throughout the supply chain.

The direction of demand may be shifting, but the long-term outlook for Canadian agriculture remains strong. The farms and agri-food businesses that succeed will be those that focus not only on production, but on understanding how and where their products fit into a food system that is becoming more value-driven, more convenience-focused and more closely tied to consumer expectations.

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Such a move would mark an acceleration of efforts to reshape Unilever. More than one Unilever CEO has tried to refocus the company’s portfolio by expanding in personal care and beauty, and selling some food brands.

The food business came under the spotlight again when the Financial Times reported that Unilever might spin it off, and had held merger talks with Kraft Heinz, which ended.

Unilever’s shares, which were higher in early trade on Friday, had fallen to their lowest since July last year as investors and analysts worried that CEO Fernando Fernandez could be distracted from the day-to-day running of Unilever by the potential separation. And they questioned ‌the benefits of such an action so soon after Unilever’s protracted ice cream unit split.

How much is Unilever’s food business worth?

Unilever’s packaged food business accounts for more than a quarter of group sales, but faces pressures from a shift away from ultra‑processed products, competition from private label brands, and softer demand as the rise of weight‑loss drugs changes consumer buying habits.

Home to Knorr bouillon powders and Hellmann’s condiments, the division’s underlying operating margin – which excludes the impact of foreign currency exchange rates – was 22.6 per cent of revenue, outstripping the group’s 20 per cent margin last year.

The food business, which also makes Marmite spreads, reported an operating profit of 2.9 billion euros (C$4.6 billion) last year, giving it an enterprise value of roughly 30 billion euros (C$47.6 billion), according to Barclays estimates.

Slower to grow compared with the rest

The business, Unilever’s second largest by sales after personal care, grew at 2.5 per cent last year, more slowly than the rest of the group and well below the company’s own mid-term goal.

Underlying sales growth at Unilever’s foods division has lagged that of other units since the COVID-19 pandemic highs, repeatedly falling short of the company’s annual goal of sales growth of between four and six per cent.

Analysts and investors question the long-term prospects of the packaged food industry when politicians, including U.S. Health Secretary Robert F. Kennedy Jr, have highlighted the potential health risks of processed foods.

Developed markets have reached saturation

Part of the problem is that the business is operating in two contexts: developed and emerging markets. Unilever’s food business is growing more slowly in North America and Europe than in countries such as India and parts of Latin America, where the group has a stronghold in food and private label products are less sophisticated, meaning they offer less competition.

“There is more growth in emerging markets, which accounts for 55 per cent of food for Unilever, but it’s still not enough to make up for Europe and the U.S. where the market is saturated,” Barclays analyst Warren Ackerman said.

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Protein Industries Canada has committed $1.3 million to these projects through its Strengthening the Canadian Supply Chain program the organization said in a Feb. 25 news release. The companies will collectively chip in about $400,000.

The projects announced are:

• Fresh Hemp Foods in Manitoba will develop a dry fractionated flax protein powder for business to business and consumer sales.
• Ontario-based 1847 Stone Milling will develop and commercialize a Canadian-grown, high-protein Atta flour. Atta is a finely-milled flour often used in Indian and South Asian cuisine. Atta flour is largely imported in Canada, Protein Industries Canada said.
• Yofiit Inc., based in Ontario, is developing a high-protein drinkable yogurt incorporating flax, oats and legumes.
• MeeT Restaurants in B.C. is developing a plant-based burger to feature in its restaurants and for online sales in order to switch to a product made of Canadian ingredients.
• Farmery Estate Brewery in Manitoba will upcycle spent brewer’s grains into a protein-rich beverage base and ingredient.
• Henry’s Tempeh in Ontario is scaling production of marinated tempeh made with Canadian organic soybeans.
• HealX Vitals in Ontario is developing ProteinFries, a high-protein frozen fry using Canadian pulses and grains.
• Trueleaf Petcare, based in B.C., is developing and scaling cold-formed dental sticks for dogs using Canadian ingredients.
• Grazy, based in Quebec, is reformulating its frozen dessert and beverage lines using Canadian pea and fava bean protein.

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The scientists, including the Brazilian professor who coined the term with colleagues around 15 years ago, argue that ultra-processed foods, or UPFs, are now increasingly common worldwide and linked to a decline in diet quality and a number of diseases, from obesity to cancer.

“It’s about the evidence we have today about … ultra-processed foods and human health,” Carlos Monteiro, professor at the University of Sao Paulo, said at an online briefing on Tuesday. “What we know right now justifies global public action.”

Processing and politics

UPFs are a class of food or drink made using processing techniques, additives and industrial ingredients, and mostly containing little whole foods. Examples include carbonated soft drinks or instant noodles.

While the term UPF has been used widely in recent years, some scientists, and the food industry, argue it is too simple, and the fight has become increasingly politicized.

The authors acknowledge criticisms in the Lancet series, saying more evidence is needed, particularly on why and how UPFs cause ill health, as well as on products with different nutritional values within the UPF class. But they say the signal is already strong enough for governments to take action.

In a systematic review of 104 long-term studies done for the series, 92 reported greater associated risks with one or more chronic diseases linked to UPF dietary patterns, and significant associations for 12 health conditions including Type 2 diabetes, obesity and depression.

Consumption rising

Most of these studies were only designed to show links, rather than direct causality, which the authors acknowledged. But they said the situation needed to be addressed while more data was gathered, not least because consumption of UPFs is rising worldwide as a share of the diet, to above 50 per cent in countries like the United States.

The three papers in the series, funded by Bloomberg Philanthropies, also outline ways to tackle the problem, such as adding UPFs into national policies on foods that are high in fat, sugar or salt. But they cautioned that the UPF industry is the biggest barrier to tackling the issue.

The International Food and Beverage Alliance, an organization representing major multinational food and beverage companies, said its members also wanted to improve global health outcomes through diet quality, and food companies should be part of policymaking.

“The policy and advocacy recommendations of this series go far beyond the available evidence,” said Secretary-General Rocco Renaldi, arguing there was a risk of reducing the availability of affordable, shelf-stable options globally.

— Reporting by Jennifer Rigby in London

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More Americans are expected to try the drugs as a pill rather than as a shot because the medication will be cheaper and many patients are hesitant to inject themselves.

The U.S. Food and Drug Administration approved Novo Nordisk’s Wegovy GLP-1 pill on Monday, sending shares of food companies down on Tuesday. Eli Lilly’s rival medication is expected to gain approval from regulators next year.

Shifts in consumer taste

Food companies including Conagra Brands and Nestle are already dealing with shifts in consumer tastes toward higher protein and smaller portions due to the popularity of weight-loss injections, and analysts believe widespread GLP-1 adoption could mean long-term changes in demand.

To cope, businesses are promoting products with more protein, tweaking labeling to say they are GLP-1 friendly and working with large retailers to better market products.

“We are seeing people cut (back) specifically on salty snacks, liquor, soda, drinks, and bakery snacks, and more focused on protein and fiber, so we expect food companies and also restaurants to cater to this audience that is growing,” said JP Frossard, consumer foods analyst at Rabobank.

“We’ll see more access to those drugs and a higher addressable market for products that have in mind the needs of the GLP-1 user,” he said.

Andrew Rocco, stock strategist at Zacks Investment Research, called Novo’s approval “groundbreaking” because the pill would be cheaper than the injectable version of Wegovy and deliver the same weight-loss metrics. “High protein, smaller portions, and functional food innovation will be necessary,” he said.

Food companies are taking note

Some 40 per cent of American adults are obese, U.S. government data shows, and around 12 per cent of adults say they currently take GLP-1 drugs, according to a poll published last month by health policy research organization KFF.

Households using GLP-1 medications cut spending at grocery stores by 5.3 per cent and fast-food restaurants by about 8 per cent on average, according to a Cornell Research study published last week that used purchase data collected by Numerator from about 150,000 households.

Those reductions largely faded when households stopped using the medication.

“The decreases we saw will likely show up in a much broader slice of the population” because of weight-loss pills, said Sylvia Hristakeva, one of the study’s co-authors. She said the cheaper price and ease of use of pills will also make it likely that people use the medication for longer.

While the Cornell study found modest increases to spending only in a handful of categories like yogurt and fresh fruit, companies are taking note.

‘GLP-friendly’ foods

Earlier this year, Conagra started labeling some of its Healthy Choice frozen meals with high protein and fiber as “GLP-1 friendly.” A spokesperson said those meals are selling faster than rival products making similar claims on their packaging. The company plans to introduce new Healthy Choice recipes with the same labeling in May and work with grocers like Walmart and Kroger to market them, the spokesperson said.

French dairy company Danone, which makes Oikos Greek yogurt, said in a statement that it is seeing double-digit growth in its high-protein offerings, a trend that has accelerated with the adoption of GLP-1 medications.

Nestle, the world’s biggest food company, has also introduced new frozen meals that cater specifically to GLP-1 users, called Vital Pursuit. The Swiss company did not respond to a request for comment.

Fast-casual Mexican chain Chipotle on Tuesday added a “High Protein Menu” that features, among other items, a single cup of chicken or steak.

In recent months, some restaurant chains including Olive Garden have added menu items for smaller, cheaper portions.

Noodles & Company marketing head Stephen Kennedy said such menu additions were about offering guests “options that satisfy without going overboard.”

— Additional reporting by Savyata Mishra in Bengaluru

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“This downward revision should not be surprising given the impacts that tariffs are having on the economy and the trade landscape,” wrote FCC senior economist Amanda Norris in a Sept. 24 report.

“Much of the sales growth seen so far is price-driven, that is sales are slowly trending up because of price increases while the volume of goods sold is declining.”

Food and beverage sales increased by 0.8 per cent in the first half of the year, but are now expected to drop by 0.3 per cent in the second half of the year. FCC Economics forecasts overall sales growth in 2025 to be 0.2 per cent, down from its forecast of 0.6 per cent growth at the beginning of the year.

Export volumes began to decline in March, wrote Norris. Volumes are now trending near the five-year minimum.

Gains and losses

Grain and oilseed milling —a heavily export-driven sector — saw a 10.6 per cent decline in year-over-year sales in the first half of 2025. FCC projects a 10.0 per cent decline in the second half of the year.

”Tariffs from China on canola seed, meal, and oil, combined with biofuel policy uncertainty in the U.S., have dampened demand and prices, bringing sales down as a result,” said Norris.

Dairy products, a sector that caters largely to domestic demand, saw a 3.8 per cent sales growth. FCC projects a 0.5 per cent increase in the latter half of 2025.

Meat products saw sales increase 5.7 per cent and are projected to see a 4.1 per cent increase in the second half of the year.

Distilleries saw a 6.1 per cent bump in sales, but are predicted to see a 1.7 per cent slump for the rest of the year. Seafood preparation saw a 1.9 per cent increase, but is predicted to decline by 9.8 per cent in the latter half of 2025.

Manufacturers’ margins are also pressured by falling sales.

“While higher prices helped offset falling demand in the first half of the year, it’s not likely enough to bring positive sales growth in the second half of the year. That, combined with raw material and labour costs that are taking longer to ease, suggests to us that 2025 margins will not improve from last year,” Norris wrote.

Industries dependent on steel and aluminum may also see packaging stockpiled pre-tariffs dwindle next year.

Bright spots

FCC is more optimistic about 2026 said Norris.

“A modest rebound in sales, paired with stabilizing or even falling input prices, could set the stage for recovery,” she wrote.

Low grain and oilseed prices, which are expected to continue, are good news for grain and oilseed millers, bakeries and beverage manufacturing.

The labour market may also see some improvement. The job vacancy rate in food and beverage manufacturing fell to 2.8 per cent in the second quarter, which FCC said is the lowest for any second quarter since reporting began in 2015. The unemployment rate in that sector grew over the summer and reached 9.4 per cent in August — the highest in over four years. This, combined with softening wages, point to a “slightly more accessible labour market” for food and beverage makers.

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Rising consumer prices and a cooling U.S. labor market have squeezed household budgets, steering shoppers to cheaper private-label alternatives and pressuring packaged food makers across the region.

The Minneapolis-based company saw quarterly volumes in its North America segment decline 16 percentage points compared with a year earlier and now expects overall category growth to fall below its long-term targets.

Tough environment for food processors

General Mills reaffirmed its annual targets of adjusted profit declining 10 per cent to 15 per cent and organic net sales ranging from down one per cent to up one per cent.

The first-quarter results underscore how tough the current environment is for food makers, who need to invest heavily to reignite volume growth, as consumers remain price-conscious but expect benefits such as added protein and distinctive flavors, Consumer Edge analyst Connor Rattigan said.

Shares were down one per cent in choppy early morning trading. The stock has dropped about 22 per cent this year.

General Mills posted a smaller‑than‑expected quarterly sales decline, helped by volume gains in its North America pet food unit and in international markets including India, China, Japan and Europe.

Net sales in the international segment rose six per cent in the quarter ended August 24, with pricing up six percentage points.

“We continue to see consumers seeking value and prioritize their spending on key benefits like protein, bold flavors, and feelings of nostalgia from brands they love,” said CEO Jeff Harmening in prepared remarks.

Pet food gains support sales

North America pet food net sales increased six per cent, partly due to the recent acquisition of Whitebridge Pet Brands’ North America business, after a one per cent decline a year earlier.

First-quarter sales fell 6.8 per cent to $4.52 billion (C$6.22 billion), slightly better than expectations for a 6.9 per cent drop to $4.51 billion, according to data compiled by LSEG.

General Mills’ adjusted profit of 86 cents per share topped estimates of 81 cents, driven partly by price increases in international and North America pet food segments.

— Reporting by Anuja Bharat Mistry and Sanskriti Shekhar in Bengaluru

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“I think we need to find our hook in some of those core government priorities,” said Brodie Berigan, the Canadian Federation of Agriculture’s (CFA) senior director of government relations and farm policy.

Berigan spoke alongside Food and Beverage Canada CEO Kristina Farrell and Canadian Agricultural Human Resources Council (CAHRC) executive director Jennifer Wright in a webinar on June 26.

Large financial commitments to things like defense and housing could draw away workers from an already strained agriculture and food labour force, Wright said.

The sector should look at how its priorities fit into the government’s mandate and use that as an entry point for advocacy, Berigan said.

Prime Minister Mark Carney set seven priorities in his mandate letter earlier this year, including building “one Canadian economy” by removing barriers to interprovincial trade, establishing a new economic and security relationship with the U.S., strengthening the Canadian Armed Forces, and making housing more affordable.

The mandate letter also mentioned “attracting the best talent in the world” while balancing immigration rates.

It’s hard to know what this means, Berigan said. He speculated this could be targeted at Americans who are feeling insecure in their job and who may be interested to move to Canada.

Need to build consensus

The Agri-food sector needs also needs to agree on what it needs so it can present a unified voice to the government.

“When you are the government, and you have a diverse set of stakeholders who are calling for different things, it’s very easy to do nothing,” Berigan said.

More than 100 members of the agriculture and food sector met for a summit on June 11 and 12 in Toronto. Berigan said the need to strengthen employers’ human resource capacity came up a lot—specifically, the need to support employers to build capacity around tech solutions and a labour pool that will increasingly rely on technology to drive productivity.

The sector also needs to identify its skills gaps, said Farrell. Berigan said the need for a “skills gap map” came up at the summit. The government already has some of this data, but needs to hear it from the industry.

Programs in flux

The federal government is at the beginning of a new mandate and structuring its priorities, Berigan said. A lot of programs are in flux, including the Temporary Foreign Worker Program.

The sector needs to clearly articulate the advantage of pursuing a multi-pronged approach like the National Workforce Strategic Plan that the CFA, CAHRC and Food and Beverage Canada have developed, he added. It also needs some sense as to how it will implement it.

“I think the clock is definitely ticking,” Berigan said.

“Unless we’re in there, able to articulate the value and the role of these types of strategies and the importance of them, decisions are going to be made without us.”

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