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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“In response to a formal request from the Canadian Association of Vegetable Growers and Processors, the government has directed the Canadian International Trade Tribunal to conduct an inquiry,” federal finance minister François-Philippe Champagne said in a March 13 news release.

A statement via Ottawa government relations consulting firm Maple Leaf Strategies bills the association as “the voice of Canadian vegetable growers, harvesters, employees and processors from coast to coast to coast, working to protect and strengthen the sector from farm to consumer.”

The CITT will have 180 days to decide if imports of frozen and canned vegetables are harming or threatening to cause harm to domestic growers and processors. If so, it will propose remedies to the federal government.

It has also been asked to consider impacts to food affordability and security for Canadians, the news release said.

The CITT, in a separate release March 16, confirmed it has launched the inquiry as requested and will report back to Champagne by Sept. 9.

In its notice of inquiry, the CITT said anyone wanting to make submissions to the tribunal on this matter must file notice by April 2 of their intent to do so, and it will hold its hearing on the inquiry in Ottawa starting June 15.

In an order in council, the government said that it appears importation of increased quantities of vegetables is a result of obligations under the World Trade Organization Agreement and “unforeseen developments in global trade.”

These have led some WTO members to restrict imports of vegetables into their markets, which has led those goods to be diverted into Canada.

In 2024, 55 per cent of Canadian fruit and vegetable preserving and specialty food were imported, according to Farm Credit Canada’s 2025 food and beverage report. That category includes frozen and canned vegetables and fruit, pickling and drying.

The Canadian Association of Vegetable Growers and Processors, in its separate statement, described the government’s move as “an important first step,” saying the domestic frozen and canned vegetable sector “has been facing a sudden surge of low-priced imports that is disrupting the Canadian market. Temporary, rules-based safeguard measures will restore fair competition and allow Canadian growers and processors to compete on equal terms.”

Such measures, it said, “will help stabilize supply chains that retailers and consumers depend on.”

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Excluding the effect of indirect taxes, the Consumer Price Index rose 1.9 per cent year-over-year in February, it said.

The inflation data for March will be the final month affected by the base-year effect of the sales tax break. But rising crude oil prices as a result of the Iran war are likely to change inflation expectations.

Economists polled by Reuters had expected inflation to fall to 1.9 per cent year-over-year in February from 2.3 per cent in January, and 0.7 per cent month-over-month compared with no change in the prior month.

On a monthly basis consumer prices rose by 0.5 per cent in February, StatsCan said.

Bank of Canada to decide rates Wednesday

The Bank of Canada has held its key policy rate at 2.25 per cent since October, as inflation stabilized around its two per cent target within a one to three per cent control range.

The BoC will give some indication of inflationary pressures at its policy decision on Wednesday.

“The tame (CPI) report will be welcomed by policymakers ahead of the energy price shock, as it shows that labour market slack is keeping a lid on core prices, with the issue for the BoC being how long the oil price shock lasts for and its magnitude,” Katherine Judge, senior economist at CIBC Capital Markets, wrote in a note.

Food prices ongoing pain point

Despite the base year effect, food prices in February rose by 5.4 per cent on an annual basis as food purchased at restaurants increased by 7.8 per cent last month.

Food prices have remained a major pressure point for Canadian households, as grocery prices have risen faster than overall inflation due to factors like U.S. President Donald Trump’s tariffs, bad weather conditions and supply chain issues.

Grocery prices rose 4.1 per cent in February after a 4.8 per cent rise observed in January, and the statistics agency said they have risen by 30 per cent in the last five years.

Gasoline prices decelerated by 14.2 per cent in February due to the continued impact of the removal of a carbon tax on the fuel, which reduced the year-over-year price. This impact will stay until April, StatsCan said.

Shelter costs – the largest component of the CPI basket with a weight of roughly 29 per cent – rose at a slower pace of 1.5 per cent in February as mortgage costs continued to ease. Rent costs rose 3.9 per cent on an annual basis in February.

Economists and the Bank of Canada closely watch core measures of inflation to gauge underlying price pressures.

The CPI-median, the centermost component of the CPI basket, was 2.3 per cent, while CPI-trim, which excludes the most extreme price changes, was also at 2.3 per cent.

The Canadian dollar firmed and was trading up 0.28 per cent to $1.3679 against the U.S. dollar, or 73.10 U.S. cents. Yields on two-year government bonds fell 6.5 basis points to 2.731 per cent.

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Still-high inflation and rising cost-of-living has led Canadian consumers to try and tighten household budgets and save money, impacting their discretionary spending.

Quarterly same-store sales at Loblaw’s drug retail rose 3.9 per cent from a year ago, while in food retail segment they increased by 1.5 per cent.

However, sales in Canada in December saw a brief bump up due to the holiday season, as consumers increased their spending on food and beverages. Demand for value deals helped Loblaw’s discount banners such as No Frills and Maxi.

The company’s revenue came in at C$16.38 billion for the quarter ended January 3, compared with analysts’ estimates of $16.77 billion, according to data compiled by LSEG.

On an adjusted basis, Loblaw earned 67 cents per share in the reported quarter, slightly ahead of estimates of 66 cents.

Loblaw expects annual adjusted net earnings per share to grow in the high single-digits, compared with analysts’ expectations of a 7.9 per cent rise to $2.61.

— Reporting by Koyena Das in Bengaluru

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Shares of General Mills, which left its annual outlook unchanged in December, were down about three per cent in early trading. They have fallen nearly 19 per cent in the last 12 months.

General Mills and other packaged food companies are under pressure as lower-income shoppers, hit hardest by persistent inflation, trade down to value brands and private-label goods. At the same time, the industry is contending with evolving dietary preferences and a growing push toward healthier foods, accelerated by the broader adoption of GLP-1 weight‑loss drugs.

”Cost of living and housing pressures are reshaping spending patterns, and value is a core expectation that is here to stay,” CEO Jeffrey Harmening said at the Consumer Analyst Group of New York (CAGNY) conference on Tuesday.

Companies cut costs, lower forecasts

Executives said the company’s cereal business, its second biggest revenue generator, was under pressure from increased competition from protein offerings at breakfast.

Earlier this month, PepsiCo cut prices on core brands such as Lay’s and Doritos by up to 15 per cent following a consumer backlash against earlier price hikes, while Kraft Heinz last week paused its splitting plans and forecast weak annual earnings after missing quarterly results estimates on tepid demand.

General Mills now expects annual sales to be down 1.5 per cent to two per cent, compared with its previous range of down one per cent to an increase of one per cent.

“The previous forecast for sales to increase as much as one per cent seemed unrealistic to us. So, the updated guidance is more in line with the recent trends at the company. Moreover, the revision puts guidance more in line with the experiences at other food companies such as Kraft Heinz and Conagra,” said senior bond analyst Dave Novosel at GimmeCredit, an independent corporate bond research house.

It also sees annual adjusted operating profit and adjusted earnings per share down 16 per cent to 20 per cent in constant currency, compared with its previous range of down 10 per cent to 15 per cent in constant currency.

— Reporting by Koyena Das in Bengaluru

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Value-focused menus continue to attract budget-conscious diners, as fast‑food chains lean into affordability while pricier rivals struggle.

The company’s Burger King chain introduced ‘2 for $5’ and ‘3 for $7’ value meal offers over the last year.

McDonald’s also topped estimates for its fourth-quarter global comparable sales and profit on Wednesday, helped by meal deals and strong marketing promotions.

Same-store sales at its Burger King outlets in the U.S. rose 2.6 per cent for the quarter.

It posted an adjusted profit of (U.S.) 96 cents per share for the quarter, topping estimates of 95 cents per share, according to data compiled by LSEG.

The company reported quarterly same-store sales growth of 3.1 per cent, compared with estimates of a 2.8 per cent rise.

— Reporting by Sanskriti Shekhar in Bengaluru

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“The Food Freedom Day analysis shows us that despite Canada being a global food supplier, there are large segments of Canadians that are struggling with food affordability, and this burden seems to be growing,” said CFA president Keith Currie in a Feb. 6 news release.

“Food Freedom Day” fell on Feb. 8, the same date as last year, the CFA said. Canadian spent 10.8 per cent of their disposable income on food and beverages in 2025 compared to 10.7 per cent in 2024.

“Average disposable income figures don’t fully reflect the pressure that rising food costs place on households, especially those with lower incomes,” the CFA said. “Global disruptions and inflationary pressures have further strained food affordability and food security across the country.”

Households in the lowest quintile of income spent 28.20 per cent of disposable incomes on food, the CFA said, citing StatCan data. Households in the highest income quintile spent 5.18 per cent.

CUSMA review a risk

While food price inflation has slowed in some categories, food prices are 27 per cent higher than they were in 2020, the most recent Canada’s Food Price Report showed. Meat prices led hikes in 2025. As such, food affordability continues to be a key concern for consumers.

A quarter of Canadians are considered food insecure and 2.2 million people visited food banks monthly last year.

The CFA flagged the review of the CUSMA trade agreement as a future risk for food prices. Most food products are exempt from tariffs under CUSMA and any shift could be costly for consumers.

“With the threat of tariffs hanging over our head from the U.S. and other major trading partners, these food affordability concerns only highlight the critical importance of a united Canadian approach to maintaining open and predictable North American trade,” Currie said.

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Among Group of Seven countries, Canada recorded the highest rate of food inflation in December, according to government data. Food prices rose by 6.2 per cent in December, double the rate in the U.S., and more than three times the rates in France and Germany.

Carney leads a minority government and relies on support from other parties to pass legislation and stay in power. While Canadians have consistently rated Carney as the best leader to deal with threats from U.S. President Donald Trump, voter sentiment could change quickly if concerns about American aggression lessen — and cost-of-living issues become more urgent, as they have in Britain, the U.S. and elsewhere.

A statement from the Bank of Canada this week noted that grocery prices jumped by 22 per cent in the last three years, compared to 13 per cent for other consumer prices. The central bank said last year’s food inflation was mostly driven by imported foods, supply shortages caused by extreme weather and the significant depreciation of the Canadian dollar in 2024.

Carney announced last week that the country’s poorest 12 million people will get a tax credit for the next five years, “to make sure Canadians have the support they need now.” The government is also taking other measures, like setting aside C$500 million to help businesses deal with supply chain disruptions and allowing producers to write off greenhouse expenses.

Tax credits and supply chain support

But the measures do little to lower food prices in Canada, which is now the biggest driver of inflation, according to Jeremy Kronick, director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute think tank in Toronto.

“This will mostly provide relief to people who are choosing between paying rent or buying food, but it is not going to bring food prices down,” said Michael von Massow, a professor at the University of Guelph who specializes in food economics.

John Fragos, press secretary for Finance Minister Francois-Philippe Champagne, said the new government initiatives were only a first step towards curbing food costs.

“We’ve bridged the food inflation gap as it exists now and we’re taking aim at structural issues that will, over the medium and long term, bring down the price of groceries,” said Fragos.

In late 2024, ex-Prime Minister Justin Trudeau also announced a two-month suspension of a sales tax on selected goods “to give Canadians more money in their pockets.” It had mixed results, with some sectors like restaurants reporting increased sales while other businesses did not see an impact.

Canada’s unique grocery market problems

Academics point to entrenched issues including the dominance of just five companies in the grocery sector, a shorter growing season for produce in Canada, and a reliance on the U.S. that has resulted in higher prices via supply chain disruptions.

“There are some uniquely Canadian problems that make the cost of food here so very expensive,” said Michael Widener, who studies food systems at the University of Toronto.

“Labour and transportation costs are higher, and geographically, we are not close to many other markets,” he said, adding that the dependence on produce from the U.S. and Mexico made Canada extremely vulnerable.

Sylvain Charlebois, an expert in food distribution at Dalhousie University in Nova Scotia, said the government should focus on efforts like eliminating high transportation costs between provinces, addressing the high internal costs of production due to labour laws and the industrial carbon tax among other constraints, and increasing competition within the grocery sector. Canada is a major producer of canola, wheat, dairy and meat but is almost entirely dependent on imports of fresh produce during the winter.

Fresh fruit and vegetables routinely cost at least twice as much in Canada as they do in Britain and elsewhere in Europe; a two-pound bag of carrots in Canada costs $2.21, compared to $0.95 in Britain and $1.18 in Germany, according to online retailers.

Food prices ‘not a voting issue’

Conservative leader Pierre Poilievre has long railed against the high cost of food for Canadians, but that has not translated into increased support. He still trails Carney by double digits in opinion polls — and Carney’s approval has risen since his widely praised Davos speech that openly called out the world’s superpowers for using “economic integration as weapons,” according to several polls.

A poll by Nanos on January 30 showed 54 per cent of Canadians approved of Carney but also noted that 11.4 per cent said inflation was their biggest concern, up from 9.3 per cent a month earlier.

The Conservatives’ co-deputy leader Melissa Lantsman told reporters on Monday that “no amount of tax rebates” will solve the problem of food inflation, adding that more than 2 million Canadians, or about five per cent of the population, now rely on food banks, the highest-ever recorded number.

Shachi Kurl, president of the non-profit pollster Angus Reid, said despite food costs consistently ranking among Canadians’ top concerns, Trump’s repeated threats to annex the country have translated into a bigger issue for voters.

“For the time being, food prices are not a voting issue,” Kurl said. “But if Canadians think that is something they can hold their leader accountable for, it may yet become one.”

Ashton Arsenault, who was an aide to a Conservative minister under previous leader Stephen Harper, said exorbitant food costs should present an opportunity for Conservatives to win more public support, but that a steady rise in prices over the years have largely left most Canadians resigned to the inflation.

“Even when things get really bad, we are still very Canadian and polite about it and don’t take to the streets to protest,” he said. “This is a very tough problem to fix and it will take political courage to do it.”

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“We’re working to address the root causes of inflation and working on longer-term solutions to bring down the cost of groceries in Canada,” said Prime Minister Mark Carney. “That starts by improving the resilience of our supply chains.”

“Global supply chain shocks caused by tariffs, weather events from a changing climate, and geopolitical disruptions have caused food prices to rise faster than overall inflation,” he added.

Carney announced Monday morning the government’s new plans for a national food security strategy, including support for food infrastructure and the Competition Bureau, a grocery rebate and unit-label pricing.

WHY IT MATTERS: Food affordability and insecurity remain major barriers for Canadian consumers.

In the 2025 budget, the government called food security a key factor in Canada’s agricultural competitiveness. Food affordability and insecurity remain major barriers for Canadian consumers.

Tariffs have added more uncertainty to the issue, affecting prices throughout 2025. Retailers have passed on many of these supply chain costs to consumers.

The government committed $500 million from the previously announced Strategic Response Fund toward helping food businesses expand capacity.

It will also introduce immediate expensing for greenhouse buildings, allowing producers to fully write off greenhouses acquired on or after Nov. 4 of last year.

Carney said there will also be support for the Competition Bureau to monitor and enforce competition in markets.

Another announced measure is unit label pricing “so Canadians can compare easily, in this era of shrinkflation.”

— With files from Reuters

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The FAO Food Price Index, which tracks a basket of globally traded food commodities, averaged 124.3 points in December, down from 125.1 in November and 2.3 per cent lower than a year earlier.

For the full 2025 year, the index averaged 127.2 points, up 4.3 per cent from 2024, led by higher vegetable oil and dairy prices, while cereal and sugar quotations fell.

— Reporting by Sybille de La Hamaide

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