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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It ends a 75-year run as a frozen vegetable processor in the area, according to a social media post by Johnson Fresh Farms from Barnwell, one of the many fresh vegetable contractors to be affected, producing the sweet Taber corn the area is known for.

WHY IT MATTERS: Nortera plant closure in June leaves several southern Alberta producers scrambling to figure out what to put in their crop rotations with upcoming loss of contracts.

The affected 6,000 contracted acres in the southern Alberta produces 40 million pounds of frozen vegetables according to Johnson Fresh Farms.

“(It) is affecting several jobs and family farms including ours scrambling to figure out what we are going to grow to replace all those vegetable acres with,” said Johnson Fresh Farms in its post.

“That is why we are encouraging everyone to support your local farms and everyone that will be affected when the plant permanently closes. We have some ideas, but we’re gonna need your support, so stay tuned to find out.”

The news comes on the heels of Quebec-based Nortera buying in late October, the Green Giant and Le Sieur brands in Canada from New Jersey-based B&G Foods, and investing $28 million in its Saint-Denis-sur-Richelieu plant. Nortera also announced the closure of its Saint-Césaire plant which was scheduled for late January 2026.

The move has been dubbed a “strategic restructuring of its Canadian frozen facilities” according to a company press release, in a market increasingly challenged by international imports.

Over the coming months, production volumes and certain equipment from the Lethbridge plant will be transferred to several of the company’s other frozen facilities.

“Closing a facility is never an easy decision, especially given the dedication of our Lethbridge team,” said Hugo Boisvert, CEO of Nortera in a press release.

“Current market pressures have made it essential for us to consolidate our operations. By optimizing our manufacturing footprint, we are securing the future and the competitiveness of Nortera.”

The transition will affect approximately 70 employees at the plant.

Nortera is North America’s leading processor of frozen and canned vegetables. It operates 13 plants in Canada and the U.S.

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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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“What (this) is really saying is that in the next 10 years, our industry is going to grow,” Bill Beisal, transportation co-ordinator for Alberta Milk, said at the organization’s recent fall producer meeting in Lethbridge.

The number of producers has decreased from 843 to 470 in 2023-24, routes have increased from 126 to 175, receiving bays have decreased from 24 to 12 and B-trains went from zero in 2002 to nine in 2023 and a dozen in the last couple of years.

WHY IT MATTERS: Transportation efficiencies are needed for cost savings in Western Canada’s dairy sector.

Beisal said there are 65 milk trucks on the road every day in Alberta, and two million litres of milk are moved every week between provinces.

“I will admit, at times we have to pay more, because logistically, we can’t do it the way that we want to do it, real efficient,” he said.

“When I talk about moving your milk out of province, we’ve got all these loads lined up, and it goes out and hauling companies are lining up their drivers. The days we can stop on a dime and turn everything around like we could 20 years ago are over, but we can still do that once in a while. But the hauling companies really don’t like it because they lose drivers,” said Beisal.

The transportation committees of the western Canadian milk groups meet every Thursday, projecting movement from six months to a year in advance. Each province has its own body, but they have to be on the same page for transportation efficiencies.

Interprovincial milk movement has increased from 33 million litres in 2016-17 to 127 million litres in 2024-25.

“We have a pretty good idea of what we’re going to do and how we’re going to do it,” he said.

“As each week comes up, orders can change easily by one million, two million.”

For example, the week before Alberta Milk’s fall meeting saw an 800,000 litre increase in the Western Milk Pool.

Unfortunately, at times there is the need to “dump” milk for a variety of reasons: milk production exceeding quotas in supply management, market fluctuations for demand such as the COVID-19 pandemic in 2020, supply chain disruptions and the perishable nature of milk. All of these are factored into transportation costs.

“Why does Alberta dump all the milk? I know that’s a swear word here, but there’s a process,” Beisal said.

“Why would we keep moving milk all the way to Manitoba out of Alberta? Why then would we have Manitoba dispose of whole milk? If we have to dispose of whole milk, let’s not move it. Let’s not spend that transportation money. Let’s dispose of it where it’s the most economical. We hate that, but that’s the absolute last thing that happens with your milk, when we have no home for it.”

The western provinces cost share and pool provincial and interprovincial transportation costs.

Alberta and British Columbia each pay 35 per cent of transportation costs and Saskatchewan and Manitoba pay roughly 17 and 13 per cent.

He said it costs approximately $1 million a month to export milk out of Alberta using a transportation rate formula that takes into account hours and kilometres involved.

Alberta and Manitoba have multiple haulers (12 to 13) that deliver to multiple plants. Saskatchewan has one hauler and one plant, while B.C. has one hauler to deliver to multiple smaller plants.

“A lot of that is to give the industry, not only just the producers, but processors as well, the confidence that we can cost share … we can do this together. It’s just going to take a little bit of work,” said Beisal.

The opening of Dairy Innovation West this year in central Alberta is expected to be a game changer for milk transportation.

Raw milk volumes are projected to increase from 43 million litres in July 2026 to 321 million in 2030, which is expected to bring logistical cost savings.

Beisal said Alberta Milk’s success has forced it to pivot in the last 10 years as production grew by 30 per cent.

“Now we’re starting to deal with more and more constraints — time constraints, volume constraints, equipment constraints, a lot of things in your transportation system that needs some improvement.

“We need to find out how to make it better. We’re looking at policy. We’re going to talk with with the processors. We’re going to see how is there anything that they have for us? What can we do for them? What can the haulers do to make this a better network and asset optimization. How can we do that less expensive?”

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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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