Food and beverage sales rise but face pressure from trade and energy costs
Farm Credit Canada says higher prices drove a 4% sales increase to $88.1 billion in the first half of 2026, while real sales were flat.
Canada's food and beverage manufacturing sales rose four per cent in the first half of 2026, but the increase was driven by higher prices rather than stronger volumes, according to a new report.
Farm Credit Canada (FCC) Economics reported sales reached $88.1 billion for the period, but after adjusting for prices, real sales were flat compared to the same period last year.
"When gains are tied more to prices than volumes, it can signal that companies are still operating in a cautious demand environment while also managing higher and less predictable costs," said Craig Johnston, vice-president and chief economist at FCC.
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The report cautions that new U.S. trade restrictions, Canadian counter-tariffs and renewed energy and freight volatility are creating uncertainty around production costs, export opportunities and margins.
"The first half of 2026 shows the sector remains resilient, but the headline sales number does not tell the whole story," Johnston said. "For manufacturers, the key issue is not just whether sales are growing, but what is driving that growth."
Results varied significantly across the sector. Grain and oilseed milling, fruit and vegetable processing and animal food manufacturing recorded some of the strongest gains, while sugar and confectionery manufacturing, breweries and distilleries posted declines.
Margins are expected to improve modestly in 2026 after a difficult year, but FCC said the recovery is expected to remain "fragile" as trade and cost pressures build later in the year.
The agency's estimates suggest the direct impact of the new trade measures will be limited in 2026 because most take effect only in September.
"As margins remain tight, diversification will become an increasingly important long-term strategy for food and beverage manufacturers," Johnston said.
"Reducing interprovincial trade barriers and expanding internationally can help open broader market opportunities."
Johnston said helping the sector achieve three per cent growth over the next decade could contribute an additional $40 billion to Canadian GDP, while supporting 217,000 new jobs, $16 billion in wages and benefits and $1.3 billion in tax revenues.
The mid-year update from FCC Economics examines how sales, costs and margins are evolving across Canada's food and beverage manufacturing sector.
It follows the agency's annual food and beverage report and shifts the outlook for the sector from resilience to risk management due to tariffs and trade disruption.
Energy and freight volatility, higher input costs, U.S. trade restrictions and Canadian counter-tariffs are putting pressure on Canada's food and beverage manufacturers, FCC said.
With files from Canadian Grocer and Grocery Business Magazine
Renée Bouchard writes about food, restaurants and grocery prices across Canada for Novello Desserts.