Food and beverage industry faces mixed outlook in 2025, FCC report says

REGINA, SK, May 5, 2025 /CNW/ - Canada's food and beverage manufacturers face a year of uncertainty, with opportunities tempered by economic challenges, trade disruptions and shifting consumer habits, according to the latest FCC Food and Beverage Report.

FCC Economics forecasts a modest 0.6 per cent increase in food and beverage sales to $168.8 billion in 2025, but a 1.5 per cent decline in sales volume, reflecting ongoing adjustments to beverage manufacturing. Profit margins are expected to improve slightly, though they will remain below pre-2019 levels, with variation across sub-sectors.

"The food and beverage industry faces ongoing pressures from economic challenges and trade disruptions," said Amanda Norris, senior economist at FCC. "While sales growth is projected to increase slightly, manufacturers will need to carefully navigate rising costs and shifting consumer habits to maintain profitability."

For 2025, FCC Economics forecasts a further decline in beverage sales of -2.5 per cent and -2.6 per cent in volumes. The anticipated decline is driven by a continued shift away from alcoholic beverages, particularly beer, and a slight slowdown in non-alcoholic beverage sales after four years of strong growth.

While inflation has eased and labour market pressures have relaxed, consumer spending remains uncertain. Per capita consumption of food and non-alcoholic beverages declined for the fourth consecutive year in 2024, down 1.0 per cent from 2023 and 8.0 per cent since 2021, as household budgets remained tight. However, food and non-alcoholic beverages showed signs of recovery near the end of 2024, while alcohol consumption continued to weaken.

"Consumer behavior is shifting, with a growing emphasis on value and products that align with individual preferences," said Norris. "In this environment, manufacturers who adapt to changing trends and focus on meeting diverse consumer needs will be better positioned to build brand loyalty and strengthen sales."

Another strong year for dairy product manufacturing sales is expected for 2025. FCC Economics forecasts an 8.3 per cent increase in sales and a 6.0 per cent increase in volumes. Gross margins in the sector are expected to improve in 2025, to the highest level over the past two years, with support from higher sales and declining raw material costs.

Strong price growth has driven double-digit sales increases in the sugar and confectionery sector since 2021, and 2025 is expected to bring another 10 per cent increase in sales, with volumes rising by 6.7 per cent. While higher revenues helped offset rising expenses in 2024, margins remain under pressure from high cocoa prices and potential trade disruptions. With over 90 per cent of confectionery sales tied to exports, particularly to the U.S., the sector faces risks from shifting trade policies, though steady growth in non-U.S. markets suggests diversification opportunities.

In addition, Canada's aging labour pool will continue to exert pressure on wages, this impact will be less pronounced than in previous years, with the decline in raw material costs helping to offset total expense.

"The food and beverage sector is at a crossroad, with both risks and opportunities ahead. Manufacturers must focus on innovation, strategic market diversification and cost management to stay competitive," Norris noted.

The annual FCC Food and Beverage Report features insights and analysis on grain and oilseed milling; dairy, meat, sugar and confectionery, bakery and tortilla products; seafood preparation; and fruit, vegetable and specialty foods, as well as soft drinks and alcoholic beverages.

By sharing economic knowledge and forecasts, FCC provides insights and expertise to help those in the business of agriculture and food achieve their goals. For more economic insights and analysis, visit FCC Economics at fcc.ca/Economics.

About FCC

FCC is proud to be 100 per cent invested in Canadian agriculture and food. The organization's employees are committed to the long-standing success of those who produce and process Canadian food. FCC provides flexible financing and capital solutions, while creating value through data, knowledge, relationships and expertise. FCC offers a complement of financial and non-financial products and services designed to support the complex and evolving needs of the industry. As a commercial Crown corporation, FCC is a stable partner that reinvests profits back into the industry and communities it serves. For more information, visit fcc.ca.

SOURCE Farm Credit Canada