The Canadian food and beverage industry is facing an uncertain year

"While sales growth is projected to increase slightly, manufacturers will need to carefully navigate rising costs and shifting consumer habits to maintain profitability."

Uncertain consumer spending

For 2025, FCC Economics forecasts a further decline in beverage sales of -2.5% and -2.6% in volumes. This predicted decline is attributed to 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 a single percent from 2023 and 8% 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."

Several strong sectors

Canadian dairy has nothing to worry about, with another strong year for dairy product manufacturing sales expected for 2025. The report forecasts an 8.3% increase in sales and a 6% 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.

It’s not the only sector looking ahead at a profitable year. 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% increase in sales, with volumes rising by 6.7%.

However, they may not be totally safe from potential trade disruptions. With over 90% of confectionery sales tied to exports, particularly to the U.S., the sector faces risks from shifting trade policies, though the report notes steady growth in non-U.S. markets suggests diversification opportunities.

The report also notes that Canada's aging labour pool will continue to exert pressure on wages. At the same time, this impact will be less pronounced than in previous years, with the decline in raw material costs helping to offset total expenses.