Mixed outlook for food and beverage industry in 2025: FCC
Food and beverage sales are projected to grow a modest 0.6% this year, FCC said in a new report.
The FCC Food and Beverage Report expects economic challenges, trade disruptions and shifting consumer behavior to create a year of uncertainty for manufacturers.
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Food and beverage sales are forecasted to grow to $168.8 billion this year, with a 1.5% drop in sales volume.
Beverage sales, specifically, are projected to decline 2.5% and 2.5% in volumes, driven by a continued shift away from alcoholic beverages.
Non-alcoholic beverage sales are also experiencing a minor slowdown after four years of growth.
Profit margins are expected to improve slightly, though still below pre-2019 levels, with variation across sub-sectors, FCC (Farm Credit Canada) said.
"The food and beverage industry faces ongoing pressures from economic challenges and trade disruptions," said Amanda Norris, senior economist at FCC, in a release. "While sales growth is projected to increase slightly, manufacturers will need to carefully navigate rising costs and shifting consumer habits to maintain profitability."
Per capita consumption of food and non-alcoholic beverages declined for the fourth consecutive year in 2024, down 1% from 2023 and 8% since 2021.
Dairy product manufacturing sales are expected to have another strong year. FCC Economics forecasts an 8.3% increase in sales and a 6% increase in volumes.
Gross margins in the dairy 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% increase in sales, with volumes rising by 6.7%.
However, despite higher revenues, margins remain under pressure from high cocoa prices and trade disruptions.
With over 90% of confectionery sales tied to exports, particularly to the U.S., the sector faces risks from shifting trade policies, FCC said.
Elsewhere, Canada's aging labour pool will continue to exert pressure on wages. This impact will be less pronounced than in previous years, FCC’s report said, due to a decline in raw material costs.
