Canada’s food and beverage sector has the resources and agricultural capacity to compete globally, but businesses need to strengthen processing, commercialization and market diversification to capture more value from domestic production, according to a new report from MNP.
The MNP Food and Beverage Business Outlook: Momentum Built. Advantage Ahead, released Tuesday ahead of World Food Day, ranks Canada seventh among the G20 countries assessed and examines opportunities to improve business performance as food costs remain high and producers and manufacturers contend with tariffs, trade uncertainty and rising operating expenses.
The report combines global benchmarking of Canada’s position with perspectives from MNP’s food and beverage leaders, highlighting areas where the country’s existing advantages could translate into stronger business performance and greater value retained in Canada.
"There's a lot that Canada does really well when it comes to food, but those advantages are not sustaining small- and mid-sized businesses. They're not having an easy time right now," says Matt MacDonald, National Leader, Food & Beverage Processing at MNP. "Manufacturers are trying to stay nimble while costs are rising, trade is unpredictable and consumers are changing what they buy. Those pressures eventually make their way to the shelf. The opportunity is to look at where we can do things differently, adapt, and get more value out of what we already produce here in Canada."
Affordability reshapes consumer demand
Food affordability remains a challenge for consumers and businesses, with The Canada Food Price Report predicting food prices will increase by four to six per cent in 2026. MNP says inflation and tariff pressures are adding to the strain, while higher costs for ingredients, labour, transportation and packaging are affecting product sizes, product mixes and profit margins.
The report says businesses must respond to changing consumer expectations around quality, nutrition, convenience and transparency. Understanding which product attributes customers value, and how much they are willing to pay for them, could help companies make decisions about pricing, product development and operations.
For businesses selling premium products, that may mean reinforcing the value proposition behind higher-priced offerings. Others may need to find efficiencies to keep lower-priced products affordable or use customer insights to identify emerging demand, the report says.
Exporters look beyond traditional markets
Canada recorded a $24.3-billion agri-food trade surplus, but the report warns that tariff uncertainty and shifting trade relationships pose challenges for businesses that depend heavily on a single market.
MNP found that 65 per cent of exporters are planning to expand into new markets. Meanwhile, exports to the United States declined by 3.8 per cent, while exports to markets outside the U.S. increased by 11.2 per cent.
Tariffs can affect businesses throughout the supply chain, including agricultural inputs, ingredients, packaging, equipment and transportation. Those pressures can squeeze margins and influence investment decisions, potentially contributing to higher consumer prices.
The report says diversification can involve more than entering new geographic markets. Companies can also pursue different customer segments, suppliers, revenue streams, private-label arrangements and strategic partnerships to reduce reliance on existing business relationships and create new growth opportunities.
Increasing domestic processing and manufacturing capacity is another potential avenue for growth. By processing more agricultural products in Canada before they are exported, businesses may be able to retain more value domestically, according to MNP.
Innovation investment needs commercial results
Canada has also attracted investment in agricultural technology, with nearly $515 million invested in Canadian agri-food technology startups in the first half of 2025.
However, the report identifies a gap between innovation and commercialization. Approximately 75 per cent of agricultural research and development funding comes from public sources, while private investment accounts for less than 25 per cent.
MNP says businesses need the operational capacity to adopt new technologies, demonstrate their financial returns and scale successful initiatives. Developing new ideas alone may not be enough to translate Canada's research and innovation strengths into commercial gains.
Digital adoption remains another area for improvement, particularly among small- and mid-sized businesses. Artificial intelligence, automation and advanced forecasting tools are becoming more accessible, but adoption across the sector remains uneven.
The report identifies targeted investments in inventory management, forecasting, production and automation as potential ways for businesses to improve productivity while developing the capabilities needed to expand.
Turning existing strengths into growth
MNP says the next stage for Canada's food and beverage sector will depend on how effectively businesses convert the country's agricultural resources and other advantages into commercial opportunities.
The report identifies commercialization, processing capacity, market diversification and investment as areas for companies to consider when determining where to compete and how to grow. The appropriate approach will depend on each business's products, customers and objectives.
The MNP Food and Beverage Business Outlook: Momentum Built. Advantage Ahead. is intended to provide a benchmark for companies assessing their competitive position and considering investment priorities, as the sector navigates higher operating costs, changing consumer preferences and uncertainty in international trade.