Recent trade tensions have put a spotlight on Canada’s food and beverage manufacturing sector.
That’s because more than 60 per cent of the nation’s agriculture and agri-food exports are sold on the other side of the border, along with 30 per cent of its food processing and 10 per cent of beverage processing sales.
The argi-food industry is also a significant contributor to Canada’s economy, accounting for 7 per cent of its GDP in 2023—totaling nearly $100 billion in revenue—and is responsible for one in nine of the nation’s jobs, employing a domestic workforce of 2.3 million.
This vital sector, however, is facing a range of new challenges in the wake of the tariffs imposed by the United States. It’s not just the higher cost of selling into its primary export market; the trade war is also having a range of secondary effects, including the higher cost of ingredients and inputs due to reciprocal tariffs, lower consumer confidence, and a general atmosphere of volatility.
As circumstances change, Canadian food and beverage producers need to adapt. Here are some ways Canadian food and beverage producers can prepare for the uncertainty ahead.
Get your facts straight
Navigating volatility requires the ability to make informed decisions, fast.
Experience and industry knowledge may be enough to confront recurring challenges but in unprecedented circumstances it’s important to base decisions in data, not instinct.
“You need to consider what data you have available to support some of these decisions and leverage the data to build forecasts and test different scenarios,” advises Jane Henderson, RBC’s Vice President of Senior Commercial Markets. “You need to really understand your numbers so you can make decisions with a strong business case.”
In periods of volatility, good data can go a long way, making now a good time to invest in its collection and utilization.
Upgrade your tech
The agricultural sector is undergoing a major technological transformation, and much of that innovation is being made right here in Canada.
The country’s “AgTech” sector has received over $4 billion in investment over the last decade, with a 8.4% compound annual growth rate, far outpacing the global average of 2.6%. These home-grown solutions, and others from around the world, strive to help improve labour costs, decision making, output, product quality, pest management, waste reduction, and facilitate greater cost efficiency.
“As a country we’ve historically under-invested in technological adoption,” says Henderson. “This is the time to focus on what you can control, and a great time to make those investments in automation, in data gathering, in production line improvements, to help make your operations more efficient.”
Such investments can be difficult for food producers managing new economic challenges. That’s why Henderson recommends working with a banking partner to explore programs offered through the federal and provincial governments and agencies, as well as industry associations and networks.
Lean into “Buy Canadian”
As Canadian food producers confront an external threat, their local communities have stepped up in a big way.
A recent survey found that more than 60% of Canadians are willing to pay a premium of 5-10% for Canadian-grown produce, dairy or meat over American alternatives.
“This ‘Made in Canada’ movement has got legs, and it’s a real opportunity for Canadian producers, manufacturers and retailers,” says Henderson.
Canada’s food producers can take advantage of grassroots support by noting Made in Canada on packaging (where appropriate), telling stories on social media, and making their local status known.
With inter-provincial trade barriers coming down, interest in supporting local businesses skyrocketing, and retailers labelling Canadian goods on their shelves, now is the time to explore opportunities to expand further into the domestic market.
Look to new international markets
Canadian food producers have long maintained their focus on the American market, but now maybe be a great time to look further afield.
Canada has 15 active free trade agreements that cover 51 global markets, whose combined GDP accounts for 61% of the global economy. Canada is also widely recognized for having one of the strongest food safety systems in the world, meaning local producers are well equipped to meet international standards.
“In an environment where standards are being relaxed, our safety standards, our requirements around traceability, all of that works to our advantage,” Henderson says.
One of the first places Henderson says Canadians should look to is the country’s other North American trading partner.
“We’ve already got logistics, supply chains and trade routes established with Mexico, so that’s a strong potential market for Canadian producers to explore,” she says. “But don’t ignore Europe or the Asia-Pacific, because the Canadian brand has a lot of strength, and its diversity positions it well to serve foreign tastes.”
Those looking further afield can explore their options with RBC Global Connect, which provides resources, news and insights on foreign trade opportunities for Canadian businesses.
“We work very closely with the Export Development Bank of Canada to provide advisory solutions to help our clients export,” says Johnny Blancas, RBC’s Director, Senior Commercial Markets. “We also offer a Global Trade hub where we connect local clients with global partners, whether they’re looking for a customer or a vendor to engage with outside of North America.”
Find ways to circumvent tariffs
While investing in technology and seeking new markets can help blunt the effects of American tariffs, Canada can’t afford to ignore the world’s largest consumer market at its doorstep entirely.
“The U.S. is always going to be the closest, most accessible, largest market, and avoiding it isn’t always realistic,” Henderson says, advising Canadian food producers to reduce their exposure to tariffs by reassessing how much crosses the border: “You need to take a hard look at your supply chains and sourcing and try to get more local.”
In some cases that will require increasing domestic production to serve the Canadian market, and in others it may require beefing up production in the United States for products bound for American shelves.
“What we’re hearing from customers is they’re looking for ways to approach their supply chain differently—finding other suppliers, other vendors—not just from the U.S. but globally, to avoid reciprocal tariffs on products coming into Canada,” says Blancas. “As a banking partner, we try to bring in some advisory capabilities on trade financing, and help our clients better understand the global trade value proposition.”
Talk to the experts
Staying on top of rapidly changing trade policies and their downstream impacts is itself a full-time job.
Canadian food producers already have enough on their plate, which is why it’s important to seek advice from industry experts tailored to their unique circumstances.
“RBC can help clients build growth strategies and manage risk, not only with the expertise we bring to the table, but by connecting them with other resources within the bank and throughout the broader ecosystem.”
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
