Navigating a Changing Landscape: What Today’s Economy Means for Canada’s Food & Beverage Sector

At a recent event, RBC and MNP invited business leaders across food & beverage and consumer sectors to a candid discussion about the economic and political forces shaping their industry – and the strategies to navigate them.

Canada’s food & beverage sector has long been a national economic strength, supporting both jobs and exports. Yet the ground feels less steady than it has in years. A recovering economy has collided with renewed trade uncertainty, higher oil prices and ongoing global economic disruptions, leaving many owners working to stay ahead of change.

To explore what these forces mean for businesses, a panel of RBC and MNP experts shared their outlook and, more importantly, where the opportunities lie:

Together, they moved past the macro headlines to focus on what individual businesses need to navigate a volatile environment: resilience, agility and the discipline to act on things within reach.

The economic backdrop, in brief

Heading into 2026, the Canadian economy was on a firmer footing than headlines suggested. Last year marked the first real per-capita GDP growth in three years, with lower interest rates supporting the recovery. But earlier this year, renewed trade uncertainty and rising oil prices reset the mood, reintroducing volatility for households and businesses alike.

Consumer spending has held up better than general sentiment, but the recovery is uneven. RBC Senior Economist Claire Fan described a “K-shaped” economy, where household spending is splitting in two directions: higher-income earners keep spending and getting further ahead, while lower-income households face growing strain.

“These days, we see more lower-income households having to rely on government transfers to sustain their most basic needs,” she said. “It tells you something about the environment – that there is a divergence in economic outcomes not represented in headline statistics.”

On interest rates, the near-term picture is one of prudence. The Bank of Canada is expected to hold its benchmark rate steady through the year, with RBC forecasting up to four rate hikes in 2027. Notably, expectations for future rate hikes are already priced in, with fixed rates moving up persistently even as benchmark rates have stayed put – a reminder for businesses that their borrowing rates are determined by more than central bank decisions.

Tariffs and CUSMA: What business owners need to know

For all the noise around trade policy, the takeaway for Canadian food & beverage businesses is more reassuring than many business owners might expect. As MNP’s Tariffs and Trade Advisory Leader Mike Cristea shared, roughly 90 per cent of Canadian exports enter the U.S. tariff-free thanks to compliance with the Canada-United States-Mexico Agreement (CUSMA) – and the panel was confident the agreement would endure.

“The U.S. has many, many times demonstrated they care about the agreement,” noted Fan, in large part because tariff-free access also means lower input costs for American importers – and as a result, lower prices for U.S. consumers. A decision on July 1 to extend (or not) the CUSMA expiry date beyond 2036 is fast approaching, but Fan expected no change in U.S. tariff rates as an immediate result of that decision.

That leaves uncertainty – not the tariffs themselves – as the primary pain point. “Business owners tell us, ‘as soon as we know what’s happening with CUSMA, things will be much better, because we’ll have clarity,’” said RBC’s Jane Henderson. She noted that many have already put the right measures in place. “People who took the time to become CUSMA-compliant are in a good position, which is why perspectives from advisors like Cristea have become increasingly more critical in the last year.”

Amid this ambiguity, businesses are also facing rising input costs while under pressure to maintain prices at retail – a combination that only adds to an already challenging operating environment. 

“You can reduce your duty costs not by changing what you do, but by changing where you do parts of it – either in Canada or the U.S.,” Cristea explained. That can mean shifting part of the production chain across the border and, in turn, lowering the duty owed when goods cross – an approach typically managed through customs origin preferences and transfer pricing.

Cristea shared three levers to help lower your effective tariff rate:

• CUSMA compliance. Ensure your product qualifies for tariff-free access under the agreement.

• Duty drawback. Recover duties paid on imported inputs that are re-exported after processing.

• Tariff planning. Structuring inputs and production to align with legal tariff classifications under current trade agreements.

Why margins are tight: rising costs meet a concentrated retail market

Within the domestic market, the bigger challenge is margin. Rising input costs – including fuel, commodities, fertilizer and climate-affected crops – are running up against a retail environment where price increases are hard to pass through.

Part of the consideration is the Canadian retail landscape. As Matt MacDonald, National Food & Beverage Processing Leader at MNP, notes, Canada’s top four retailers control roughly 72 per cent of the market as highlighted in MNP’s Global Most Influential Nations Ranking report. This level of concentration reduces optionality for producers, limiting access to diverse channels, increasing reliance on a small number of buyers, and compressing margins across an already complex and costly supply chain.

It also illustrates the challenges of scale. As MacDonald illustrates, a single U.S. regional grocer can operate as many locations in the southeast as a national Canadian chain does across the entire country, highlighting how geography and concentration together shape a very different operating environment in Canada.

While the dynamic is most acute in food & beverage, similar margin pressures are playing out across consumer sectors wherever pricing power is constrained.

The path forward, MacDonald suggests, is collaboration — creating more intentional forums for the industry to align, share insight and tackle shared challenges. In doing so, businesses can unlock efficiencies and navigate the constraints of scale more effectively.

The opportunity: Turning gaps into growth

Disruption doesn’t necessarily eliminate demand – more often, it changes where and how that demand appears. Even as households pull back on big-ticket purchases, smaller indulgences like premium coffee and everyday treats have proven resilient – and quick-serve formats are gaining share while traditional dining continues to lag.

For businesses, the opportunity lies in responding to such shifts quickly and deliberately. Larger players are buying into faster-growing categories or segmenting brands to capture changing preferences without diluting their core positioning. But scale doesn’t guarantee agility, and that is where smaller, nimbler producers are often better placed, able to move quickly, carve out niche growth and meet demand as it evolves.

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For many businesses, success will come down to a few fundamentals: building strong strategic relationships, refining supply chains and protecting margins. Together, these create the flexibility to move quickly and capture new pockets of growth as they emerge.

Focus on what you can control

Uncertainty is colouring how many owners and operators price, partner and run their businesses. With so much in flux, the panel’s practical advice was to concentrate on the levers within reach. As RBC’s Lana Difrancescomarino put it: “There’s so much you can’t control – tariffs, the economy, the consumer. But you can control your level of knowledge. In the worst case, you learn something new and put more tools in your toolbox.”

For food & beverage and consumer businesses, the panel recommended four priorities:

• Know your own numbers. Timely, accurate financial data is the single most powerful decision-making tool, making it possible to model scenarios – whether that’s a rate change, a cost increase or a new tariff – before they happen.

• Manage the financial risks you can. Foreign exchange, interest rate and commodity exposures can be actively managed through hedging and tailored financing, taking some volatility off the table.

• Lean on your partners. Bankers and advisors can recommend tools, strategies and financing options that can help relieve pressures on the areas outside your control.

• Build diversification into your long-term plan. Exploring new markets and supply routes is a strategic decision – not a reaction to make under pressure.

What it means for your business

The macroeconomic picture will likely remain fuzzy for some time, but the panel’s message was ultimately an optimistic one. Trade stability is the likely path forward, and the businesses best positioned to thrive will be those that stay nimble – while staying close to their numbers, managing what they control and moving quickly when opportunities open up.