Canada’s food producers face challenges such as a lack of early-stage capital, unclear and fragmented regulations and restricted access to some ingredients.

However, the sector is feeling more optimistic now than in recent years, thanks to a recently announced federal National Food Security Strategy, say leaders in Canada’s food ecosystem.

The shift in consumer awareness and buying preferences – fuelled by U.S. tariffs – also creates a strong opportunity for Canadian manufacturers to build brand loyalty and capture local retail and food service market share, they said during a webinar.

The webinar featured leaders from global consulting firm Ayming Canada, Natural Products Canada, Food Producers of Canada, and the Canadian Food Innovation Network.

Studies show more funding isn’t sufficient by itself to grow the food processing sector and make productivity gains, said Dana McCauley (photo at right), CEO of the Canada Food Innovation Network.

“Money isn’t the solution in and of itself,” she said. “We need wraparound services.”

“We need to create a culture change because we don't right now have innovation on the strategies and in the budgets of the companies who are most well positioned to grow, and that would be about 600 medium-sized enterprises in Canada who are currently struggling to make money,” McCauley said.

A lot of work still needs to happen to break down interprovincial trade barriers, she said.

Interprovincial trade barriers cost Canada's agriculture and agri-food sector an estimated $1.7 billion annually, driving up food prices and limiting the ability of domestic processors to scale their operations

“But it's a very hopeful time compared to, say, a year ago, when everyone was, I think, really, really quite justifiably terrified about what the future would hold,” McCauley said.

One of the aims of the federal National Food Security Strategy is to provide and leverage more capital for the agricultural and agri-food sector, said Tavia Fedoruk (photo at right), government funding director at Ayming.

The intention behind the strategy “is to finally acknowledge that this is really a major sector and a major economic driver within Canada,” she said. “And also acknowledge that we are exporting more than 50 percent of our food grown in Canada, and it's not going to Canadian consumers.”

Food processing in Canada’s core agricultural sector currently makes up only 10 percent of Canada’s GDP, compared with 30 percent or more in peer countries such as France, Fedoruk noted.

That because those countries “put a lot of policy pieces and a lot of initiatives” to support food processing within those nations, she said.

Canada’s National Food Security Strategy, which was announced in June, puts domestic production and processing capacity at the centre of the country’s drive for greater economic independence and sovereignty.

The strategy pledged $3 billion over 10 years to expand domestic processing and production, make supply chains more efficient and improve grocery competition.

Fedoruk noted that the strategy also includes a new fund, a $1-billion specialized debt-financing initiative led by Farm Credit Canada targeting capital-intensive, construction-ready processing and value-added manufacturing projects.

There’s also an additional $150 million investment led by Canadian entrepreneur Arlene Dickinson's Velocity Capital to help mid-sized agri-food and agri-tech companies scale across North America and export to Southeast Asia.

Regional economic growth initiatives also have increasing funding, especially for food processors, Fedoruk said.

“Governments are putting their money where their mouth is when it comes to the national food security strategy,” she said. “It wasn't just a policy announcement. It has, in fact, come with a lot of funding initiatives. So that's a really positive indicator.”

Canada needs to change its risk-adverse investment culture

Shelley King (photo at right), CEO of Natural Products Canada, said there’s a need for more early-stage, risk-tolerant, patient capital for innovative startups.

“We also see – because  a lot of our products are innovations – there are no regulatory systems that can guide [companies],” she said. “So regulatory turnaround and actually the regulatory pathways are often unclear.”

“And then when you get to a certain scale, the lack of scale-up infrastructure inside Canada is also problematic,” she added.

“In order for us to really go in a positive direction, we need to change the culture of how we think about investment,” King said.

“We are a little risk-adverse as Canadians. We need to get over ourselves, and that means whether you're an entrepreneur or an investor, and be willing to take that longer-term risk and truly understand innovation and perhaps move a little bit away from the traditional other pockets that Canadian investors invest in.”

John Kelly (photo at right), treasurer of the Food Producers of Canada and president of Food to Market Inc., said the food processing sector has to deal with several different federal government ministries, “and we constantly are looking for appropriate rules for the industry that we’re in.”

The sector’s challenges include access to capital, customers and ingredients, including “sometimes restricted access to some inputs that make us less competitive,” Kelly said.

These restrictions are driven by a combination of tight domestic safety regulations, supply management policies, and rising geopolitical and trade barriers.

For example, processors face strict limits on importing cheaper foreign dairy ingredients, chicken, turkey and eggs. Imports beyond small, pre-allocated Tariff-Rate Quotas are hit with prohibitive, triple-digit tariffs.

Escalating trade measures and Canadian counter-tariffs on U.S. agricultural products heavily impact imported processed food ingredients and specialized proteins.

When it comes to capital, the food processing sector needs “long-term commitments, not short-term investments: ‘Get in, get out, make your money and go,’” Kelly said.

“We really want investments in infrastructure. We want investments that are going to give long-term gain to the industry as a whole, and to the country as a whole.”

Kelly suggested that Canada needs a “pre-approval program,” whereby companies that want to or have projects in mind could go through a pre-approval process to secure capital. Then, as a company hits certain milestones, funding would be released automatically so the company can proceed, without requiring more discussions and paperwork.

King said Natural Products Canada, with its investments, tries to move at the speed of business in making funding decisions quickly, at levels ranging from $25,000 to $5 million.

“The turnaround time is pretty quick because companies sometimes have less than six months runway,” she said. “And if you can't help them, they're gone.”

“You have to have some skin in the game,” King noted. “You can't grow a viable company on 100-perccent government-related money. It serves a very important purpose, but that's not how you get from pre-revenue to $50 million in revenue.”

National Food Security Strategy gives produces some positive “new sales tools”

McCauley pointed out that Canada's productivity in manufacturing as a whole and in food manufacturing specifically has been declining.

“I would say that a big part of that has been our over-reliance on a U.S. customer, because Canadian companies have not had to worry as much about becoming extremely productive and getting their margins in good shape because we've had the [market] in the U.S. and the Canadian dollar,” she said.

“So we've been able to go to the U.S. and have our Canadian inputs and then sell in U.S. dollars. And to be honest, we've gotten a bit hooked on that,” she added.

Canadian food and beverage manufacturers want to diversify into other global markets, such as Japan and other countries, McCauley said. “But until your unit economics and your food and beverage manufacturing business are in good shape so that you can actually make money in those markets, you're wasting your time and your energy on pursuing those new markets.”

However, with the National Food Security Strategy initiatives, food producers now have some positive information they can use with investors, she noted. “Potentially it’s taking a little bit of pressure off of those companies to have to go out and fundraise with VCs and private equity and that kind of thing, because I think they have some new sales tools.”

Fedoruk said there’s a huge focus now in Canada on controlled environment agriculture (CEA), greenhouse vegetables and fruit production, along with processing much closer to where food is produced, given Canada’s size and high transportation costs.

The National Food Security Strategy commits $750 million to expand CEA, which includes indoor food production systems like greenhouses, vertical farming and hydroponics operations.

Also, building new wholesale food terminals in Canada would bring buyers and sellers together, and create more access for locally grown food to buyers, she said.

Ontario has a large food terminal that could serve as a model that could be replicated on a smaller scale regionally and locally, Fedoruk said.

Food industry associations in British Columbia and Manitoba are seeking close to $1 billion from government and private business to build regional food terminals as trade tensions with the U.S. continue to expose the risks of relying on north-south trade.

BC Food & Beverage, which represents provincial food processors and manufacturers, is readying a proposal for a massive facility with an estimated cost of $700 million.

The proposed space would be the first in the province and loosely modelled on the Ontario Food Terminal, the only one of its kind, which distributes two billion pounds of food each year across Canada.

The western anchor would be part of a network of terminals that move food along interprovincial routes already running from the port to Alberta, the Prairies and Northern Canada.

Manitoba’s industry association is looking to build its own terminal with a price tag between approximately $150 million and $200 million.

When it comes to bolstering investment, King pointed out that Natural Products Canada’s (NPC) portfolio of companies, after receiving NPC support, managed to raise $722 million in follow-on financing this year. “The majority of that comes from private investors and a good chunk of that is actually from Canadian investors.”

“My bottom line is there's nothing like a good crisis to come up with innovative solutions, but it has to be a systems approach. And we have to be committed to the long haul,” King said.

See also: Canada is overly reliant on the U.S. for agri-food exports, but could increase its global share of exports with the right investments (in “Reports & Policies” in the September 9, 2026 Short Report).

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