2026 Economic Considerations for Food Manufacturers

Key Takeaways:

• Plan for “lower, but not low” interest rates: Financing may ease compared to recent years, but capital will still reward discipline and strong cash conversion.
• Commodity relief will be uneven: Broad indices may soften, yet category-by-category volatility (and climate risk) will keep procurement and pricing strategy front and center.
• Regulatory, labor, and trade uncertainty will shape budgets as much as demand: Build scenarios, protect your must-win investments, and set growth targets you can deliver under multiple conditions.

As we move into 2026, the landscape for food manufacturers appears to be one of cautious optimism. While interest rates may trend lower and some inflationary pressures may ease, the return to “normal” is not anticipated to be swift. Food manufacturers will need to navigate a complex environment characterized by persistent challenges such as consumer trade-down behavior, evolving regulatory frameworks, and ongoing labor shortages.

A Macro Baseline: Steady Growth and Cooling Inflation

A helpful starting point for 2026 budgets can be gleaned from the U.S. Federal Reserve’s Summary of Economic Projections from December 2025. The median projection indicates:

• Real GDP growth around 2.3% in 2026
• Unemployment steady at about 4.4%
• PCE inflation projected to hover around 2.4%
• Federal funds rate expected to be around 3.4% by the end of 2026

Implications for Food Manufacturers

• Demand should be resilient, but not effortless: Innovation and strict cost controls will be key for manufacturers.
• Price/mix gains may be harder to replicate: As inflation moderates, justifying prices to consumers will become more challenging.
• Borrowing costs may ease, yet lenders remain selective: Capital will increasingly favor strong operational strategies.

Interest Rates and Capital Availability: Budgeting for Discipline

Despite the expected decrease in interest rates, borrowing will still pose challenges compared to previous years.

What to Expect in 2026

• Incrementally cheaper debt: Companies must demonstrate returns to secure funding.
• Working capital matters more than ever: In slower growth periods, cash conversion is vital.
• Uneven capital availability: Strong performers will attract funding; weaker companies may face tighter terms.

Planning Moves Leaders Can Make Now

For CFOs and Finance Teams

• Develop plans with three rate scenarios (base, downside, and upside).
• Consider rebalance strategies for fixed vs. floating exposure.
• Reassess hurdle rates to align with capital costs.

For Operations and Engineering

• Focus on projects that enhance labor productivity and yields.
• Apply a time-to-value filter to prioritize quick payback projects.

Commodity Price Trends: Easing Overall, Volatile in the Details

According to the World Bank’s Commodity Markets Outlook (October 2025), global commodity prices are projected to see some easing in 2026:

• Energy prices anticipated to decline further.
• Food prices could be flat to slightly decreased, masking significant item-specific fluctuations.
• Fertilizer costs may stabilize after previous price surges.

Why Lower Commodity Prices May Not Enhance Margins

Manufacturers might still experience margin pressure from:

• Category-specific tightness affecting margins.
• Weather-related crop volatility.
• Trade restrictions and logistics hurdles.
• Retail pricing dynamics that could hinder margin relief.

Turning Volatility into Advantage

Rather than viewing commodity volatility as a fixed cost, many manufacturers are now leveraging data-driven forecasting and hedging strategies to stabilize costs.

Susan Doering, Aon’s global food leader: “Manufacturers that use these solutions to make their costs more predictable will be in a stronger position to maintain consumer pricing…”

Practical Actions for Procurement, R&D, and Finance

• Segment ingredients based on risk and align your contract lengths accordingly.
• Build flexibility into your formulations to accommodate changes without affecting consumer trust.
• Prioritize collaborative supplier relationships to bolster resilience.

Consumer Spending Patterns: Value-seeking and Health-Driven Shifts

Food demand appears robust, yet consumer choices are shifting rapidly towards value and health-conscious options.

1. Value Pressure: Price-sensitive shoppers are pushing for increased private-label options.
2. Health Awareness: Rising scrutiny over ingredients is reshaping product offerings.

What This Means for Manufacturing Leaders

• Budget for price testing as demand becomes more elastic.
• Invest strategically in areas that you can defend, such as functional nutrition and value-added offerings.
• Develop packaging strategies that clarify pricing tiers.

Trade Policy Uncertainty: Predictability Without Full Cost Reset

The evolving trade landscape will continue to affect ingredient availability and pricing.

David Lennarz, Registrar Corp: “…manufacturers should not expect food prices to revert to pre-tariff levels. The market has fundamentally shifted…”

Budgeting Implications for Supply Chain and Finance

• Model tariff costs as a constant unless proven otherwise.
• Plan for longer lead times for imported ingredients.
• Strengthen supplier qualifications and documentation processes.

The Role of Technology

AI will increasingly play a role in formulation processes as well as regulatory compliance:

Lennarz: “AI helps manufacturers manage complex requirements, monitor changes, and reduce compliance risk…”

The 2026 M&A Outlook: Selective Deals and Tougher Diligence

The M&A landscape will likely prioritize realistic valuations and stringent review processes.

Jeff Hechtman, Kilpatrick: “A flight to quality is expected, where desirable targets command high valuations…”

Planning for M&A in 2026

If You’re Buying:

• Budget for integration efforts, not just purchase price.
• Expect longer diligence cycles with a robust cross-functional team.

If You’re Selling:

• Prepare to defend your performance with accurate data.
• Be ready for more performance-based payments.

Labor Market Conditions: A Slight Rise in Unemployment, but Scarcity in Skills

Even with a projected increase in unemployment, many sectors will still face difficulty in filling essential roles.

What to Align on in 2026

• Implement retention strategies as a productivity measure.
• Build a pipeline for essential skills.
• Utilize automation strategically to enhance productivity.

The Hidden Economic Pressures: Compliance Risks and Emerging Contaminants

2026 budgets will not only be affected by macroeconomic factors but also by compliance costs and emerging risks in the marketplace.

Compliance Costs for Packaging

Gillian Garside-Wight, Aura: “2026 will be the year that Extended Producer Responsibility really takes hold…”

Emerging Contaminants

Doering: “Micropollutants can end up in food and can quickly become costly concerns…”

A Practical 2026 Budgeting Framework for Food Manufacturers

To set realistic goals, align on a few straightforward assumptions, and stress-test them.

1. Begin with a Base Case

Document essential assumptions:

• Price/mix and volume assumptions.
• Commodity basket insights.
• Wage and staffing plans.
• Capex envoys and compliance costs.

2. Develop Stress Scenarios

Downside Case Ideas:

• Increased promotional intensity.
• Input spikes due to disruptions.

Upside Case Ideas:

• Input costs ease faster than expected.
• Productivity projects achieve quicker returns.

3. Protect Key Investments

• Focus on food safety and quality systems.
• Invest in core brand renovations.
• Ensure compliance data readiness.

For many food manufacturers, 2026 won’t be defined by a single headline but rather by the ability to navigate through mixed signals: evolving inflation, selective capital, and shifting consumer behaviors. It’s vital to establish clear assumptions, proactively plan for uncertainties, and commit to achievable growth targets even in fluctuating conditions.

FAQ for Food Manufacturing Leaders

Q: What interest rate environment should we budget for in 2026?

A: Expect rates to ease modestly but remain higher than in the past decade. The Federal Reserve projects a median rate around 3.4% by end of 2026.

Q: Will commodity prices decrease in 2026?

A: Broadly, major outlooks predict easing, though this won’t be uniform across all items.

Q: How should pricing and promotion expectations be set for 2026?

A: Anticipate more price resistance and budget for flexibility in your pricing strategy.

Q: What does the M&A market look like for food manufacturers in 2026?

A: Expect selective markets with increased due diligence and a focus on quality.

Q: How do we budget for labor in 2026 with slight unemployment increases?

A: Plan for skill shortages in critical roles and consider retention and training as part of your budget.

Q: Are trade and tariff costs likely to return to pre-tariff levels?

A: Don’t expect a full reset; treat higher sourcing costs as persistent until proven otherwise.

Q: What additional costs should we watch for in 2026?

A: Monitor compliance costs relating to packaging and potential new contaminant concerns.