McKinsey report.
This McKinsey report examines the structural slowdown in the food and beverage (F&B) consumer packaged goods (CPG) industry. Historically, the sector relied on scale, brand strength, and steady volume growth. However, that model is now weakening due to shifting consumer behavior and rising competitive pressures. As a result, growth has slowed to less than 1 percent annually, and leading firms are underperforming broader equity markets.
The breakdown of the traditional growth model
For decades, CPG companies generated value through mass-market brands, global expansion, and efficient supply chains. Nevertheless, this model began to erode in the 2010s. Population growth slowed, consumer attention fragmented, and competition intensified.
The chart on page 3 shows that revenue growth fell sharply after 2012, while margins and valuation multiples became more volatile. More recently, inflation temporarily supported growth through price increases, but this effect has faded. Consequently, companies now face constrained volumes, weaker margins, and declining investor confidence.
Changing consumer behavior and demand patterns
Consumer priorities have shifted significantly, driven by affordability pressures and evolving preferences. According to the report, 61 percent of consumers now consider price more important than two years ago. At the same time, food prices have risen faster than overall inflation, forcing households to reassess spending.
In addition, health and functionality are becoming central decision factors. Around 57 percent of consumers rank health among their top three considerations, reflecting growing demand for products with clear benefits. However, purchasing behavior remains inconsistent due to budget constraints and convenience preferences.
The report also identifies four key spending shifts: trading down to cheaper alternatives, trading up for premium benefits, spending more on food away from home, and cooking more from scratch. These patterns indicate that consumers are reallocating spending away from traditional CPG brands toward a broader ecosystem.
Competitive pressures: Private labels and disruptors
Competition has intensified from both private-label products and small, innovative brands. Private labels now offer comparable quality at significantly lower prices, often around 30 percent cheaper. As shown on the article, consumers increasingly perceive these products as equal or superior to branded alternatives.
At the same time, smaller brands are capturing growth by focusing on functionality and differentiated value. The chart on page 15 shows that small, independent brands accounted for 35 percent of category growth by 2025, despite representing a smaller share of total sales. This dynamic leaves large incumbents squeezed between low-cost and high-value competitors.
Strategic response: A dual agenda for growth
The report concludes that CPG leaders must adopt a dual strategy. First, they must reshape their portfolios toward high-growth segments such as health, premium, and functional products. This requires active capital allocation, including acquisitions and divestitures.
Second, companies must improve performance by strengthening product quality, rebuilding brand relevance, and enhancing consumer acquisition. This includes redesigning pricing strategies, improving affordability, and leveraging digital tools for discovery and engagement.
AI also plays a central role. The report estimates that AI-driven productivity could generate 200 to 300 basis points in cost savings, which can be reinvested into growth initiatives. Ultimately, firms that combine portfolio transformation with operational excellence will be better positioned to restore sustainable growth.
Reference
Miller, D., Sänger, F., Moulton, J., Bar Am, J., Habernoll, K., & Schmutzler, R. (2026, April 8). State of food & beverage: The choices CPG leaders can make to renew growth. McKinsey & Company. https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/state-of-food-and-beverage#/