The Consumer Packaged Goods (CPG) industry is undergoing a fundamental transformation. The era of growth driven by price increases is over, giving way to a new landscape where consumers are more discerning, fragmented, and value-conscious. As shown in Zappi’s report, CPG Mega-Trends: The data, trends & forces reshaping consumer packaged goods, 2026 Edition, this shift necessitates a strategic pivot for CPG leaders, demanding not just better products and smarter innovation, but also faster, data-driven decision-making and a proactive embrace of artificial intelligence (AI). The market no longer rewards the old formula; businesses must now prove their worth through perceived value and agile adaptation .
The New Consumer Imperative: Value, Health, and Shifting Loyalty
The current economic climate and evolving consumer mindset have fundamentally altered purchasing behavior, making brand loyalty increasingly fragile and value a paramount concern.
The Macro Squeeze and the End of Price-Led Growth
For the past three years, CPG growth was primarily driven by pricing, with inflation providing cover and consumers absorbing higher costs. This dynamic is now ending. A majority of CPG executives (51%) acknowledge they cannot rely on price increases for revenue growth in 2025. This sentiment is reinforced by consumer behavior: 64% of consumers still negatively compare current prices to 2019 levels. This isn’t a temporary blip; 75% of executives view value-seeking behavior as a structural shift, not a cyclical response to inflation.
Consumers are actively tightening their belts. For example, Americans are spending 10% more on groceries but purchasing 4% fewer items . This pressure is exacerbated by structural challenges like commodity prices remaining 20-40% above 2019 levels and 85% of major food commodities facing increased drought exposure . Furthermore, tariffs are estimated to cost the average American household $1,000 annually, with 58% of consumers opposing them. Even small price increases of 5-10% would deter purchases for a majority of consumers in categories such as snacks (55%), beverages (51%), and cosmetics (62%). The implication is clear: the focus must shift from price-taking to value creation.
What to do:
- Prioritize value communication: Articulate the tangible benefits and “worth” of products across all price tiers.
- Optimize supply chain resilience: Invest in de-risking supply chains to mitigate commodity price volatility.
- Understand price elasticity by segment: Conduct granular analysis to identify specific consumer segments and product categories where price sensitivity is highest (e.g., households with multiple children are particularly stretched, with 52% reporting weekly grocery bills above $200, and 10% spending more than $400) .
The Great Trade-Down: Collapsing Brand Loyalty
Brand loyalty is eroding, with private labels establishing themselves as a permanent fixture rather than a temporary compromise. A significant 60% of global consumers now consider private-label quality equal to or better than national brands. The US private label share is currently around 19%, suggesting ample room for growth compared to over 25% in Europe. This shift is part of a broader trend: 75% of US consumers are actively trading down or delaying purchases, and 38% of US and Canadian shoppers tried new brands in a three-month period . For Gen Z, loyalty is particularly fragile, with 62% open to considering alternatives even for their favorite brands .
This landscape has empowered insurgent brands, which captured 40% of overall growth in US consumer products in the first half of 2024, despite their small market share . Incumbent CPGs are reacting by acquiring these agile, consumer-centric brands (e.g., PepsiCo acquiring Poppi, e.l.f. Beauty acquiring Rhode) rather than organically building similar growth. Crucially, brand-only buying has declined by 11 points in just six months, with two-thirds of consumers now engaging in mixed purchasing (brand + generic) . Price has surpassed brand as the primary driver of purchase decisions, with 32% choosing the least expensive option regardless of brand . A staggering 93% of consumers are actively changing how they shop for groceries, employing tactics like using coupons (46%), switching to store brands (40%), buying only essentials (38%), and even using Buy Now, Pay Later (BNPL) options for groceries (11%) .
What to do:
- Innovate for perceived value: Focus innovation on products that offer superior “more-value-for-the-price” experiences, providing benefits beyond price alone .
- Simplify portfolio complexity: Rationalize SKUs to improve efficiency and align with evolving consumer needs. Reducing SKU complexity can increase sales growth by 2-5 percentage points and margins by 100-400 basis points .
- Develop agile market entry strategies: For new product launches, leverage rapid testing and market feedback to ensure relevance and competitive pricing from the outset.
What to avoid:
- A one-size-fits-all portfolio strategy: Consumer segments now split into “survival mode” (<$50K income), “surgical optimization” ($50K-$99K), and “efficiency-driven” ($150K+), each with distinct buying behaviors .
- Over-reliance on legacy brand equity: Brand equity alone is no longer sufficient to win at the shelf; tangible value must be demonstrated.
What Consumers Want: Health, Function, and Affordability
Health is a non-negotiable consumer demand, but it is entirely conditional on affordability and taste. A majority of consumers across Europe, the US, and China are more health-conscious than before the COVID-19 pandemic. The “biohacking” trend is significant, with the global vitamins, minerals, and supplements market projected to grow by 11.7% annually to $365 billion by 2030. Half of consumers actively seek less processed and ultra-processed food , and sales are stagnating or declining in categories associated with heavy processing (Nielsen, BCG, 2025).
Functional claims are strong purchase drivers: “high protein” influences 40% of shoppers, followed by “low sugar” (35%). Attributes like “no artificial dyes” (30%) and “clean ingredients” (28%) also hold sway . However, cost remains the primary barrier to healthier eating, cited by 62% of consumers, outweighing taste, availability, and variety .
The emergence of GLP-1 weight-loss drugs is also reshaping the food and beverage landscape. Users of these medications spend 4% less on groceries and 5% less on fast food within the first six months. GLP-1s could reduce US caloric intake by 1-3% over the next decade, impacting categories through shifts in portion sizes, increased demand for protein and satiety, and reduced alcohol consumption. Awareness of GLP-1 drugs is rising rapidly, reaching 83% of consumers . This is not a temporary diet fad; it is a pharmaceutical-driven reshaping of food demand. Beyond health, convenience is non-negotiable, with Gen Z willing to pay a premium for food delivery services .
What to do:
- Innovate for accessible health: Develop products that deliver perceived health benefits (e.g., high protein, low sugar, clean label) at accessible price points.
- Anticipate GLP-1 impact: Proactively analyze portfolio exposure and develop product strategies for smaller portions, higher satiety, and shifts in consumption patterns.
- Integrate convenience: Ensure seamless digital and delivery channels for products, especially for younger, convenience-seeking demographics.
Reshaping Discovery and the Retailer-CPG Dynamic
The landscape of brand discovery has fragmented significantly, with digital channels and new intermediaries altering how consumers find and choose products.
Fragmented Discovery and the Rise of Social Commerce
Consumer discovery pathways are more diverse than ever. While friends and family remain the most vital for discovery (32% overall), digital channels are rapidly gaining prominence. TikTok, for instance, is the single biggest digital discovery channel for Gen Z (45% for ages 18-25), and 26% overall . YouTube (24%) and social media ads (24%) also play significant roles, with AI tools like ChatGPT emerging as a nascent but fast-growing channel (8% overall, 11% for 18-35 year olds) .
Social commerce is no longer experimental; it is a core channel. 15% of CPG marketing budgets are now allocated to influencer marketing . Brands like Kraft Heinz have seen engagement rates 103% higher through influencer programs compared to their owned brand channels . There is a paradox: consumers report social media as their least trusted source for buying decisions, yet it is where they interact with their most trusted people – family, friends, and authentic influencers . Food and beverages (42%) and household essentials (36%) are among the top categories for social media-driven purchases , with online grocery shoppers being particularly responsive to social commerce.
What to do:
- Develop generationally segmented discovery strategies: A single-channel approach will fail. Tailor content and platform presence to align with how different age cohorts discover brands (e.g., TikTok for Gen Z, TV for older demographics, AI for emergent users).
- Prioritize word-of-mouth and advocacy: Shift social strategy from solely paid placement to enabling authentic community and advocacy at scale. Invest in micro-influencers, who often outperform mega-influencers in engagement and trust.
- Optimize for diverse digital touchpoints: Ensure consistent brand messaging and product availability across social media, online marketplaces, search results, and emerging AI tools.
What to avoid:
- Ignoring emerging AI tools: Brands not optimized for AI discovery risk becoming invisible as AI becomes a default shopping assistant.
- A one-size-fits-all social media approach: Content styles and conversion potential vary significantly across consumer segments and age groups.
Retail Media’s Ascendance and the Data Power Shift
Retail media networks have transformed into a major advertising channel, fundamentally altering the power dynamics between CPGs and retailers. These networks, including Walmart Connect, Amazon Ads, Kroger Precision, and Instacart Ads, represent a $50 billion+ market. CPGs are now paying to access their own consumers on retailer platforms, essentially buying access to first-party data that retailers control. This shifts the question for CPG marketers from “TV vs. digital” to “How much of my budget goes to the retailer?” .
Simultaneously, digital video ad spend has surpassed traditional TV broadcast ad spend for the first time in the US, reaching $64 billion in 2024 and projected to grow 14% to $72 billion in 2025. CPG companies are expected to increase digital video ad investment by 13% this year, recognizing the highly personalized and targetable nature of the medium . The shift to online purchasing is pervasive: nearly all shoppers are now omnichannel, with over 90% purchasing groceries both in-store and online.
What to do:
- Rethink media allocation: Re-evaluate marketing budgets to account for the growing influence and cost of retail media, considering it a direct investment in customer access and data.
- Develop robust first-party data strategies: Counter the retailers’ data advantage by enhancing proprietary customer data collection and analysis capabilities.
- Integrate omnichannel experiences: Ensure consistent brand presence, messaging, and promotional activities across both physical and digital retail touchpoints.
AI’s Entry into the Purchase Flow: Disintermediation Risk
Generative AI is already reshaping how consumers research, learn about, and engage with brands. AI tools like ChatGPT and Google AI Overviews are influencing purchase decisions . This presents an existential risk for CPGs that remain reliant on traditional search advertising and fail to optimize for AI recommendations. Retailers are actively exploring AI to streamline operations and leverage it in supplier negotiations .
The adoption of agentic AI, where AI systems act on behalf of consumers, is rapidly approaching mainstream acceptance. Most executives expect AI’s role in the shopping journey to be widespread before 2028 . Over two-thirds (68%) of retail executives anticipate deploying agentic AI for key operational activities within 12-24 months . If brands are not optimized for this AI-mediated discovery, they risk becoming invisible in the next generation of commerce.
What to do:
- Immediate priorities (first 90 days): Form a cross-functional AI task force to assess current AI readiness and identify high-impact use cases for product discovery.
- Optimize for AI discovery: Begin to understand how AI models process product information, reviews, and consumer queries to surface recommendations. Adjust product content, metadata, and digital presence accordingly.
- Pilot agentic commerce strategies: Experiment with how AI agents can interact with your brand’s product information and purchase pathways.
Bridging the AI Action Gap for CPG Growth
Despite widespread awareness of AI’s potential, CPG leaders face a significant “AI action gap,” hindering their ability to translate intent into tangible business value. Addressing this gap through connected insights and robust data infrastructure is paramount for future growth and competitiveness.
The Disconnect Between AI Prioritization and Execution
The CPG sector is currently underperforming other consumer-facing industries in shareholder returns, trailing tech, healthcare, retail, and financial services – sectors that embraced digital transformation faster . This underperformance reflects a market discounting price-driven growth and a failure to adapt. While 90% of CPG executives acknowledge AI’s importance, only 6% have a concrete plan to create value from it . Similarly, 70% of CPG marketing leaders expect generative AI to boost efficiency, yet only 13% report widespread use ). This disconnect is critical: AI prioritization surged by 24 percentage points from 2024 to 2025, but actual execution remains at a mere 6% .
Integrating AI effectively requires depth, not just breadth. While 71% of CPG leaders have integrated AI into at least one business function , many struggle to scale successful pilots across the organization. Key application areas for AI include product development (consumer insights, data patterns), supply chain (forecasting, inventory, waste reduction), and marketing (content creation, personalization) . However, only 35% of CPG companies are actively implementing generative AI, with the majority still in pilot, planning, or having no plans at all .
What to do:
- Establish clear AI value creation plans: Move beyond thinking about AI to developing specific, measurable initiatives linked to financial goals (e.g., target a 15% improvement in EBITDA margins and 3-5% sales growth, as projected by McKinsey and Bain for those investing in data-driven transformation).
- Scale successful AI pilots: Develop a repeatable capability to transition AI pilots into scaled, integrated business processes, treating AI as vital infrastructure rather than a departmental tool.
- Invest in AI talent: Address talent scarcity in consumer insights and AI implementation.
The Imperative for Connected Insights and Data Infrastructure
The primary roadblock to effective AI action is data fragmentation, cited by 41% of companies . Without resolving this, AI investments become expensive projects that fail to deliver. Currently, only 38% of organizations report having connected, centralized insights, while half describe their insights as fragmented and 12% as disconnected . This fragmentation directly impacts decision-making quality and speed. Connected organizations demonstrate a 24-point higher satisfaction with their insights capabilities compared to fragmented ones .
Leading CPG companies are addressing this by consolidating consumer insights under a single integrated function, often led by a Chief Growth Officer, to create a “holistic, 360-degree view across key growth drivers” ). CPG marketers rank generative AI-based insights and analytics as the most important internal capability to build over the next three years ). This consolidation, enabled by AI, allows for cost efficiencies and localized market execution. Companies adopting AI in marketing are already seeing 25-40% faster workflows, 2x speed to market, and up to 50% ROI improvement ).
Operating model and roles:
- Chief Growth Officer (CGO) or equivalent: This role is critical for unifying siloed insights functions across market analysis, category analysis, business performance, consumer, shopper, and innovation.
- Dedicated Insights Department: While only 23% of companies currently have one, centralizing insights functions is crucial for building connected, real-time data capabilities .
Governance and risk controls:
- Data Readiness Framework: Implement a clear framework for data collection, integration, quality, and accessibility across all consumer touchpoints (innovation, advertising, brand tracking).
- AI Ethics and Policy: Establish internal guardrails and policies for AI use in marketing, product development, and customer interactions to ensure fairness, transparency, and consumer trust.
- Performance Monitoring: Define clear metrics (e.g., product concept-to-market time, engagement rates, ROI) and thresholds for AI initiatives, with regular reporting to CX and marketing leadership.
Six Strategic Imperatives for CPG Leaders
To thrive in this evolving landscape, CPG leaders must focus on six core strategic imperatives (Zappi, 2026):
- Prove Value, Don’t Raise Prices: The era of price-led growth is over. Growth must be earned through superior products, smarter formats, and clear value communication.
- Innovate to Defend Against Trade-Down: Private label is a structural shift. Defense against insurgent brands and trade-down behavior requires innovation and diverse assortments, not just cost-cutting.
- Simplify Your Portfolio: Consumers are willing to accept fewer options for meaningful savings. Reducing SKU complexity can boost sales and margins, streamlining operations and improving speed to market.
- Meet Consumers Where They Discover – By Generation: Discovery has fragmented. A single-channel strategy is ineffective. Tailor engagement across channels like TikTok for Gen Z, TV for older demographics, and emerging AI tools for all.
- Build AI and Data Capability – Now: The potential for significant EBITDA margin improvement and sales growth is contingent on connected data, skilled talent, and organizational commitment.
- Connect Your Insights to Act Faster: Data fragmentation is the biggest barrier. Consolidating innovation, advertising, brand tracking, and consumer insights into a single, real-time system is critical for faster, better decisions.
Summary
The CPG industry stands at a critical juncture. The shift in consumer behavior, marked by a demand for demonstrable value, affordable health, and frictionless convenience, combined with the fragmentation of discovery channels and the rise of AI, demands immediate and transformative action from CPG leaders. The “AI action gap” is not merely a missed opportunity but an existential threat for brands unable to adapt their operating models and data strategies. Companies that move now to connect insights, simplify portfolios, innovate on value, and optimize for AI-mediated commerce will define the next decade of success. Those that wait risk becoming invisible and spending the future attempting to catch up. The time to act is now.
Source: Zappi. (2026). CPG Mega-Trends: The data, trends & forces reshaping consumer packaged goods, 2026 Edition.
