The traditional playbook that drove food and beverage CPG growth for 40 years has run out of steam. A new McKinsey report shows volume growth for the sector sits below 1% annually, far short of historical performance. Since 2023, total shareholder return for major global CPG players is down about 7%, while the S&P 500 is up 9%.
The shift began well before the pandemic. From 2002 to 2012, publicly held CPG companies averaged 9% annual revenue growth with consistent margins and 22% return on invested capital. But in the following seven years, growth slowed as population gains flattened, consumer attention fragmented, and private label and smaller disruptor brands gained ground.
Price increases during the 2021-2022 inflation spike masked deeper problems. CPG companies raised prices steeply but volume declined, and gross margins remain below pre-pandemic levels. McKinsey found that efficiency gains from earlier productivity programs have plateaued, leaving few levers left to pull. Throughout 2025 and today, price growth has reverted to historical norms while volume growth stays constrained.
Consumer spending has turned into survival mode
Affordability has become the dominant concern. US food prices averaged 31% higher through the third quarter of 2025 than in 2019, outpacing the 26% rise in the total Consumer Price Index over that period. Lower-income households now spend roughly one-third of their after-tax income on food versus 8% for highest-income households.
McKinsey's global survey of 15,000 consumers across 10 markets found that 61% say price matters more to them today than two years ago. Cost and perceived value rank as the top two reasons shoppers abandon brands, followed by concerns about quality, product range and lack of new offerings. Over 8 in 10 US consumers polled called shrinkflation deceptive, and about two-thirds have stopped buying shrinkflation products.
Private label and small brands are winning
Private label has captured a growing share of spending. Twenty-eight percent of global consumers surveyed said they buy more private label items than two years ago, rising to 34% for US shoppers. Among US consumers, 86% said private label value is better than or equal to name brands, with 77% citing comparable quality and 72% saying selection is similar.
Smaller independent brands are gaining ground in a different way. Brands with less than $100 million in sales represented just 13% of the US food and beverage market in 2021 but delivered 15% of category growth from 2021 to 2023. By 2025, they accounted for 35% of category growth, with outsized impact in sweet snacks, tea, butter and oils, seasonings and sauces, cheese, and functional shakes and powders.
Health and function have become the growth frontier
Health ranks as the fastest-rising consideration in purchase decisions. McKinsey found that 57% of consumers rank health as a top-three factor, the largest increase in importance of any attribute in the past two years. Approximately 75% of shoppers seek fresh fruit and vegetables, and 60% target foods with more protein and fiber. Half avoid or limit artificial flavors, sweeteners, alcohol, sugar and highly processed foods.
Small brands consistently outperform large brands on functionality, while private label wins on price. That leaves many large national brands caught in the middle, lacking a meaningful advantage on either front. As a result, private labels increasingly win consumers on both quality and price rather than price alone.
Appetite-suppressing GLP-1 drugs pose another challenge. Early data show users cut back on chips, sweet snacks and soft drinks in favor of high-protein foods and fresh produce. Though GLP-1 use remains relatively low today outside the United States, McKinsey projects growth that could drive measurable shifts in what consumers buy.
Where CPG companies must shift
McKinsey recommends a two-part agenda: reshape brand and product portfolios toward high-growth subsegments, and concentrate on core excellence and brand relevance. Within most food and beverage categories, subsegments tied to health, functionality and premium pricing expand at rates 200 basis points or more above the industry average of 2%.
Deliberately increasing exposure to faster-growing portfolio segments rather than squeezing mature categories can materially change a company's growth trajectory in a slower-growth environment. The second part requires coordinated action to clarify how brands win with consumers, build pipelines of new buyers and drive the next wave of productivity gains with artificial intelligence tools.