Navigating the Shifting Landscape of the Food & Beverage Industry

Carpe Diem Global Partners recently spoke with 46 executives in the CPG industry, specifically food, beverage, and nutrition segments. Businesses were comprised of small and mid-market sized companies that had proven the ability to scale thru both organic and inorganic growth.
The food and beverage industry is undergoing rapid transformation, facing a confluence of economic pressures, shifting consumer preferences, and evolving regulatory challenges. As companies strive to scale efficiently while delivering strong EBITA, they must also navigate global supply chain constraints, capital market uncertainties, and increasing competition from both established brands and emerging private labels.
Economic Headwinds and Supply Chain Complexities
The lingering effects of the COVID-19 pandemic continue to disrupt purchasing behaviors, with restaurants and hotels struggling to recover. Scaling production remains a challenge, especially with capital flowing at a slower pace. Many companies are exploring co-packing agreements to expand globally while mitigating supply chain risks. Additionally, the industry faces significant inflationary pressures, with commodity prices—especially coffee—reaching historic highs.
Consumer Behavior and Market Trends
A fundamental shift in consumer priorities is reshaping the industry. Price sensitivity is at an all-time high, pushing brands to balance affordability with innovation. While major branded players struggle, private label and smaller, more agile companies are thriving by offering healthier, value-driven options. The “better-for-you” segment, once commanding a 35% premium, is now facing mainstream adoption, increasing competition among brands to differentiate themselves.
Simultaneously, a generational shift in beverage consumption habits is underway. Gen Z and millennials are reducing alcohol consumption by 10-15%, giving rise to the “sober curious” movement. This has fueled the rise of ready-to-drink (RTD) non-alcoholic and cannabis-infused beverages, particularly as more adults turn to edibles over traditional spirits. At the same time, regulatory headwinds continue to pose challenges for cannabis and CBD-infused products.
Retail and Distribution Challenges
Retailers such as Walmart, Costco, and Kroger are aggressively managing margins, placing downward pressure on vendors. The retail environment is increasingly unfavorable, with high inflation forcing brands to fight for shelf space while justifying price increases to both consumers and retailers. Grocery channels remain a difficult avenue for profitability, driving brands to focus on direct-to-consumer strategies. Furthermore, brands seeking retail expansion must contend with distribution challenges, including limited refrigerated shelf space and rising freight costs. Companies operating in fragmented beverage categories—such as organic kombucha—are particularly vulnerable to these logistical constraints.
Regulatory and Political Uncertainties
With a potential shift in the U.S. administration, the industry faces geopolitical risks, including tariffs on imports from Mexico, China, and Canada. For companies reliant on international supply chains, these policy changes could significantly impact costs and profitability. Additionally, stricter regulations surrounding ingredients in the health and wellness space mean constant legal scrutiny for brands offering functional or plant-based beverages.
Capital Constraints and Growth Strategies
The capital markets remain tight, making it difficult for emerging brands to secure funding. Investors now expect companies to demonstrate at least $75MM in annual recurring revenue before considering significant investments. As a result, many businesses are forced to operate leaner, requiring a strategic approach to cost management and expansion.
With discretionary consumer spending on the decline, the challenge for brands is twofold: driving product innovation while effectively communicating a compelling value proposition. Companies that can balance these priorities—offering premium, functional, and sustainable products while addressing price-conscious consumers—will be best positioned for success in this increasingly competitive landscape.
Conclusion
The food and beverage industry is at a critical juncture. Economic pressures, shifting consumer behaviors, and evolving regulatory landscapes are forcing companies to rethink their strategies. Success will hinge on the ability to innovate, manage costs effectively, and build strong brand loyalty in an environment where both capital and consumer dollars are harder to secure. Brands that embrace agility, sustainability, and differentiation will emerge as leaders in this next phase of industry evolution.
Survey completed in October ‘24 – February ‘25 by Jamie Farnham and Jeff DeFazio.

Jeff DeFazio
Managing Partner

These market insights from Carpe Diem Global Partners are gathered from the firm’s extensive client work leading Board, CEO, CXO, and CHRO executive search engagements for public and private multinational companies. For deeper, custom insights, contact Jeff DeFazio at Jdefazio@carpediempartners.com Jamie Farnham jfarnham@carpediempartners.com.

Jamie Farnham
Partner