2025 Food & Beverage Industry Outlook: Expect the Unexpected
Heading into the 2025 calendar year, the food & beverage industry’s rear-view mirror may show a highly contentious presidential election disappearing into the distance. Through the windshield, the outlook is not as clear as some might have hoped. In fact, 2025 could be quite the wild ride — after a year that produced some positive outcomes.
“For the first time in three years, the industry achieved volume growth [in 2024]: We had 1% volume growth for total CPG, and that was consistent between food & beverage, and non-food,” says Sally Lyons Wyatt, global executive vice president and chief advisor at Circana.
That may not seem like a lot of growth, but Billy Roberts, senior analyst of Food & Beverage CPG for CoBank, explains, “If the past couple of years in the CPG space has taught us anything, it's that volume is everything. We've seen dollar sales in a lot of different segments and categories continue to rise, but strictly on the back of price increases.”
In 2024, retail volume (up 1.1%) benefitted from a 2% drop in foodservice traffic, Circana data shows, even though both channels showed 2.5% dollar sales growth. But will volume continue to rise next year? Well, says Lyons Wyatt, “The complexities of 2025 are daunting — there are just so many things that can happen.”
With all that uncertainty, Circana is forecasting a similar year for volume — somewhere between flat (0%) and 1% growth. The dynamics, however, are expected to change, with more people expected to return to the office this year, bumping foodservice traffic up and retail food & beverage purchases for in-home consumption down. Beverages, meat, produce and dairy should continue to outpace the average, Lyons Wyatt says, while general foods, frozen foods and deli keep pace, and bakery and seafood lag the average.
Buckling up
Indeed, “expect the unexpected,” is the turn of phrase we have been hearing from many sources — with full disclosure that unexpected doesn’t always mean negative.
Donald Trump won the November 2024 presidential election, and by the time you’re reading this, he may have begun to serve a second, non-consecutive term as U.S. president. As with any new administration, change is expected, and his picks for cabinet and to lead various government agencies should help shine some light on the future.
That said, President-elect Trump is also a returning president — who had not selected any nominees from his first term (as of late December, when we went to press with this story), so anyone hoping his first-term policies and actions will lend strong guidance might want to pump the brakes.
Even so, Sarah Gallo, senior vice president of product policy for the Consumer Brands Assn., explains that food & beverage processors don’t necessarily have to plan radically differently this time around.
“Nutrition, consumer transparency about ingredient safety, trade and tariffs, cost to consumers and impact on supply chains: These are all longstanding issues for our industry,” she says. “That ‘first 100 days agenda’ everyone talks about might be a little different, but changes in administration happen, and it’s been ‘business as usual’ for us as we advocate for our industry.”
Gallo says food & beverage companies are well aware of the influence they can have on the incoming administration, and the CBA has already begun laying the groundwork to try and smooth out the transition.
“We know that President Trump won on an economic message, and having a strong and robust American economy is really important to him,” she says. “So in that regard, the industry should be prepared to talk about just how big of an economic impact we have in the United States.”
Along those lines, CBA recently conducted an economic impact analysis that showed consumer-packaged goods as the single largest manufacturing employer in the U.S., something Gallo said isn’t likely the first thought folks have when it comes to domestic manufacturing.
“It’s something we’re eager to talk about with the incoming administration, because our industry is providing jobs and economic growth in a lot of places around the country that were big supporters of President-elect Trump,” she says. “We’re talking about millions of jobs across the country that are tied to our industry, so as the administration is considering trade or tariff conversations, that manufacturing piece and that jobs piece is going to be really important.”
Digging deeper
Tariff threats made toward Mexico, Canada and China by Trump in December, before he had even returned to office, perked up ears and caused plenty of handwringing — but many analysts are still trying to sort out the realities of such tariffs, says Roberts.
“I think Trump comes into his second term much more aware of what his ambitions are, and I think it becomes a much different ballgame this time around,” he says. “I think he also recognizes what tools he has in his arsenal — and that’s what I think the tariff suggestions are.
“Within the first couple of months of the new administration, we’ll have a much better idea of what that actual tariff plan is: if there is one, or if it’s more of a threat and a negotiating tactic,” Roberts adds.
Lyons Wyatt believes any new tariffs instituted by the new administration will disproportionately affect other industries and goods — such as toys, electronics and other manufactured products. She says it will be hit-and-miss on which food & beverage categories, or ingredient supplies, fall victim, but that we aren’t likely to see tariffs hitting the total food supply.
Should President-elect Trump’s tariff threats come to pass on a grand scale, there will be a deep impact on many products, such as avocados, orange juice and other products that simply can’t be grown in the U.S., Roberts says.
“Consumers could see a fairly significant price increase because of those tariffs, but it's not exclusively orange juice or avocados,” Roberts says. “It's across the board and could be everything from garlic to coffee.”
Gallo says the CBA is suggesting a more targeted approach to any tariffs because of the very fact that many agricultural products and ingredients for so many items must be imported.
“If you think about things like bananas, coffee and some ingredients in personal care and household products, there is not an option to produce that domestically,” Gallo says. “Our big message to the administration is, you really have to take a surgical approach when thinking about tariffs on imported goods.”
A potential headwind arises if supply chain disruptions rear their ugly heads once again as a result of any trade scuffles or wars that could start up, Lyons Wyatt says. However, a tailwind for the industry could arise if consumer financial stability continues to rise in response to positive economic news, as some believe will happen.
“We are sitting on top of compounded price increases across not just food & beverage, but lodging and utilities as well, and I keep hearing reducing energy costs will help all of those come down,” Lyons Wyatt says. “If that's the case, then you will see more spending. I don't know if that necessarily means the spending will come to retail food at home, but it could mean more spending out of home.”
Another concern based on the rhetoric of the incoming administration involves immigration reform and the threats of deportations — the concern being the lack of clarity as to who will be impacted and how that will affect an already labor-strained industry such as food & beverage. Processors may not be as heavily impacted as their agriculture and foodservice cousins, but those companies will likely look to a solution that has helped many a food & beverage processor get through labor challenges over the past decade, Roberts says.
“There are some areas where manufacturers will probably seek to streamline and invest in automation, which I think will continue,” he explains. “One story that gets underplayed a little bit is the role of autonomous driving as a delivery vehicle for a lot of food products; there are a couple of entities utilizing autonomous delivery vehicles to ship from field to plant, reducing driver costs and labor costs.”
Moving forward
How the new administration will change the regulatory landscape is another worry of many. President-elect Trump nominated Robert F. Kennedy Jr. to be secretary of the Dept. of Health and Human Services, parent of the FDA, an announcement that made waves for Kennedy’s past stances and comments on ultraprocessed foods and vaccines, among other things. Almost immediately, Kennedy began discussing how he was going to “Make America Healthy Again,” playing off the “Make America Great Again” slogan of Trump’s campaigns.
“Is ‘Make America Healthy Again’ a real objective of the administration? It certainly seems to be the case,” Roberts says. “[Kennedy has] some fairly ambitious ideas that I don't know we will see come to fruition, but I think there will definitely be some pushback.”
Roberts says the big push comes from the insinuation that the food industry hasn’t been interested in making Americans healthy.
“I think food manufacturers are fairly willing to do what they can do to help consumers in terms of their health, it's really just convincing the consumer what a healthy meal consists of, and that's frankly not something that an administration can necessarily address,” he says. “They can advise — and I suspect RFK will probably be involved in the guidelines that are set forth.”
Lyons Wyatt warns processors to begin to look across the Atlantic for a glimpse at what may be ahead for the food & beverage supply chain.
“Anyone who isn't looking at the regulations in Europe, they're missing the mark, because I think there will be longer-term legislation put in place to get us to a similar place,” she says. Though it won’t be identical to those in Europe, she expects it to be similar with regard to how foods are farmed, the technology and tools that can be used, the colors or other ingredients that will be absolutely frowned upon or banned outright.
In terms of big business moves, Roberts sees opportunity for an uptick in mergers and acquisitions, building off the momentum in 2024, at least because of the falling cost of debt. He expects the Mars-Kellanova deal to get sewn up with few stumbling blocks in the way, and other opportunities to start rolling through.
“Oscar Mayer is probably the biggest one that I keep hearing [at presstime], and I think we're going to start to hear a little bit more interest, particularly in that entity, but also in some others in the snacking space,” Roberts says. “Consolidation seems to be kind of the rule of the land right now — certainly in the snacking space, and I think we're going to see it a lot in the plant-based and meat alternatives spaces.”
If players in those categories continue to be strained, Roberts thinks the doors will open for consolidation via M&A activity. Lyons Wyatt sees M&A opportunities continuing as well, as she advises food & beverage companies to get “back to basics” in 2025, focused on the consumers.
“When you talk about the consumer, I think we’ve gotten away from that because we were all getting such great business from top-line growth,” she says. “Well, now it’s back to basics: Do you have the right assortment? Do you have the right price? Do you have the right mix? Are you going after the right cohorts? And are you hitting your benchmarks for innovation?”
Innovation, she adds, must be Priority Nos. 1, 2 and 3 for companies going into 2025.
“If there’s differentiation, it drives excitement,” Lyons Wyatt explains. “It gets consumers in the door and clicking online, and retailers want that excitement and want to be able to have that differentiation.”
Companies should “get to know your consumer better than you know them today,” she adds. That means knowing the attributes and benefits people seek, and then finding a way to offer it through whatever means necessary. If the product mix doesn’t include what shoppers want, can those attributes be obtained through merger or acquisition? Or will innovation take care of it?
“Getting back to basics, zeroing in on where that consumer is and getting the right message to them is really important to get the pockets of growth needed,” she concludes.”
By the middle of the first quarter of calendar 2025, the picture should be clearer. Yet, even with the speculative nature of planning for any new president and his/her administration, processors can take solace in knowing that their place in the U.S. economic engine should count for something, Gallo says.
“Until we see that ‘Day One agenda,’ both from the administration and from Congress, this is all rather speculative,” she says. “In the meantime, we are just trying to make sure that the incoming administration first and foremost understands the role that we play in the economy and how indiscriminate changes that could have a disproportionate impact on our industry will actually have a disproportionate impact on consumers and those local economies as well.”
