As we enter 2026, food manufacturers are facing challenges due to higher costs and slowing consumer spending. This tough outlook follows a difficult 2025 which saw many companies cutting jobs, closing plants, or selling off underperforming brands. The industry is bracing for further contraction while keeping an eye out for growth opportunities.
Brian Choi, CEO of The Food Institute, expressed concerns about the tough operating environment in the food and beverage sector. Circana has revised its 2026 growth forecast to a range of 2% to 4%, down from the earlier prediction of 3% to 5%. Price competition is intense, and companies are using technology to manage costs and keep consumer prices in check.
Sally Lyons Wyatt, from Circana, emphasized the importance of affordability, channel flexibility, and personalized experiences for brands and retailers to succeed in the current market conditions.
Nestlé, a leading food company, anticipates slower sales growth in 2026, with some categories expected to average 1% to 2%. Despite some cost benefits, the overall operating environment remains challenging.
Cutting costs — and prices?
With higher costs and slim margins, food and beverage companies are reevaluating their business strategies to stay competitive. Many are focusing on operational cuts to maintain profitability in the face of consumer price sensitivity.
Several major companies, including Nestlé, General Mills, Molson Coors, and Hormel Foods, have made job cuts or closed facilities to streamline operations. PepsiCo is also planning further layoffs in North America.
As companies reach the limit of cost-cutting measures, they need to explore other avenues for growth. Enhancing value propositions through innovation, marketing strategies, and affordable pricing will be crucial to attract consumers.
Nestlé’s introduction of single-count Hot Pockets and rebalancing product prices has shown success in attracting price-conscious consumers. The company aims to focus on fewer, larger innovations and strengthen brand marketing to drive growth.
“It’s going to be a much more difficult operating environment on all different fronts. … It’s not going to be easy.”
Brian Choi
Managing partner and CEO, The Food Institute
Some companies, like PepsiCo and General Mills, have directly lowered prices to attract cash-strapped consumers and drive volume growth.
Providing value by staying on-trend
Despite the challenging environment, companies with on-trend products are poised to thrive in 2026. Vita Coco, known for its coconut water, expects growth in the mid-to-high teens this year due to its positioning in the better-for-you space.
Larger CPG companies are also embracing trends in health and wellness. Kellanova, acquired by Mars, introduced Pop-Tarts Protein and is investing in R&D to bring innovative products to market quickly.
Nico Amaya, Kellanova’s North American president, emphasized the importance of providing solutions that resonate with consumers in the current environment. The company is also focusing on efficiency to minimize costs for consumers.