The following is an op-ed written by Jeremy Allen, Chief Commercial Officer at Circana.
We are living in a transformative time for the food and beverage industry, where sustainable growth depends on a deep understanding of consumer behavior. Today’s shoppers are reshaping their priorities and redefining what value means to them. As preferences evolve and shopping habits shift, brands and retailers must remain agile to find success. By adapting to these shifts and prioritizing consumers’ experiences, companies can build deeper connections with shoppers and seize emerging opportunities in a competitive landscape.
Understanding Evolving Consumer Preferences
While some sectors within the CPG industry are beginning to see a recovery in volume growth after years of decline, this trend is not universal. U.S. consumers spent $1.68 trillion on food and beverages in the past year alone. However, as foodservice traffic continues to decline (-2% year over year through Q2 2024), the share of spending has shifted increasingly toward retail, which now captures 61% of total expenditures, according to Circana data. To sustain top-line growth, brands must prioritize a deeper understanding of category dynamics and evolving consumer preferences. By refocusing on core management capabilities like market analysis and operational efficiency, brands can identify and pursue pockets of demand.
Much of the positive volume growth is driven by changes in consumer behavior, particularly a shift toward convenience-focused solutions that simplify meal preparation. Heat-and-eat meal options have surged in popularity as busy consumers seek quick ways to get meals on the table. In addition, meal deals now account for 29% of foodservice traffic, highlighting the demand for cost-effective, time-saving solutions. The use of home appliances that help streamline cooking processes is growing across the day with upticks on toasters, coffee makers and stovetops in the morning and air fryers at lunch and dinner.
While inflation has eased slightly, it remains a significant factor influencing consumer behavior, with prices still much higher than pre-pandemic levels. Financial pressures have driven consumers to adopt more mindful shopping habits, shifting from bulk pantry stock-ups toward “just-in-time” shopping. This has created opportunities in specific categories, such as fresh perimeter products, while growth in center-store items has been flat.
Navigating a Bifurcated Market
There have been shifts in not just what shoppers buy, but also where and how they shop, as consumers seek the best balance of value and quality. Economic pressures and shifting consumer priorities also have created a bifurcated market, with shoppers making more deliberate purchasing decisions, trading up or down based on perceived value. Consumers are seeking private-label products, which have grown 3% year over year, or paying premium prices for products with recognizable brands. This trend has left many mainstream brands squeezed in the middle, prompting them to rethink their strategies and redefine their value proposition to attract target consumers. Value channels and e-commerce have emerged as key growth drivers, with e-commerce now accounting for 35% of food and beverage volume growth. Retailers and brands that have embraced online shopping trends and invested in omnichannel experiences benefit from stronger consumer loyalty.