This audio is generated automatically. Please let me know if you have any comments.
High costs and slowing consumer spending are setting up 2026 for a challenging year for food manufacturers, leaving them with little choice but to downsize, cut prices or rethink their approach to innovation to stay relevant.
The bleak outlook for the new year comes after a bruising 2025 forced many food and beverage companies to cut jobs, close manufacturing plants or sell underperforming brands. With the same headwinds still present, the industry is bracing for further contraction while leaving growth opportunities open.
“It’s going to be a much more challenging operating environment in every way,” said Brian Choi, managing partner and CEO of The Food Institute. “It’s hard to see a food and beverage sector that has a really long runway. It’s not going to be easy.”
Circana recently lowered its 2026 growth forecast. Retail food and beverage sales fell 2% to 4% in August, compared to the 3% to 5% range expected in August. The company noted that shoppers are spending less and seeking more value through “serious” price competition and the use of AI-assisted technology to help curb consumer price increases “even while cost pressures persist.”
optional captions
Christopher Doering/Food Dive
Sally Lyons Wyatt, Global Vice President and Chief Counsel, Circana said in a statement teaThe hat brands and retailers best positioned to succeed prioritize affordability, channel flexibility, and personalized experiences.
“Our revised 2026 outlook reflects a tightening and more challenging market, but not without growth vectors,” Lyons Wyatt said. “While pricing pressures and cautious consumer sentiment are shaping a more measured growth trajectory, the food and beverage sector continues to demonstrate resilience and adaptability.”
Food companies are also cautiously presenting their outlook for this year.
Nestle, the world’s largest food company, is bracing for a “slowdown” in sales in many of the categories it operates in, with growth in those categories expected to average 1 to 2 percent by 2026. Nestle USA CEO Marty Thompson said the maker of Stouffer, Nescafe and Hot Pockets is benefiting from lower input costs for coffee, cocoa and other goods, but the broader operating environment remains difficult.
“If you say, ‘What do you think about the midterms?’ I would say things will bounce back, but I don’t think that will happen until next year or so,” he said.
Cost savings and prices?
High costs and low margins are forcing food and beverage companies to drastically restructure their businesses to prepare for the future. With consumer prices becoming more sensitive than ever, many companies are choosing to scale back operations to preserve profits.
Last year, about a dozen prominent food and beverage companies laid off employees or closed manufacturing facilities. nestle, general mills, molson coors and Hormel Foods. PepsiCo announced last year that it would close its stores in Orlando, Detroit, and Rancho Cucamonga, California. It is reported that additional layoffs are planned to be announced. In North America.
“The lowest hanging fruit right now is cost reduction,” Choi said. “We’re going to see more layoffs across the board.”
But at some point, there’s nothing left to cut. That means companies must find other avenues to foster growth. To bring back consumers, companies must strengthen their value proposition to consumers by adjusting prices or using newer ingredients that justify higher costs.
optional captions
Provided by Nestle
To help their products stand out and attract shoppers’ attention for less, companies will prioritize innovation, turn to unique forms of marketing, such as partnering with influential media, and launch package sizes that are more affordable to consumers.
For example, Nestle Single Count Hot Pocket launched Last year, it proved useful in attracting new, price-sensitive consumers to the brand.
The world’s largest food company has also “rebalanced” the price-value equation of its products in its pizza business to regain market share. Nestle launched the DiGiorno Wood Fired Style Crust Pizza last summer, giving consumers who spend less time eating out another opportunity to enjoy a restaurant-quality meal at home.
Nestle, which generates about 15% of its $114 billion in global sales in the U.S., is stepping up its brand marketing with the goal of fewer, bigger innovations and increasing the visibility of some of its brands, including Seattle’s Best and Starbucks, to attract shoppers.
“It’s going to be a much more difficult operating environment in every way. … It’s not going to be easy.”
Brian Choi
The Food Institute Managing Partner and CEO
Several companies, including soda and snack giants, have also directly lowered prices or announced plans to do so. pepsico and General Mills.
Cheerios and development soup Manufacturer General Mills He told analysts last December. I reduced the price by approx. It sold two-thirds of its groceries in North America to attract cash-poor consumers. While the move has led to a rebound in volumes across the business, the company noted that shoppers, especially those earning less than $100,000, remain under pressure.
PepsiCo said similarly. Offering more affordable products to consumers is one step that can help the CPG giant accelerate organic revenue growth and improve operating margin expansion.
Providing value in line with trends
Even in a difficult business environment, companies with products that match trends are in the enviable position of being able to grow this year regardless of the circumstances.
Mike Kirban, co-founder and chairman of Vita Coco, said the coconut water company is “well-positioned” heading into 2026 following recent tariff easing, less competition for private brands and improved ocean shipping rates.
Additionally, these beverages are ideally positioned in a better space with products that are low in sugar and rich in nutrients such as vitamins and electrolytes. New York-based Vita Coco has recorded a five-year compound annual growth rate of 12.5% and expects growth in the mid-to-high teens this year as well.
optional captions
Provided by Vita Coco
“We’re lucky because we’re trending,” Kirban said. “We feel really, really good about where our business is in a very difficult environment.”
The success of previous niche companies prioritizing better ingredients has prompted larger CPGs to enter the fray. Kellanova is Recently acquired by candy company MarsWe’re caught up in the protein craze. Pop Tart Protein. We’ve also invested in our supply chain and R&D capabilities to ensure these types of product innovations can reach the market quickly.
Nico Amaya, president of North America at Kellanova, said the maker of Pringles and Cheez-It is doubling down on its efforts to provide “solutions that consumers actually need in this type of environment.” This includes not only having products that resonate with consumers, but also making sure they are accessible, affordable, and in the right sizes that shoppers need.
Kellanova is also working to ensure its brand is visible where enthusiasts watch and snack. These include: College Bowl Sponsorshipbecome The Official Snack of U.S. Soccer and Partnership with women’s basketball team.
Amaya said the snack giant is looking for ways to operate as efficiently as possible to reduce spending and minimize the potential for higher costs to be passed on to consumers.
“We’re always looking at this to stay competitive,” he said. “This is a competitive environment.”
