The CPG Growth Model Is Broken. McKinsey’s Research Points to What’s Next.

Why It Matters

The collapse of the old CPG growth engine forces incumbents to reinvent with AI and health‑focused portfolios or face declining market share and investor confidence. Early adopters can protect margins and capture the emerging consumer demand for affordable, functional nutrition.

Key Takeaways

• CPG volume growth under 1%; TSR down 7% versus S&P 500.
• Consumers shift to private label, functional indie brands, food‑away‑home, home cooking.
• AI delivers 200‑300 bps savings, funding brand reinvestment and growth.
• Indie brands generated 35% of category growth by 2025, outpacing majors.
• Health and premium sub‑segments beat broader categories by over 200 basis points.

Pulse Analysis

The consumer packaged goods (CPG) sector is confronting a structural slowdown that goes beyond a cyclical dip. Rising food inflation—31% above 2019 levels—has outpaced general price growth, prompting shoppers to re‑evaluate value and health. McKinsey’s survey of 15,000 consumers across ten markets shows volume growth now under 1% and total shareholder returns down roughly 7% while broader equity markets climbed, indicating that legacy brand formulas are no longer sufficient.

At the same time, private‑label and independent brands are reshaping the shelf. In the United States, 34% of shoppers now buy more store brands, citing comparable quality, while indie firms under $100 million in sales captured 35% of category growth by 2025. Functional benefits drive this shift: 37% of U.S. and U.K. consumers choose small brands for health‑focused attributes, compared with just 18% for large manufacturers. The four‑way consumer fragmentation—trading down, trading up, food‑away‑from‑home, and home cooking—creates a fragmented demand landscape that legacy CPGs struggle to serve.

AI emerges as a decisive lever for the next wave of growth. McKinsey estimates that AI‑enabled efficiencies can shave 200‑300 basis points from operating costs across supply chain, procurement, and marketing. Market leaders are reinvesting these savings into portfolio realignment, emphasizing health, premiumization, and SKU rationalization, while also optimizing generative AI discovery channels that now influence 31% of U.S. grocery shoppers. Companies that marry AI‑driven productivity with a health‑centric, high‑growth portfolio are poised to rebuild household penetration and restore investor confidence.