CAGNY 2025: FSV take-aways
Another year, another CAGNY conference. And as per usual, the FSV team keeps a close ear to the ground to understand the core challenges and analyse the strategies of the biggest public FMCG companies.
A snapshot of our takeaways from CAGNY 2025:
- Headwinds are Here to Stay: structural stagnation or temporary challenges?
- Coping Mechanisms: format innovation and functionality to the rescue?
- Bringing Back Brand power: the return of the Billion Dollar Brand focus
Headwinds are Here to Stay: structural stagnation or temporary challenges?
The key headache for most presenting corporations: how to deliver on their revenue growth promises towards investors. Sales volumes continue to stagnate due to consumer demand slowdown, resulting in growth being primarily driven by pricing. But where this tactic still seemed to work in 2023, in 2024 price elasticity resulted in consumers maxing out on FMCG spending. While price increases have served to somewhat hide underlying volume challenges in the past, these are now becoming increasingly correlated as part of stagnating consumer demand.
Beyond volume and pricing, new challenges arise with significant potential implications. Here are a few clear themes that emerged. While Mondelēz and Hershey are optimistic about the ‘resilience strategies’ they have in place to mitigate the volatile cocoa supply chain, P&G expressed caution at the future macro economic outlook by new tariffs linked to the geopolitical background and RFK’s intended war on processed foods.
Interestingly, the ever-growing usage of GLP-1 drugs, which reached 12% of US adults in 2024, was indicated by a surprisingly low number of presenters, especially in comparison with last year, as a reason for weakened consumer demand. Conagra foods was among the few exceptions, highlighting efforts to provide better-for-you products boasting low-carb and high-protein contents as a response. While Big Food’s overall response was criticized by analysts as underestimating a potentially more structural threat, the true long-term impacts of GLP-1 are yet to be seen.
Coping Mechanisms: category leadership, format innovation and functionality to the rescue?
So, how does Big FMCG cope with the current headwinds? From what they presented at CAGNY, by moving back to basics: double down on their high-performing brands, focus on distribution gains, supply chain efficiency, and through ‘innovation’. While Nestlé’s focus lies on growing its most successful brands of KitKat and Maggi, Mondelēz gave a clear example, with plans to bump up the contribution of its top 3 product categories of biscuits, baked snacks and chocolate from 80 to a target of 90% of total sales. Similarly, Coca Cola’s renewed focus on its core category — carbonated soft drinks — has resulted in portfolio divestments of “out of scope” brands totalling some $18bn while still booking at a target of 12% YoY organic revenue growth.
For other consumer giants, boosting margins through operational efficiency is a core part of the strategy, with Kellogg, Church & Dwight and Conagra Brands among the many CAGNY presenters pouring resources into supply chain optimization.
On a product level, this means driving more sales with the existing portfolio. In doing so, price architecture (think portion-controlled and on-the-go servings) and product line extensions (e.g., J. M. Smucker discussed introducing Milk Bone Peanut Buttery Bites — the 1st dog treat to feature a human food brand) are an important and effective tactic mentioned in many presentations.
Equally, maximising product availability and driving distribution points have been indicated as priorities by various presenters, tapping into the “away from home” trend — now accounting for over 55% of total food spending. For example, PepsiCo, which aims to leverage its existing portfolio to create new consumption occasions throughout the day, is providing mini-cannisters and mini-beverages to be enjoyed on the go.
Bringing Back Brand power: the return of the Billion Dollar Brand focus
As FMCG giants try to capture the increasingly elusive growth, more resources are expected to be allocated to Branding. Branding drives justification of premium prices (read: better margins), and can result in shifting consumer preferences (read: taking market share from a competitor). The ‘Billion Dollar Brand’ focus and ‘Doubling Down on the Winners’ approach were mentioned across multiple CAGNY presentations a lot more than in previous years, including tangible examples of increased Brand and Marketing budgets. For example, PepsiCo’s marketing spend is up 36% compared to 2022, while WK Kellogg’s new marketing model has an explicit focus on brand relevance and features its very own in-house social team.
But where exactly is all that money going? Digital and influencer marketing emerged as a major recipient, with beauty and personal care players leading the trend. Among them is CAGNY first-time presenter e.l.f., which has been increasing marketing and digital spend to 25% of sales and boasts a 30% net sales CAGR over the past 6 years through a laser focus on the Gen Z, Gen Alpha and Millennials segments. This may not bode well for social-media-savvy start-ups, until recently the experts of channels like TikTok, that in turn are likely going to face competition and increasing customer acquisition costs.
What we can expect in 2025 — M&A implications & Final Thoughts
As mentioned, stagnating organic growth is a major challenge, driving the need for alternative growth strategies. Many FMCG companies mentioned strategic M&A as a possible path forward, as most of them have the Balance Sheet resources to do so. A key factor here is ensuring a clear strategic and financial fit with the existing portfolio, supporting ‘the right to win’ of any newly acquired brand. Celsius’ acquisition of Alani Nutrition is a good example, as they expand their foothold in the energy drink category, whilst reaching new customer segments. For ‘bolt-on’ acquisitions that are meant to fill a gap in a portfolio, we expect an increasing demand for large size and tested scalability, more than trendy, but unproven start ups.
Overall, our look at CAGNY 2025 somewhat reveals a back-to-the-roots approach following a few years of relying mainly on price increases rather than volume to drive organic growth. FMCG will focus on doing what they have been doing for years: manufacturing and distribution of branded products in their core categories, with reduced appetite for ‘side projects’ like non-core innovation, sub-scale M&A or increasing investments in sustainability. Or as Nestlé’s Global CEO, Laurent Freixe, put it: “Fewer, bigger, better” product innovations to maintain category focus. By all accounts, 2025 is shaping up to be a year of spring cleaning for CAGNY presenters, touching everything from rationalizations to divestitures. And with companies looking to clean up their portfolios and cash balances getting bigger, 2026 might just be the year of acquisitions — especially as inorganic growth is becoming more and more efficient as an option.
