• 📦 Pack News: Shrinkflation Reverts
• 🥩 Cell-Cultured Sallea Raises $2.6M
• 🦊 Foxtrot Reopens Third Location
• 👔 Nestlé’s New CEO Seeks Efficiency
• 🥃 Craft Distillers Prepare For A Tariffs

Today’s volatile macroeconomic environment – characterized by inflation and ballooning consumer debt – has heavily influenced shopping behavior within the food and grocery space, creating “unprecedented,” bifurcated consumption patterns and significant M&A opportunities, according to a new report by Capstone Partners. 

High-income shoppers have shown inelastic demand despite widespread pressures on consumer spending and continue to add premium-positioned products to their carts. Conversely, middle- to low-income consumers have sought value-oriented products, often trading down to private label. 

“A significant portion of the population is buying primarily on price, while more affluent consumers are purchasing premium and specialty food products despite elevated prices lingering from the recent inflationary period,” said Brian Boyle, managing director at Capstone Partners, in the report. 

Consumers may soon find some relief; growth in food prices has steadily decelerated, increasing by an average of 2.3% year-over-year in the first six months of 2024 versus 3.5% in the final six months of 2023, according to the Bureau of Labor Statistics (BLS). This may, in turn, help support volume growth for both branded and private label items, the report states.

Across the industry, the M&A outlook is also positive, according to the report, with major players signaling an appetite for inorganic growth to strengthen sales volumes and capture wallet share in 2025. For example, during its Q1 earnings call last month, Cheerios maker General Mills announced plans to shift its focus to bolt-on acquisitions of “smaller-size assets”  ($1-2 billion) to enhance growth. 

In 2024, overall M&A activity in the food industry rose 5.3% year-over-year to 180 transactions announced or completed – including Mars’ $36 billion pending acquisition of Kellanova, Our Home’s acquisitions of Pop Secret and ParmCrisps and the Atlanta Corp.’s acquisition of Big Picture Foods. 

Both strategic and financial buyers have expressed a growing appetite for acquisitions in the branded segment, which saw the highest rate of transaction activity – 86 deals so far this year – among food industry M&A. Consolidations among strategic players in the branded space have also increased, with 51 private or public transactions announced or completed in 2024 compared to 41 last year. 

Nosh Insiders can access the full report to learn what’s driving the M&A increase within the branded CPG space.

Whole Foods Market has long served as a launching pad for food and beverage brands, but many founders don’t know how to get a foot in the door. What do executives and merchants seek from potential suppliers? And what is required to expand into additional regions?

Attendees at Nosh Live Winter 2024 in Marina del Rey, Calif., will learn how to get in, stay in and grow at the natural grocery retailer.

Casey Gaston, executive leader of Local and Emerging Brands at Whole Foods, will share how brands can prepare strong pitches, properly calibrate growth ambitions, and forge the best path for success within the company. She will shed light on the retailer’s process for tracking top trends, how its annual compilation informs its sourcing strategy and how Whole Foods collaborates with brands on exclusive innovation.

Don’t miss out: Register today and save $100 (early registration pricing goes through Friday, October 25).

📈 This week PepsiCo announced plans to reverse some shrinkflationary (yes, that's a term now) practices by putting 20% more chips back in Lay’s, Doritos, Tostitos and Ruffles chip bags while keeping the same price. The reversal comes after years of the snack giant reducing snack bag sizes. 

🧄 Dorot Gardens unveiled a new look this week, complete with a new tagline "Pop. Drop. Done." The fresh-frozen pre-portioned herbs and garlic producer adopted a more vibrant aesthetic with color-coding for each flavor. The new look also ushered in a website redesign, a social media campaign, new in-store displays, special events, and a national advertising campaign.

⭐ Better Sour introduced a new packaging designed by r.vH Design that saw its gummies transition from a sun to a star shape and a tightening of its flavor offerings. The new packs feature a mix of two flavors rather than three which were chosen for their wider consumer appeal. The bags will now contain Guava and Calamansi Lime or Pomegranate and Apricot.

Swiss tech startup Sallea, which has developed a method to produce cellular, edible “scaffolds” that can be used to create cultivated meat and fish products, has raised $2.6 million in funding from Founderful and Kost Capital. This pre-seed raise marks the one-year-old company’s first equity investment.

🔬 The company says it aims to improve on past cultivated meat technology with a means to “kick-start cellular agriculture” with faster time to market and lower production costs to create alternative steaks and filets.

😞 The investment comes at a time where cultivated meats have come under scrutiny for lacking a commercially viable path to scale up technologies Likewise, plant-based brands that look to approximate real meat have struggled in recent years as consumer demand has dropped off.

Foxtrot Café & Market, the resurrected spin-off of the modern convenience store chain, announced the reopening of its third Chicago location today.

☕ Located in the Wicker Park neighborhood, the grand opening will feature promotions including free coffee as well as discounted happy hour drinks later this week. Last week the company announced the return of its online ordering platform.

🔍 The news comes as the original business remains under scrutiny after it failed to pay vendors following its abrupt closure and bankruptcy filing in May. 

Nestlé reported weaker-than-expected results in its most recent earnings report last week, and it’s already sparking change at the Swiss consumer goods giant. Laurent Freixe, the company’s new CEO as of September, is reducing the size of Nestlé's executive board and merging several international departments in hopes of reinvigorating anemic sales growth, with full-year projections slashed from 3% in July to now 2%.

🗺️ First up, Nestlé is consolidating its five geographic zones into three: Zone Americas (North America and Latin America), Zone Asia, Oceania and Africa, and Zone Europe.

⏩ The changes are aimed at improving efficiency: zone leaders will report directly to Freixe, while a slimmed down executive board “will increase simplicity, speed up decision-making and strengthen the momentum behind global initiatives.”

☕ Analysts have criticized Nestlé’s hesitation on prices – a 1.6% nine-month increase was lower than expected – while the company argues that soaring coffee and cocoa prices has made its cost dynamics less flexible.

On this episode of the CPG Week podcast BevNET spirits editor Ferron Salniker joins Nosh managing editor Monica Watrous and senior reporters Lukas Southard and Brad Avery to share details from her recent feature about how craft distillers have been pulled into a long simmering trade war. The group discusses the history of export taxes on American-made products, the impending reinstatement of various tariffs that impact liquor makers and what the potential impact could be on smaller producers.

Listen to this week’s episode now.

Like what you are listening to? Please don’t hesitate to rate our show and leave a review on your podcast platform of choice.