Looking into my crystal ball, I see that 2025 is going to be a very interesting and eventful year for the US food industry.
The year’s big issues will be very dynamic (and challenging) and will take up a lot of industry oxygen – not least with Donald Trump returning to the White House next month.
But one constant remains of paramount importance year after year, which is to not take your eyes off the consumer. They still matter more than anything else.
There are five big issues and megatrends to which I suggest industry executives in the US pay close attention for the coming year as they look to grow their businesses over the next 12 months.
The end of the “era of cheap food”
The “era of cheap food” in the US refers to a period of time beginning after World War II until pretty much the end of the 2010s when food became increasingly affordable and abundant for the average American household thanks to a combination of agricultural innovation, government policies and global economic factors.
That period has ended. The Covid-19 pandemic was its last call. The food inflation and frequent price increases from packaged foods companies and grocery retailers we’ve seen in recent years have been its accelerant.
Access the most comprehensive Company Profiles
on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Company Profile – free
sample
Your download email will arrive shortly
We are confident about the
unique
quality of our Company Profiles. However, we want you to make the most
beneficial
decision for your business, so we offer a free sample that you can download by
submitting the below form
By GlobalData
Food inflation and price increases haven’t caused the end of that era, though. The reasons are more structural. They include climate change. More frequent extreme weather events disrupt agricultural production and increase prices. They also include rising input costs in food production more broadly, such as energy, labour, water and fertiliser. Global supply chain pressures have played a role and, at the other end of the chain, consumer demand for better-for-you and more sustainable foods, too. There has also been increased investor pressure on food companies to achieve higher profits.
Food inflation has been tamed considerably at the end of 2024 but that doesn’t mean food prices will be coming down. Instead what we’ll see, unless inflation returns, is slower growth in the cost of food at home and food away from home. All of the inputs that go into producing, transporting and selling food will continue to increase in cost and food makers will reflect that in their pricing to retailers, who will in turn reflect those increases to consumers.
The war on processed foods
2024 has seen more formal criticism of processed food companies, particularly those that produce ultra-processed food companies, than at any time in recent memory.
Under President Biden, the FDA reorganised and started to implement reforms targeting food companies in the processed and ultra-processed food spaces.
In addition, for the first time in a very long time, processed food, food companies and agriculture were key topics in the 2024 presidential race.
In 2024, we only saw the opening salvos of the war on processed foods
Robert F. Kennedy Jr., who started the year running for president as an Independent but then later quit the race and supported President-elect Trump, brought the topics to the forefront of the campaign with his MAHA (Make America Healthy Again) campaign. Trump has now nominated Kennedy to head the Department of Health and Human Resources (HHS) and, unless something surprising happens next month, I expect him to gain Senate confirmation to serve as the nation’s food and health chief. HHS has jurisdiction over the FDA, among other agencies.
In 2024, we only saw the opening salvos of the war on processed foods. The real war on processed foods starts in 2025.
Kennedy says he will target ‘Big Food’ and processed and ultra-processed foods. He plans on “reforming” the food industry and Trump has said he plans to let his prospective HHS Secretary “go wild” on the food industry.
Big food companies have been caught by surprise and are playing defense. Democrats like Bernie Sanders and Cory Booker are also leading the charge. It will be interesting to see if a bi-partisan coalition might form around the issue of food and food industry reform.
The latest major salvo in the war on processed foods, which will heat up in 2025, is a lawsuit filed this month by the politically-connected Morgan & Morgan law firm. The law firm has filed a multi-million dollar legal action against 11 big food (and drinks) companies, including Coca-Cola, Kellogg, Kraft Heinz, Mars, Mondelez International, Nestle and PepsiCo, arguing their ultra-processed products cause chronic diseases like type 2 diabetes and non-alcoholic fatty liver disease.
The rise of regenerative agriculture
Regenerative agriculture has been gaining some steam in the food industry over the last few years but still remains a niche area. That could change next year.
Kennedy is also a strong advocate for regenerative agriculture, viewing it as a means to enhance soil health, boost biodiversity and reduce environmental harm associated with conventional farming. He has expressed intentions to overhaul US agricultural policies to support regenerative practices, aiming to phase out the use of synthetic pesticides and fertilisers.
According to Kennedy, industrial farming practices contribute to environmental degradation and public health issues and he proposes shifting subsidies to encourage farmers to adopt regenerative methods. Kennedy plans to put a major emphasis on and promote regenerative agriculture if he becomes HHS Secretary.
California, which is the leading food-producing state in the US, is also focusing on regenerative agriculture. The California State Board of Food & Agriculture and the California Department of Agriculture are working on creating a formal, legal definition of regenerative agriculture. There currently isn’t a formal, legal definition for regenerative agriculture either statewide or nationally, like is the case with organic. The state agencies plan on announcing a draft definition in early January.
Nearly every major food company is making investments in regenerative agriculture. Companies are doing so for both business – brand, sales and profit – and ESG (environmental, social and governance) reasons. Regenerative agriculture is one way food companies can meet climate change goals through agriculture and many CEOs see it as good business to get involved.
If all these stars align in 2025, regenerative agriculture could become more mainstream, going from a popular buzzword and niche business to something much more significant in the agri-food industry.
More M&A and investment
Merger and acquisition activity has been picking up a bit in the latter half of 2024 and it’s going to accelerate significantly in 2025. Key to this happening is a continued cooling of inflation and stable interest rates.
Very big food companies want to get even bigger, underlined by Mars’ move for Kellanova and – if reports are to be believed – Mondelez’s recent interest in Hershey. We’re going to see more of this in 2025.
Meanwhile, major food companies also want to streamline their brand portfolios, which will happen in 2025, making the acquisition pool more plentiful. Unilever is one notable example. Trade buyers will face more competition. I expect private equity to come out of its relative hibernation and increase its acquisition activity in 2025.
I also think the incoming Trump administration will spur investment in the consumer packaged goods sector. In fact, the war on packaged foods might have a positive effect in that it spurs investment in healthier food companies and brands. 2025 might be the right time for venture capital to “go wild” investing in smaller better-for-you emerging CPG brands even if Kennedy “goes wild” on food.
AI takes hold in the food industry
2025 will see a leap in the use of AI (artificial intelligence) by food and drinks companies, ranging in areas from product development and supply chain to packaging design, distribution, marketing, sales and more.
Manufacturers have been flirting with AI but the technology has reached the point in its development where it can start to provide significant benefits across the board. Enhancements to AI are happening on a weekly basis.
AI is a brave new world for boardrooms, the wider industry and consumers alike and 2025 should also mark the year where the industry puts a serious focus on the ethics of AI and its use. Used ethically, the tech can be a major positive disruptive force for companies. The efficacy of AI is only going to increase.
