Consumers plan to spend less in 2025. AlixPartners' 2025 Global Consumer Outlook found a net intention for reduced spending of 12 percentage points compared with 2024 globally. Shifting consumer priorities will be met with new challenges as tariff and trade conflicts evolve and geopolitical tensions play out. Nearly half (49%) of Consumer Products (CP) executives are expecting supply-chain disruption to be a bigger challenge in 2025, a 14-point jump from 2024 according to the 2025 AlixPartners Disruption Index.

While disruption remains on the radar for CP leaders, we expect relief in CP volume pressures and see ample opportunity to deploy and scale AI tools across CP functions. While consumers may spend less, there could be upside for CPG companies as consumers plan to eat at home more and allocate away from travel-based spending. The environment also seems to be leaning towards an increase in dealmaking in the CP space, an opportunity for CP companies to retool their businesses.

Here, our team touches on the major trends we are watching and how we are preparing our clients to act.

AI and automation reach the point of being able to scale

The 2024 holiday season was the first time many consumers used AI chatbots to shop for gifts on Amazon.com, Walmart.com, and Target.com -- one clear use-case finally deployed en masse. While many organizations have already conducted AI pilots and experimentations, only few were able to truly scale AI technologies efficiently and pragmatically across functions.

M&A activity remained sluggish in 2024 thanks to a challenging macro environment, high interest rates, a scarcity of attractive assets, weak balance sheets, and elevated valuations. Private equity (PE) firms specifically found themselves holding assets longer than expected, waiting for the right time to exit. The tide may be changing for consumer products companies in 2025, as we look at deals such as the $36 billion Mars-Kellanova transaction. Generally, factors seem more favorable for dealmaking: the election is in the rearview, the Fed is expected to continue slowly easing interest rates, the economy is stabilizing, and bid-ask spreads are narrowing.

We see the below implications for M&A:

M&A will continue to be a significant driver for companies looking to grow, innovate and meet evolving consumer needs. Given this improved backdrop for M&A, we think it is critical for acquirers to ensure thorough and holistic focus on up front diligence, map out and plan key sign-to-close activities to ensure a successful Day 1, and then execute detailed post-merger integration plans to unlock full potential value creation.

Industries face multi-faceted supply-chain disruptions

In 2024, CPG companies battled inflation to keep material costs in check while dealing with a decreasing ability to boost prices. While inflation might be moderating (but not going away), threats of supply chain disruption are climbing as a new U.S. administration details a more protectionist agenda, economic and military conflicts rage, and challenges on labor and operating costs continue. While CP firms have worried about the long-term risk of sourcing from China, they are now looking at the ramifications of importing from Mexico and Canada, should steeper tariffs be deployed.

There is a lot of uncertainty. The best defense is to get on offense:

Pressure on CPG volumes may finally ease

With rare exceptions, CPG companies have faced ongoing volume headwinds following the post-pandemic period. There are two driving forces: 1) high inflation has forced consumers to reprioritize household spend; and 2) demand continues to fragment, as younger generations shift away from mainstream brands that make up a large share of CPG sales.

But there may be light at the end of the tunnel: recent data from Circana indicates that CPG volumes increased for the first time in three years, growing at 1.1% for the 52-week period ending September 29. However, CPG dollar sales still grew at the lowest rate in three years at 2.5% (versus 4.7% in 2023 and 8.6% in 2022). Early signs indicate that we may be returning to a historical norm of 2-3% year-over-year growth for the industry.

These are the implications for 2025:

While consumer spending is expected to moderate further in 2025, opportunities will still exist for companies to improve on commercial performance and drive growth.