Last year was practically a layup in terms of making relatively accurate predictions. Continued concerns about the economy, an upcoming presidential election, narrow profit margins but relatively strong consumer demand made calling that F&B manufacturers would invest in their existing facilities rather simple. Healthier-for-you, spicy and pet foods being popular? Check, check and check. Yay for us! What was definitely not on our 2024 bingo card were the food safety issues that brought the industry under greater public scrutiny. We’re not going to predict that CPGs are going to pay extra attention to food safety in the coming year because that’s just too easy. What do we think this year has in store? These are our thoughts.

Look Out for More M&A

Kelley Rodriguez commented during a recent episode of the FOOD ENGINEERING Podcast recapping 2024 that she read a report stating that mergers and acquisitions were “soft” throughout the year. While we don’t keep tight tabs on M&A, per se, we do stay on the lookout. Clearly one of the more surprising occurrences last year was the Mars acquisition of Kellanova. (Our hats off to you if you were on the outside of that situation but did see it coming.) But like with the Mars-Kellanova merger, there may be a few surprises around the corner—and it has to do with the incoming U.S. presidential administration.

FE has reported before that many F&B manufacturers were taking a wait-and-see approach to building new manufacturing facilities because of the uncertainty surrounding the election in 2024. While we have zero proof that the same affected M&A, we’re betting that it did. Our guess is that companies were holding off on any expenditures until they knew who would be in charge.

We know that the Trump administration raised tariffs during the first term, and it made no bones about doing the same if put into office once again. Now that they know tariffs will be in play, we’re predicting that companies will look to shore up their domestic supply chains and operations by acquiring suppliers that help manufacturers to avoid the tariff issue. Why buy another company when simply switching vendors could do the trick? We’re betting that demand for domestic products and services is going to increase prices, which will mean buyouts will make more financial sense.

The BBC is reporting that some analysts expect an increase in M&A during the second Trump administration, citing his friendliness toward deal making. The article adds that customers have been cutting back on purchases because of price increases, and it states that companies may seek “deals to secure new markets and booth growth.”

According to Charles Haverfield, CEO of U.S. Packaging & Wrapping, “[F]or businesses relying on foreign suppliers, these tariffs will add layers of complexity to cost management and logistics, as companies brace for these changes by frontloading imports. The rush to beat tariff deadlines could lead to bottlenecks in warehouses and ports, creating a logistical hurdle that could impact the timeliness of shipments for months.”

Is This AI’s Big Year?

AI is definitely a buzzword right now. Will it become more than that in the coming year with a large volume of companies integrating it into their systems in some way, shape or form? Some experts are saying that the tariffs mentioned in the previous section could create such complexity in the supply chain that only AI and digitalization will have the necessary capabilities to create positive outcomes.

“Supply chain challenges remain a top concern, with 71% of manufacturers saying disruptions and economic downturns have added uncertainty to their operations. In response, many are diversifying suppliers and increasing inventories to build greater resilience in the face of ongoing labor and supply issues. As a result, digitalization efforts are likely to accelerate even further and mature faster in the new year,” says Ryan McMartin, product marketing manager at Parsec Automation.

“Businesses that have embraced technologies like manufacturing execution systems (MES) over the past few years have seen significant efficiency and productivity benefits, especially in food and beverage facilities,” he adds. “Still, as of September 2024, only 32% of manufacturers say they’ve completed their digital transformations. As generative AI (GenAI) adoption accelerates and manufacturing platforms become more powerful and accessible, this desire for supply chain stability will drive significant investment in more tailored, specialized digital tools. Those who start early will be better positioned to enhance their supply chain strategies and optimize operations in an increasingly complex environment.”

Haverfield says that the incoming presidential administration’s friendliness toward AI and fewer regulations for it could create faster-than-expected advancements and benefits.

“The potential of AI to enhance efficiencies at every stage of logistics, from real-time inventory tracking to predictive analytics, will be transformative for the industry,” he says. “By harnessing AI tools, businesses can minimize shipping delays and forecast demand with greater accuracy, allowing them to maintain optimal inventory levels and route shipments more efficiently. AI also enables a more data-driven approach to logistics, allowing companies to predict market fluctuations, reduce shipping costs and minimize the risk of supply chain disruptions.”

Gen Z’s Presence Continues to Impact Manufacturing

Manufacturers of consumer packaged goods have been paying attention to Gen Z’s influence on the market, and that seems to only be getting stronger…somehow. It’s starting to feel like the only people who matter are the ones influenced by influencers. Yes, that’s complete hyperbole, but the following is something we received from Nestlé about what it’s expecting for 2025. See if you notice a theme:

Trend: Feel Good, Functional Food and Beverage

Gen Z has given health a new meaning, focusing on a lifestyle that goes beyond exercise and mindful eating. In fact, 76% of Gen Z define wellness as accessible, holistic and “anything that makes you feel good.” Consumers are taking their health into their own hands, on their own terms, to curate personalized wellness practices that meet their needs. In 2025, brands will lean in to deliver “better-for you” goods with functional benefits, serving consumers on their wellness journey, wherever that may take them.

Data Points:

• 82% percent of U.S. consumers now consider wellness a top or important priority in their everyday lives

Trend: Fusion Flavors Captivate Taste Buds Everywhere

Gen Z is pushing palates to places they’ve never been before, and even Boomers are along for the ride. As the most diverse generation in history, Gen Z has taken the convergence of cultures, flavors, and traditions mainstream, leaving consumers with a taste for adventure. Consumers are now adding bold, spicy, eclectic and complex flavor combinations to their day to day. The proliferation of these fusion flavors can be seen across TikTok and Instagram. In fact, 79% of Gen Z admit they have tried a food or flavor solely because they saw it on social media. Brands are responding to this growing appetite by experimenting with more flavor combinations across every aisle of the grocery store, igniting interest and access to new tastes and cuisines.

Data Points:

• 42% of U.S. consumers express interest in fusion cuisine, embracing the creative marriage of culinary traditions 
• Older Gen Z, those 18-26, often seek adventurous and flavorful combinations
• In the past four years we’ve seen:
  • Hot Honey menu penetration +98%
  • Salsa Roja menu penetration +36%
  • Pickled jalapeno menu penetration +31%
  • 75% of consumers are interested in trying new and unique flavors

Trend: Accessible Experimentation: Coffee at Home

The fourth wave of coffee has arrived, and it’s nothing like we’ve seen before. Today, consumers are focused on a more personalized cup, increasingly intrigued by new, exciting textures and flavors that rebel against the purist brews of the past. In this new wave, coffee is increasingly considered a “little treat,” especially among Gen Z who drink it throughout the day as an affordable indulgence. In 2025, we’ll see brands deliver products that encourage at-home coffee play and personalization, with a focus on different textures and added taste like cold foam and floral flavors.

Data Points:

• 61% of consumers say crafting coffee at home allows them to save money without giving up on an enjoyable experience
• 51% of U.S. coffee consumers own or are interested in syrups and additives for their coffee
• Outside of Baby Boomers, 1 in 3 coffee consumers consider themselves a coffee enthusiast

We’re expecting manufacturers will continue to invest in and expand their offerings that they see Gen Z opening their wallets for.

Okay, not everything is about Gen Z. In fact, that same Nestlé study found that people are still looking for comfort in the past, which will see new brands teaming up with legacy brands to “reinvent the ‘old’ with a fun and fresh twist.”

They’re also going to be looking for speedy home options that have the same restaurant-style expertise with bold flavors. On top of that, Nestlé also says that brands extending to new formats will be able to “cut through the clutter in today’s crowded environment.” This means that brands creating experiences so that consumers feel the products are “distinctive, personalized and reflective or who they are as people” will be the standouts.

Flavor Trends

Consumers will also continue to want products that stand out in terms of flavor. Fresh Thyme market says it expects spicy foods will continue to be popular saying, “Consumers are demanding more complex flavor profiles and will be bringing on the heat through expanded use of more fresh and dried chilies like ghost chilies, Chils De Arbol and jalapenos.” Sticking with the distinctive flavor trend, the better-for-you grocer, says that Korean ingredients like gochujang and kimchi will be in demand because of the rising interest in Korean BBQ.

While we agree that spicy foods will continue to be popular in the coming year, we can’t say the same about dill or pickle flavors. Quite a few foods introduced dill variations in late 2023 through 2024. Kraft Heinz launched pickle ketchup, we got to experience pickle-flavored cupcakes, Lantana Foods introduced Dill Pickle Hummus, and V8 and Grillo’s Pickles teamed up to offer V8 Grillo's Dill Pickle Bloody Mary Mix. As much as we love it, pickle flavoring isn’t pumpkin spice and is more of a one-off craving instead of a flavor with staying power. That’s why we’re predicting a steep decline in consumer demand for pickle-flavored products through 2025.

What do you think? Are we off base? Are we on target? As always, only time will tell.