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Inflation dominates many economic discussions, not least because it shapes the spending power of consumers and big businesses alike, meaning everyone is affected.
Recent years have seen significant inflation spikes, which have cooled as the underlying issues behind them abated. Thus, retailers and their customers expect to be able to claw back some ground in terms of rising prices, or at least enjoy a general easing off of major month-on-month increases.
Manufacturers of consumer packaged goods (CPGs) are not so lucky. Inflation’s impact on raw materials and supply chains is persistently volatile, making it difficult for them to identify the savings and efficiencies needed to bring prices to heel.
On top of this, retailers and consumers are less willing to stomach the pricing of a plethora of goods. Manufacturers can’t reliably raise prices to offset their cost concerns, which in turn puts margins at risk of significant shrinkage.
In the face of inflationary pressures, brands can use the next 18 months to pivot away from the blunt instrument of price hikes. Instead, a combination of Price Pack Architecture (PPA) and supply chain agility represents a more reliable strategy for long-term viability.
With that in mind, here’s a look at what CPG brands can do to deal with inflationary pressures, protecting their profits while keeping retail partners and consumers on-side.
The ‘Trade-Down’ Opportunity
To avoid relying on speculation and individual anecdotes, the team at The Barcode Group, a retail agency, has collated data on the impact of inflation on groceries to understand where things stand, how we got here, and what the future might hold.
The best source for up-to-date information on how the cost of food purchased for domestic consumption is changing is the USDA’s data. The agency compares the Consumer Price Index (CPI), a measure of all items considered when calculating overall inflation on a month-on-month and year-on-year basis, with food-at-home price changes over the same periods.
In the most recent Food Price Outlook, the CPI rose by 0.3% between July and August 2025. The YoY increase of 2.9% reflects economy-wide price increases relative to the same month in 2024.
What’s significant about this data is that grocery prices actually increased at a rate slightly below inflation, rising 2.7% YoY. In contrast, food-away-from-home prices shot up by 3.9%, reflecting that restaurants and other food service providers have raised prices beyond the cost of raw ingredients. This ties into the fact that they are exposed to inflationary pressures across different areas, including rising energy costs, rents, and wages.
With dining out becoming prohibitively expensive, CPG brands have an opportunity to reframe cooking at home as an appealing alternative. Since more consumers are “trading down” by skipping eating out, aggressively marketing products that promise restaurant-quality meals at home is a savvy move.
Brands can also work with retailers to capitalize on this pu