This story is part of a series of 2025 outlooks from PNC Corporate and Institutional Banking.

It’s a difficult environment for consumers. Inflation remains persistent, and wages are not keeping up. Housing and non-housing debt levels are rising, and personal savings rates have fallen to nearly 20-year lows. Given all these contributing factors, people are focusing on affordability and value in efforts to stretch dollars for food and beverage purchases at the retail level. They are voting with their feet on a range of purchases both within and outside the home.  

Leading grocery retailers are holding the line on pricing in efforts to improve customer traffic and basket size, and operators are building up their respective store brand offerings. Today, private label represents nearly one-quarter of total industry sales. The emphasis on affordability and value has aided the lowering of food-at-home inflation to nearly flat, as compared to the high single-digit levels experienced just a few years ago.  

Food-away-from-home inflation continues to run hot, with diner demand ebbing across all restaurant formats. Dining segments on the upper end from casual to premium are experiencing high single-digit traffic declines in the face of ongoing higher checks. Quick service and fast casual are faring a little better but still working through a similar dynamic of rising checks and falling traffic. The foodservice sector is countering this dynamic with a focus on value offerings.

“Looking ahead, it’s likely that we will see a new norm in terms of prices going up,” said Jim Kenwood, group head of Food & Beverage Advisory for PNC Bank. “Companies at different points of the value chain are realizing that if they continue to raise prices, consumers that are already stretched will simply take their business elsewhere. It’s critical for businesses to think about the health of the consumer and what it means for pricing strategies and demand planning. It’s simple, but if you don’t do it in this market, it can lead to top- and bottom-line earnings compression.”

Beyond price, innovation is also key. “Even as grocery and foodservice retail operators struggle with demand planning in this environment, some are really thriving, and it’s because they have been evolving products to consumers taste and convenience profiles,” said Kenwood. “If you are not innovating and repackaging product in a way that makes sense for customers to benefit, profit and loss will suffer. In this market, the best companies are going to win, and the best are those that are giving the consumer what they want.” 

Although aspects of the overall outlook may not be fully clear, one thing is certain, according to Kenwood: companies that make, move, and sell food and drink will continue to put capital to work in efforts to lean forward, innovate, and invest in accretive demand growth.

 

Brilliant Begins Here

PNC’s Food & Beverage team combines industry and financial experience with local relationship management to offer tailored financial solutions to Food & Beverage companies across the value chain. For more information, reach out to your Relationship Manager or contact us.


PNC 2025 Outlooks:

Pressures and Opportunities for the Healthcare Industry

Uncertainty and Optimism for Commercial Real Estate

Lower Rates Present Opportunity for Mid-sized Businesses