As 2025 winds down, consumer packaged goods (CPG) brands find themselves facing renewed financial pressure and growing economic uncertainty heading into the new year. In order to stay afloat and ahead in the months to come, CPG cost management strategies have the ability to make or break brands on the precipice of a rapidly evolving industry.
What is CPG cost management?
The phrase “CPG cost management” refers to certain processes, tools and day-to-day strategies CPG brands use to keep their expenses down and profits up. In order to be effective, it’s important that brands implement cost-saving measures throughout every step of the supply chain, otherwise they risk spending more on production than they can comfortably earn in profits.
From procurement and manufacturing to marketing, distribution and retail practices, reliable cost management efforts require a delicate balance of maintenance and reinvention if brands want to deliver on evolving consumer expectations.
What are the key cost drivers for CPG brands today?
In 2025, several forces thoroughly reshaped the CPG brands landscape – many of which are expected to continue driving behaviors and procedures in 2026. Here are five of the key cost drivers influencing the CPG industry:
- Ingredient pricing: 2025 saw plenty of agricultural volatility that directly influenced the availability of various ingredients necessary for CPG production. Unreliable access to key ingredients creates a major supply/demand issue for competing CPG brands, leading to increased prices across multiple stages of production.
- Shifting economic policies: This year, the implementation of global tariffs combined with widespread economic uncertainty have driven up costs for CPG brands and consumers alike.
- Packaging costs: As consumers clamor for more sustainable products, many companies have needed to up their investment in packaging R & D and material expenses.
- Transportation and logistics: As oil prices surge and labor costs rise, many brands have fallen victim to supply chain challenges and logistics backlogs. These higher freight costs and other disruptions have further affected the availability of certain products and components, leading to increased supply chain spending.
- Marketing advancements: What was once a brick and mortar-based industry has become increasingly digitized over the last several years. Growing reliance on CPG ecommerce platforms, delivery services and social media platforms has resulted in many brands pouring money into state-of-the-art digital marketing tools.
CPG brands find themselves caught in the crosshairs of technological development and supply chain vulnerability. All of these factors combined have contributed to soaring back-end costs and front-end sticker prices.
The role of data in modern CPG cost management
In recent years, data and analytics have become some of the most powerful cost management tools in CPG finance teams’ arsenals. Advancements in technology and ongoing data collection efforts have made it easy for companies to source and analyze data in real time in order to:
- Identify potential sources of waste within production
- Track fluctuations in ingredient and product demand
- Streamline and optimize promotions for likely consumers
- Predict future category-wide shifts
- Nail down and validate pricing decisions
Artificial intelligence (AI) has played a central role in many of these advancements, and AI integration is only expected to diversify in the months and years ahead. CPG brands looking to evolve along with their bases should seriously consider investing in responsive AI tools that add context, clarity and certainty to their production, distribution and marketing efforts.
Strategic pricing and margin protection
In the past, CPG brands could get by by making yearly or quarterly pricing decisions. Today, however, pricing is an ongoing, dynamic exercise that can make or break a company’s bottom line. With inflation fluctuating and competition rising, CPG teams looking to hold their own must adopt dynamic pricing models that reflect their true costs along with the expectations of consumers.
At the end of the day, products are only worth as much as consumers are willing to pay for them. By tracking data points like retailer margins, competitor stats, marketing reach and consumer behavioral patterns, CPG brands can land on price points that effectively cover their costs while remaining competitive in a crowded field.
Demand planning and forecasting
Here’s the bottom line: If you’re not investing in forecasting and demand planning, you’re more or less flying blind in a field dominated by data. Effective modern demand is an ongoing process and often relies on:
- AI-powered consumer insights
- Micro-trend analysis
- Flavor and format forecasting based on consumer intelligence data
- Regional and localized buying signals
- Real-time interpretation of behavior from primary brands and their competitors
With the rise of AI-powered consumer intelligence platforms and other advanced technological tools, there’s no excuse for brands not to leverage data to drive up CPG sales. Comprehensive CPG brand management requires more than the bare minimum – it’s a dynamic exploration built on actual, practical insights.
What are the 7 most effective CPG cost management strategies?
There’s often some trial and error involved in finding the right CPG cost management strategies for your brand, but there are certainly some proven approaches worth test-driving. Here are seven noted approaches CPG brands are using to minimize costs while keeping pace with innovation:
- SKU rationalization: Rather than attempting to drag underperforming products across the finish line, brands looking to keep costs low can prioritize their highest-velocity SKUs and reinvest in categories most likely to spark growth.
- Ingredient optimization: When facing supply chain and agricultural disruptions, brands can recover by reformulating and substituting more cost-effective inputs that still deliver comparable quality, flavor and function.
- Packaging efficiency: Streamlined packaging processes can kill two birds with one stone. Not only are lightweight and optimized packaging materials help cut costs, they can also deliver on increased demand for packaging sustainability.
- Automation in CPG manufacturing: AI isn’t just for data analytics – it can also revolutionize the manufacturing process. Robotics and AI-powered automations can streamline workflows and save brands on labor expenses.
- Demand-driven production: Using data analytics and consumer intelligence platforms to forecast demand can help brands funnel more resources into likely high-performers and prevent low-demand products from unnecessarily draining resources.
- Smarter trade spend allocation: Many of today’s consumers are actively searching for deals and promotions that will save them money. By optimizing promotions based on region, overhead and other analytics, brands can smartly increase demand without overly compromising on their bottom lines.
- Proactive supply chain planning: If you wait until the supply chain shows signs of strain, chances are you’ll have already missed your chance to change course. Having multiple sourcing and logistics options in play can help protect against supply chain uncertainty and allow brands to respond more nimbly to all kinds of shifts.
As you can see, CPG cost management must be both a proactive AND responsive process in order to be effective. Waiting for things to take a turn will seriously impact your ability to recover, but being overly committed to one approach could lead to you falling behind. The best approach is to track trends to help inform your decisions and to continue monitoring the data to assess and re-evaluate performance on an ongoing basis.
How Tastewise helps CPG brands manage costs smarter
Tastewise is an AI-powered consumer intelligence platform that provides CPG brands with the real-time data and insights they need to make informed cost management decisions. Tastewise provides eye-opening analysis of flavor trends, consumption moments and market drivers to help brands:
- Identify high-value opportunities for innovation
- Mitigate risk and reduce failure rates for new products
- Streamline SKU prioritization
- Forecast demand more accurately
- Fortify pricing and promotion decisions
Not only do these insights help CPG teams protect their margins, but they can help CPG companies execute more targeted brands management strategies that appeal directly to the wants and needs of their consumers.
Final thoughts
The landscape of CPG cost management is shifting as rapidly as the industry as a whole. In light of fluctuating inflation cycles, evolving consumer demands and rapidly growing competition, CPG brands looking to find and maintain their footing must rely on all the tools they have at their disposal. Across the board, AI-powered insights and flexible, well-informed operational strategies can make a world of difference in cost management, brand reach and productivity in 2026 and beyond.
FAQs
What drives CPG costs?
Common factors that influence CPG costs include: ingredient pricing, labor costs, packaging expenses, logistics , and marketing investments are the primary factors affecting modern cost structures.
How can AI help CPGs manage costs?
Artificial intelligence can support CPG cost management by optimizing workflows, streamlining production processes and providing real-time, data-driven CPG insights regarding consumer behaviors and expectations. Integrating AI into daily practices can drive CPG sales, inform CPG M & A initiatives and enhance CPG marketing strategies from end to end.
How should CPGs prioritize SKUs?
To help advance CPG growth, brands should utilize all of the data and AI tools they have at their disposal to make informed, data-backed decisions about which SKUs are performing at requisite levels or stand poised to drive CPG revenue moving forward. If the data indicates a particular SKU consistently underperforms or fails to align with high-velocity CPG trends, it might be time to put that SKU on the back burner.
