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Consumer packaged goods (CPG) companies are under extraordinary pressure to address pricing and affordability. With shelf prices up 30% since 2020, companies are confronting mounting public criticism of their pricing practices amid high-profile retailer-manufacturer disputes, deteriorating consumer trust and volume losses for branded manufacturers in some categories. As costs stabilize at 20% above pre-pandemic levels, the time has come to shift from tactical fixes to holistic affordability strategies. While affordability pressures can impact the entire CPG sector, the effects vary slightly by category.
This challenge represents a structural shift in CPG market dynamics. Brand loyalty appears to be wavering as private labels gain share and a significant number of consumer segments abandon categories they can no longer afford. As government investigations into pricing practices intensify, companies often face risks that extend far beyond immediate sales impacts, threatening their core market positions. These risks are heightened by the fluid tariff situation, which could introduce new cost pressures amid geopolitical tensions or policy changes.
Traditional response tactics — shrinkflation, reformulation and temporary discounts — are now less effective in preserving brand value and addressing core affordability issues. Surviving this market shift demands operational transformation and business model reinvention, such as portfolio renewal, ecosystem strategies and/or end-to-end operating model redesign enabled by emerging technologies like AI. At the same time, as business and consumer ecosystems increasingly overlap, partnerships are blurring traditional industry lines and creating new affordability opportunities — in PwC’s 28th Annual Global CEO Survey, consumer markets CEOs tell us that, on average, only 6% of their revenues in the past five years came from new businesses.
To help capitalize on these shifts, organizations should centralize decision-making processes, focus on engaging more directly with customers rather than just collecting data, and adjust incentives to deliver true value, not just affordability. This approach can help turn affordability from a challenge into a competitive advantage.
Restoring affordability could require price reductions (or increases in perceived consumer value) of 5% to 10%.
Strategic levers for the future
To help navigate the affordability challenge, executives should rethink how products are developed, priced and delivered. The current environment shows the risks of treating affordability as a short-term tactic. Instead, companies should embed affordability as a continuous capability, making it an integral part of operations ready to adapt dynamically to market shifts. Success rides on aligning the C-suite around affordability as a strategic imperative and building the cross-functional teams required to transform affordability into a competitive advantage. Given that CPG shelf prices have risen about 10 percentage points more than costs and overall inflation (CPI) since 2020, restoring affordability could require price reductions (or increases in perceived consumer value) of 5% to 10%. The path forward involves choreographing key affordability initiatives into a cohesive strategy.
Companies can enhance revenue growth and further their competitive advantage by understanding the impact of key affordability levers on underlying growth drivers.
Affordability strategies can also be adapted based on category-specific price elasticity, competitive dynamics and brand strength — where investment in brand equity can serve as a key lever.
Different strategies — from temporary price cuts and special promotions, to targeted marketing and loyalty programs — can work together to provide value for customers.
Leveraging AI and advanced analytics for affordability enhancements
Technology and data underpin many affordability levers, with AI-powered tools supporting key decisions across pricing, portfolio and commercial strategies. Revenue growth optimization (RGO) systems, for instance, help companies fine-tune pricing and trade investments while managing costs with greater precision. Outcomes achieved by companies deploying holistic RGO solutions include trade spend improvements of over 5%, annual revenue growth of 2% to 3% and a six to 10 times increase in ROI on annual software as a service (SaaS) fees.
Many companies are using these tools to help simulate market conditions and forecast consumer behavior. Scenario planning, which has delivered 2% to 3% profit lifts, has become a key element in pricing strategy, allowing companies to anticipate competitor reactions and incorporate those scenarios into their pricing simulations. Additionally, RGO, offering a potential 4% to 5% profit lift, uses these insights to refine strategies further and influence pricing decisions to improve profitability.
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Addressing affordability challenges with AI
By leveraging stronger datasets — such as point-of-sale data, retailer-provided performance metrics and competitive behavior — companies can generate forward-looking recommendations that account for potential market shifts, with greater precision and predictions of 90% or better. This proactive strategy has demonstrated measurable impact, including up to 730 basis points in trade efficiency increases and 100 basis points in sales activity margin improvements.
Companies are rethinking their innovation approach by focusing on cost-effective formulations and packaging that meet consumer needs without compromising quality.
Preparing for growth in a new era
Affordability is now a strategic necessity for confronting today’s market pressures. No longer effective as a piecemeal or optional approach, companies should embed affordability into their operations as they position themselves for long-term growth. The path forward lies in leveraging technology, innovation and strategic foresight to help deliver value to both consumers and businesses.
Author: Ali Furman, CM Industry Leader
Contributors (by solution): Growth Strategy, Paul Blase; Pricing Strategy, KB Clausen; Supply Chain Optimization, Carla DeSantis; Customer Loyalty, Samrat Sharma; AI Pricing, Sudhanshu Shekar
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