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Food Makers Need to Rekindle Demand in 2026. That’s a Tall Order.

Dec 28, 2025 05:00:00 -0500 by Evie Liu | #Staples

(Spencer Platt/Getty Images)

Key Points

Food and beverage companies head into 2026 under unusual pressure, squeezed by policymakers, consumers, supply challenges, and fast-changing cultural expectations about what Americans should eat and drink.

After a bruising 2025, many companies have recast their portfolios, cut costs, or made bold acquisitions in hopes of regaining momentum. The coming year will show whether those efforts are enough—or whether the industry’s headwinds have become structural.

Food companies were under significant cost pressures in 2025. Commodity prices stayed stubbornly high as supplies of beef, cocoa, coffee, and dairy proteins remained tight. Tariffs added further pressure, leaving companies to choose between raising prices and testing consumer patience or absorbing margin hits.

Demand wasn’t much healthier. Immigration uncertainty weighed on Hispanic consumers—historically among the most reliable spenders across food and beverage—while November’s government shutdown disrupted food-stamp payments and squeezed lower-income households.

“2025 has been one of the toughest we can remember in our 25 years covering the consumer staples sector,” wrote RBC Capital Markets analyst Nik Modi in a recent note.

Some pressures may ease next year. The Trump administration has already reversed tariffs on some agricultural products and signaled an interest in moderating beef prices. The World Bank expects agricultural commodity prices to remain stable to slightly lower in 2026, though weather shocks and crop diseases could still trigger volatility.

Other headwinds look far more durable. The rapid adoption of GLP-1 weight-loss drugs like Wegovy is encouraging Americans to eat less, a demand shock hurting volume growth from snacks and meals to sodas and beer. As new oral versions of the drug become available and prices come down, usage is expected to continue rising.

At the same time, regulators are intensifying scrutiny under the Make America Healthy Again initiative. The initial push to remove synthetic colors may soon extend to added sugar, sodium, preservatives, and front-of-pack nutrition labels—changes that could raise reformulation costs and erode already-thin margins.

Accustomed to pricing power during the inflation surge, food companies now face consumers who are both more price-sensitive and more skeptical of ultraprocessed foods. Policy changes surrounding immigration and SNAP benefits will also continue pressuring the spending power of millions of Americans. The toll is showing up in earnings and stock performance.

Companies focused on pantry staples, where private labels have been taking share, were hurt the most with sluggish or even declining sales. Conagra Brands, Lamb Weston Holdings, and Campbell’s stocks led the pack, losing 38%, 34%, and 32%, respectively. Seasoning and snack companies are holding up better: McCormick shares are down 10%, Mondelez International lost 9%, while chocolate giant Hershey scored a 12% gain as cocoa prices started to ease.

Beverage makers are facing similar headwinds: Coca-Cola posted only 1% volume growth in the latest quarter, while PepsiCo’s North America beverage volume shrunk 3% from a year ago. PepsiCo shares had tumbled 15% by mid 2025, but bounced back as investors regained hope over the involvement of activist investor Elliott Investment Management.

Alcohol consumption remains depressed as well—stocks of Constellation Brands, Diageo, Boston Beer, Molson Coors, and Brown-Forman all saw steep declines this year, led by Constellation’s 39% loss.

“We are struggling to find any drivers that would suggest middle- and lower-income pressures will improve,” said Modi. “In fact, we would argue things could get worse before they get better given changes to SNAP benefits, some wobbling in the labor market and general anxiety over AI and its impact on job security.”

Still, consumers aren’t abandoning packaged foods—they’re simply demanding different ones. Shoppers increasingly prefer shorter ingredient lists, recognizable components, and products that convey wellness through high protein, high fiber, or gut-health ingredients. That shift has forced strategic pivots.

Companies are pruning underperforming legacy brands and doubling down on faster-growing categories. Kraft Heinz plans to unwind its past merger and split into two businesses, while Keurig Dr Pepper is separating its coffee unit—along with an acquisition of JDE Peet’s—from other soft drinks. Others are buying growth outright: PepsiCo purchased prebiotic soda maker Poppi, and Celsius Holdings acquired Alani Nu, expanding its share of the energy-drink market.

Investors continue to reward companies that can diversify their portfolios and find growth pockets even in a market of shrinking calories and shifting tastes. Much of that is happening in the beverage market.

Energy drinks have been a notable standout. Shares in Monster Beverage has increased 45% in 2025, thanks to its innovative products and international expansion. Celsius stock gained 63% as its Alani Nu acquisition and deepened partnership with distributor PepsiCo boosted revenue significantly. Vita Coco, a leader in coconut water, is also drawing interest as demand for low-sugar, natural hydration rises. The stock, which is a Barron’s pick, is up 45% this year.

Legacy names could shine as well. Shares in Anheuser-Busch climbed 29% despite weak beer volumes, lifted by strength in its premium brands, expansion into nonalcoholic offerings, and shareholder-friendly capital returns. Coca-Cola increased 13% as the company showed strong pricing power even as inflation cools. The beverage giant also benefits from its global footprint, strong balance sheet, and new growth engines in brands like Fairlife milk.

For food and beverage stocks, performance next year will depend on whether companies can spark real demand through innovation, reformulation, and successful marketing. Modi expects 2026 to be another tough year, but believes that companies that lay out the most realistic targets will be the best performing stocks.

“We believe the companies that create value over the next 1, 3 and 5 years will be those that have the courage to make decisive decisions that others are not willing to make,” he said.

Write to Evie Liu at evie.liu@barrons.com