The Retail and Consumer Packaged Goods (CPG) sector has experienced a relatively quiet period in recent years, with Merger and Acquisition (M&A) activity slowing due to global economic headwinds and rising interest rates.
However, 2025 is expected to bring a resurgence in dealmaking, particularly in RCPG, as companies look to strengthen their portfolios, expand their customer base, and gain a competitive edge in a shifting market. Nevertheless though, evolving geopolitical dynamics could temper this momentum, potentially leading to a more moderate level of M&A activity.
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While deal activity has been sluggish—M&A volumes dropped 22% and values declined 4% between the first half of 2023 and the first half of 2024—several standout transactions have maintained momentum.
J.M. Smucker’s acquisition of Hostess Brands, Mars-Kellanova’s merger and The Campbell Soup Company’s integration of Sovos Brands still illustrate that major deals can generate industry-wide excitement.
At the same time, the failed $8.5 billion Tapestry-Capri Holdings deal, and the collapse of the $25 billion Kroger-Albertsons merger highlight the fact that not all high-profile deals come to fruition.
Key drivers of M&A activity
- Evolving consumer preferences
Demand for health-conscious, premium, and sustainable products is shaping M&A trends. Companies are acquiring brands that align with consumer values, such as environmental stewardship and nutrition-focused lifestyles, to future-proof their portfolios
- Macroeconomic shifts
Global corporations have shifted from being net sellers to net buyers, now accounting for 71% of deal activity—even as regulatory uncertainty lingers. Strong balance sheets and pent-up demand still fuels M&A growth, even amid high interest rates. As capital costs ease and 2025 policy shifts loom, rising Chief Executive Officer (CEO) confidence signals continued momentum in dealmaking
- Digital and technological innovation
As traditional marketing loses ground to hyper-personalized engagement, enterprises are seeking to plug into real-time consumer sentiment with predictive analytics, retail media, sentiment mapping, and artificial intelligence (AI)-led product innovation inorganically
- Portfolio diversification and risk management
Companies are pursuing acquisitions that complement existing offerings to mitigate risks and expand their market reach. Diversification strategies help brands remain resilient in uncertain economic conditions
The Albertsons-Kroger merger: A cautionary tale
Despite the renewed enthusiasm for M&A, large-scale deals still face significant hurdles. The failed $25 billion Kroger-Albertsons merger exemplifies the challenges of navigating regulatory scrutiny and stakeholder opposition.
When pandemic-related disruptions reshaped the grocery industry, Kroger and Albertsons sought to merge, aiming to compete with Walmart’s dominance. The deal would have created a retail giant, combining Kroger’s 9.2% market share with Albertsons’ 6.4% market share into the second largest United States (U.S). grocery chain, though still far behind Walmart’s 23.6% grocery market share.
Why the deal collapsed:
- Regulatory concerns: The Federal Trade Commission (FTC) argued that the merger would reduce competition and lead to higher consumer prices
- Stakeholder pushback: Unions feared job losses, smaller providers worried about reduced bargaining power, and communities anticipated store closures
- Divestment challenges: Kroger’s plan to sell stores to C&S Wholesale Grocers failed to alleviate regulatory concerns about market competition
Ultimately, the court ruled that the risks of price increases and diminished local competition outweighed potential long-term benefits, signaling a stricter regulatory environment for future mega-deals.
What should you expect in 2025?
Despite recent setbacks, M&A activity in RCPG is far from stagnant. Below are our key predictions:
- AI-powered consumer intelligence startups will be hot targets
- Digital-native challenger brands will fuel M&A, especially in legacy mid-market
- Retailers will double down on private label through vertical integration
- Operational model synergy (in terms of technology stack, supply chain network, product categories, etc.) will drive ‘Tuck-In’ M&A deals even in areas where brands are looking for diversification
- Despite easing business policies, regulatory scrutiny will be at an all-time high
The road ahead
While M&A activity in RCPG slowed in recent years, its strategic value remains undeniable. Economic stabilization, shifting consumer behaviors, and technological advancements are expected to drive renewed dealmaking.
However, as the Kroger-Albertsons case illustrates, regulatory scrutiny and operating model-related integration challenges will remain a critical consideration for large-scale mergers.
To succeed in this dynamic landscape, companies must strike a balance between innovation and responsibility. Whether through acquiring AI-powered platforms, forging strategic partnerships, or prioritizing sustainability, the most agile and consumer-centric businesses will emerge as industry leaders.
If you found this blog interesting, check out our The Power Of Pricing In The Success Of CPG Brands: 2025 And Beyond | Blog – Everest Group , which delves deeper into another topic relating to the retail and CPG sector.
If you have any questions, would like to gain further expertise in the retail and CPG sector, or would like to reach out to discuss these topics in more depth, please contact Manu Aggarwal ([email protected]), Abhilasha Sharma ([email protected]) or Priyanka Jotwani ([email protected]).
