Where Next for Pricing in Consumer Goods?

This article is derived from our full-length White Paper, "Where Next for Pricing in the Consumer Goods Industry", available here.

For years, consumer goods companies have leaned on price increases to offset rising costs. It worked—until it didn’t. Between 2019 and mid-2024, CPG prices rose 32.3%, yet volume growth barely reached 3.4%. (1) Now, the cracks are appearing. In Q3 2024, one-third of top CPGs saw volume declines, with food, beverage, and alcohol brands among the hardest hit. Meanwhile, 65% of the top 46 FMCG companies missed revenue expectations as consumers pushed back against higher prices. (1)

The reality is clear: price hikes alone are no longer a sustainable growth strategy. Consumers are recalibrating their spending, retailers are resisting increases, and governments are stepping in with new regulations and tariffs. Pricing is entering a new era—one where data-driven precision, strategic balance, and organizational alignment will define success.

Pricing leaders' challenge is no longer reacting to cost pressures. It’s about responding to complexity with smarter, more adaptive pricing strategies.

Why Pricing Must Evolve

For many brands, pricing has been treated as a financial adjustment rather than a strategic function. Cost-plus models have dominated, where companies pass cost increases directly to consumers. But that approach is proving unsustainable, with three key factors driving the need for a new pricing playbook.

First, the price-volume relationship is shifting. Consumers are becoming more price-conscious, carefully weighing each purchase. Over-reliance on promotions as a volume recovery tool is further complicating the picture—conditioning shoppers to wait for discounts rather than paying full price.

Second, external pressures are mounting. Governments are intervening, from sugar taxes to new import tariffs, adding another layer of pricing complexity. Meanwhile, retailers are pushing back harder in price negotiations, making it more difficult for brands to pass through cost increases without detailed justification.

Third, companies are moving beyond cost recovery toward more competitive and value-based pricing models. Pricing is no longer just about covering input costs—it’s about how a brand positions itself in the market, how it differentiates from competitors, and how it balances revenue growth with long-term brand health.

A company’s ability to refine, execute, and scale pricing strategies in real time is quickly becoming a key differentiator. Those still relying on legacy pricing models risk losing ground to more agile competitors.

Balancing Short-Term Gains With Long-Term Pricing Power

One of the biggest risks in pricing today is chasing immediate revenue gains at the expense of brand equity. Promotions, for example, can boost short-term sales but erode pricing power over time. If a product’s average realized price is too close to its lowest promotional price, it signals weak brand health and makes it harder to maintain long-term profitability.

Instead of relying on frequent price adjustments and discounting, brands need a structured, strategic approach to pricing. That means defining clear price positioning, ensuring that price reflects perceived brand value rather than just cost dynamics. It requires optimized price pack architecture (PPA)—ensuring brands have the right product mix across price tiers to serve different consumer segments effectively. And it demands more precise promotional strategies, where discounts reinforce price position rather than undermine it.

This shift is not just about how companies price—it’s about why. Leading organizations are using pricing as a tool to strengthen brand equity, drive sustainable growth, and optimize profitability—not just to fill short-term revenue gaps.

AI-Powered Pricing: The New Competitive Edge

For decades, pricing decisions were slow, manual, and heavily dependent on historical trends. That’s no longer viable. AI is turning pricing into a real-time capability, allowing companies to analyze market shifts, track competitor movements, and optimize pricing at scale.

Despite this, many companies are struggling to modernize their pricing processes. Research shows that 60% of RGM leaders cite a lack of pricing tools as a key challenge, while 40% say their organizations lack the data and agility to execute modern pricing strategies. (2)

AI is closing this gap. Instead of relying on reactive pricing adjustments, brands using AI-driven models can predict demand shifts, simulate pricing scenarios, and execute price changes dynamically. Machine learning algorithms are now capable of real-time elasticity modeling, helping companies understand price sensitivity across different SKUs, markets, and channels. AI-powered tools also allow for automated competitive benchmarking, ensuring brands aren’t pricing in a vacuum but are continuously aligning with broader market trends.

This shift is significant: pricing is moving from a static, periodic process to an always-on, dynamic function that can adjust in real time to changing conditions. For brands looking to stay ahead, AI-driven pricing isn’t just a competitive advantage—it’s a necessity.

Embedding a Pricing-First Culture

Even with AI and automation, pricing success hinges on how well it’s embedded across the organization. Too often, pricing is treated as a commercial or finance function when, in reality, it touches every aspect of the business—from marketing and sales to supply chain and category management.

Leading organizations are making pricing a cross-functional priority. They are ensuring clear ownership and accountability, making pricing a core part of commercial strategy rather than an afterthought. They are creating standardized pricing frameworks, so teams across finance, sales, and marketing are aligned on how pricing decisions are made. And they are integrating pricing discussions into regular business planning cycles, ensuring that pricing is embedded in executive meetings, commercial reviews, and supply chain planning.

When pricing is treated as an organization-wide capability rather than a back-office function, companies move faster, execute better, and drive more sustainable profitability.

The Future of Pricing: Smarter, Faster, More Strategic

Consumer goods brands are entering a new era of pricing complexity. Cost-plus pricing, reactive adjustments, and aggressive promotions will no longer be enough. The brands that succeed will be those that adopt AI-driven, dynamic pricing strategies, balance short-term revenue needs with long-term brand positioning, and develop pricing capabilities that scale across markets and channels.

Pricing is no longer just about covering costs—it’s about defining a brand’s competitive position and shaping consumer behavior. Companies that embrace real-time, data-driven pricing models today will be the ones setting the industry standard for the next decade.

Sources:

(1) Frederic Fernandez Associates, Company analysis; (2) PwC 

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