Revenue is growing across much of the food industry, but inflation, tariffs, capital costs, and changing demand continue to pressure profitability.
Revenue growth is usually viewed as a sign of a healthy business. In food manufacturing, however, a growing top line does not necessarily produce stronger margins, improved cash flow, or greater business value.
Food and beverage companies continue to operate in an environment shaped by fluctuating ingredient costs, labor pressures, tariffs, interest rates, changing consumer behavior, supply chain risk, and the need for continued investment in technology.
These pressures do not eliminate opportunities for growth. They do change the type of leadership required to turn growth into sustainable financial performance.
For food manufacturers, protein processors, agricultural businesses, and distributors, the central challenge in 2026 is not simply generating additional sales. It is determining which sales, products, customers, facilities, and investments create lasting value.
Revenue Growth and Profit Growth Are Not the Same
Recent industry surveys show that many food and beverage companies are growing, but the rate and quality of that growth vary considerably.
Citrin Cooperman’s 2025 food and beverage industry outlook found that 83 percent of responding companies were experiencing revenue growth. More than half, however, characterized that growth as modest or limited.
Survey participants identified inflation, supply chain constraints, and an inability to fully pass higher costs to customers as continuing threats to profitability. Rising interest rates were a significant concern for 28 percent of respondents, while 26 percent identified the high cost of capital as a leading concern.
A separate 2025 Grassi survey of 169 food and beverage decision-makers produced a similarly mixed picture. More than two-thirds of the companies surveyed reported revenue increases during 2024, but only 56 percent reported profit growth.
The difference between those figures is significant. It shows that additional sales did not translate into improved profitability for every growing company. Respondents that did report profit improvement frequently connected it to investments in technology, supply chain efficiency, and employee productivity.
Revenue can increase while profitability weakens for several reasons:
- Ingredient and packaging expenses may rise faster than selling prices
- Labor costs may increase without corresponding productivity improvements
- New customers may require unfavorable pricing or service levels
- Product complexity may create additional changeovers, waste, and downtime
- Higher inventory may consume cash and increase carrying costs
- Freight and distribution expenses may reduce customer-level profitability
- Capital investments may not produce their expected return
- Growth may exceed the capacity of existing systems and management processes
A company can therefore appear successful based on sales while becoming less efficient, less profitable, or more financially vulnerable.
Food Price Inflation Has Moderated, but Cost Pressure Has Not Disappeared
Food inflation has slowed from the exceptional increases experienced earlier in the decade, but prices continue to rise.
USDA reported that overall food prices were 3.0 percent higher in June 2026 than in June 2025. Grocery prices were 2.7 percent higher, while food-away-from-home prices were 3.4 percent higher.
For all of 2026, USDA forecasts:
- A 3.1 percent increase in overall food prices
- A 2.7 percent increase in food-at-home prices
- A 3.5 percent increase in food-away-from-home prices
These averages can conceal substantial differences among ingredients and product categories. In June 2026, beef and veal prices were 11.8 percent higher than one year earlier. Fresh vegetable prices were 9.9 percent higher, and sugar and sweets were 6.9 percent higher.
At the producer level, USDA found that wholesale beef prices were 12.7 percent higher than a year earlier. Farm-level vegetable prices were 59.2 percent higher, while farm-level egg prices had fallen sharply as egg production recovered.
This volatility makes margin management especially difficult. A processor may experience cost reductions in one major ingredient while facing sharp increases in another. Product mix, customer contracts, inventory timing, hedging practices, and purchasing agreements can all affect whether those changes improve or weaken profitability.
Executives must therefore look beyond broad inflation averages. They need visibility into the cost structure of each product, customer, and production line.
Passing Every Cost Increase to Customers Is Becoming More Difficult
Price increases helped many companies protect profitability during the highest periods of inflation. That strategy has become more difficult as consumers and customers place greater emphasis on value.
In Grassi’s 2025 industry survey, 85 percent of responding companies reported increasing prices during 2024, typically by 1 to 4 percent. At the same time, 90 percent expected tariffs to increase operating costs, generally by an estimated 3 to 5 percent.
The numbers illustrate a potential imbalance. If input costs rise faster than the prices a company can pass through, margins can narrow even when unit volume remains stable.
Consumers are also adjusting their purchasing decisions. RSM reported that many food and beverage businesses anticipated a recovery in sales volume during 2025, but that recovery had not fully materialized by the second half of the year. Instead, consumers increasingly sought lower-cost alternatives and shifted toward private-label products.
Private-label competition creates pressure from two directions.
Branded manufacturers may have less flexibility to raise prices without losing volume. Contract and private-label manufacturers may gain new opportunities, but they must manage demanding customer pricing, service, quality, and production requirements.
Neither situation rewards growth at any cost. Leadership teams need to understand:
- Which products contribute the most margin
- Which customers create excessive operational complexity
- How promotions affect actual profitability
- Whether a price increase will offset a potential volume decline
- Where private-label production creates attractive opportunities
- Whether low-margin products consume capacity needed by stronger products
- How customer-specific packaging and service requirements affect costs
Without reliable cost and performance data, leaders may pursue revenue that appears attractive but produces little financial return.
Inventory Can Protect Operations While Consuming Cash
Supply chain disruptions encouraged many food companies to increase safety stock, diversify suppliers, and place orders earlier. Those decisions may protect production, but they also require additional working capital.
RSM reported that median inventory levels among a group of North American packaged food companies had been increasing since 2020. More recently, tariff uncertainty and concern about future supply interruptions contributed to additional inventory accumulation.
Higher inventory can provide protection against delays, shortages, and price increases. It can also create significant costs:
- More cash is tied up in raw materials and finished goods
- Additional warehouse space may be required
- Perishable inventory may lose shelf life or become obsolete
- Forecasting errors can produce excess or insufficient stock
- Insurance, refrigeration, handling, and financing costs may increase
- Packaging or labeling changes may make existing inventory unusable
- Slower inventory turnover may conceal inaccurate demand assumptions
The appropriate inventory level depends on the product, supplier network, lead times, customer commitments, shelf life, and consequences of a production interruption.
Reducing inventory without understanding those factors can create shortages. Increasing inventory without a clear strategy can weaken cash flow.
This is why supply chain leadership has become a financial function as well as an operational one.
Capital Is Becoming More Selective
Food and beverage companies still need to modernize plants, increase capacity, replace aging equipment, and improve automation. The financial environment, however, is requiring greater discipline around those investments.
Food Processing’s review of 31 major publicly traded food and beverage companies found that their combined 2025 capital spending budgets were 1.1 percent lower than the previous year’s actual spending.
The reduction was relatively small, but it marked the first projected decline identified by the publication since its 2009 report. The same companies had budgeted approximately 3 percent more for capital projects in 2024 but ultimately spent 1.6 percent less than planned.
The shift does not mean food manufacturers have stopped investing. It suggests that leadership teams are placing greater scrutiny on project selection, execution, and return on investment.
A well-designed automation project may:
- Increase throughput
- Reduce repetitive manual work
- Improve product consistency
- Strengthen traceability
- Reduce waste and giveaway
- Improve employee safety
- Reduce downtime
- Provide more reliable production data
A poorly designed project may add complexity without solving the original operational problem.
Before approving a major investment, leadership should be able to answer several questions:
- What measurable problem is the investment intended to solve?
- What is the current cost of that problem?
- Does the facility have the technical staff to support the new system?
- How will installation affect active production?
- What training will employees and supervisors require?
- How will results be measured after implementation?
- What assumptions could prevent the expected return?
These questions require cooperation among finance, operations, engineering, maintenance, food safety, information technology, and human resources.
Technology Must Produce Measurable Results
Food companies continue to show strong interest in digital tools.
An Institute of Food Technologists survey of 194 industry professionals found that approximately:
- 50 percent planned to invest in artificial intelligence
- 48 percent planned to invest in supply chain tracking systems
- One-third planned investments in data analytics, automation, cloud platforms, or ERP systems
- 26 percent planned to invest in advanced pathogen identification or detection technology
The three leading reasons for digital investment were improving production efficiency, improving cost efficiency, and gaining better data for decision-making. More than 60 percent of respondents, however, identified cost as a major barrier to technology adoption.
The value of a system depends on whether leaders can translate its capabilities into better decisions and measurable performance.
An ERP implementation does not automatically improve inventory accuracy. New production software does not automatically reduce downtime. Artificial intelligence does not automatically correct incomplete, inconsistent, or poorly governed data.
Technology investments require leaders who can:
- Define the business requirement
- Select systems appropriate for the operation
- Establish ownership of data and processes
- Gain employee adoption
- Connect systems across departments
- Set realistic implementation schedules
- Measure financial and operational results
- Correct problems when performance falls short
The strongest technology strategy begins with operational clarity, not with a particular software product.
Ownership Changes Are Increasing the Need for Stronger Management Systems
The food industry may also experience significant ownership and acquisition activity.
Citrin Cooperman found that 42 percent of food and beverage survey respondents anticipated selling their business within three years. Another 36 percent expected to acquire a business during the same period.
Companies preparing for a potential sale identified several priorities for increasing business value:
- Improving sales infrastructure, cited by 37 percent
- Improving organizational talent, cited by 36 percent
- Improving financial reporting, cited by 34 percent
These priorities are closely connected.
A potential buyer generally wants to understand whether the company has dependable financial data, repeatable systems, stable customer relationships, and a management team capable of operating the business without excessive dependence on the current owner.
For an acquiring company, the leadership challenge continues after the transaction. Integration may require:
- Consolidating financial reporting
- Aligning food safety and quality systems
- Combining purchasing and supplier networks
- Reviewing product and customer profitability
- Integrating ERP and operational technology
- Retaining important employees
- Standardizing management practices
- Eliminating unnecessary duplication
- Communicating changes to customers and suppliers
A transaction may create growth on paper immediately. The operational and financial benefits depend on the leaders responsible for integration.
Margin Improvement Is a Cross-Functional Responsibility
Protecting profitability is not exclusively the responsibility of the CFO or finance department.
Plant managers influence labor utilization, yield, waste, downtime, overtime, safety, and maintenance expenses. Supply chain leaders affect ingredient costs, freight, inventory, supplier risk, and working capital. Sales leaders influence customer mix, pricing, promotions, and service requirements.
Research and development determines whether new products can be manufactured efficiently at commercial scale. Food safety and quality leaders help prevent recalls, customer rejections, regulatory problems, and avoidable product loss.
The most effective leadership teams understand how these functions affect one another.
A purchasing decision that lowers ingredient costs may create production difficulties. A sales agreement may increase revenue while requiring expensive changeovers. Deferred maintenance may temporarily reduce spending while increasing downtime later. Reduced staffing may lower labor costs while weakening quality or throughput.
Margin-focused leadership requires more than budget reductions. It requires the ability to identify the complete financial and operational effect of a decision.
Leadership Priorities for Profitable Growth
Food companies pursuing sustainable growth should evaluate whether their current and future leaders can demonstrate strength in several areas.
Financial Visibility
Leaders need access to reliable information about product, customer, facility, and production-line profitability.
Operational Improvement
Candidates should be able to explain how they improved yield, throughput, labor efficiency, quality, maintenance, or capacity.
Pricing and Commercial Discipline
Sales growth should be evaluated alongside contribution margin, service costs, promotional spending, and customer complexity.
Supply Chain Management
Leaders must balance cost reductions with availability, food safety, shelf life, working capital, and continuity of supply.
Capital Allocation
Executives should be capable of comparing investments, challenging assumptions, and measuring whether completed projects deliver their expected return.
Technology Implementation
Leaders must understand the organizational and operational work required to turn a technology purchase into a successful business system.
Organizational Development
Companies need leaders who can build management depth, develop successors, improve accountability, and reduce dependence on a small number of individuals.
M&A Integration
Acquisitions require leaders who can combine systems, teams, facilities, customers, and operating practices without losing focus on daily performance.
Finding Leaders Who Can Convert Growth Into Value
Recruiting experienced leadership is itself becoming more expensive and resource-intensive. SHRM reported that the median cost per executive hire reached $15,000 in 2026, up from $10,600 in 2025. The median time required to fill an executive position was 45 calendar days, and the median percentage of executive positions filled externally was 100 percent among the organizations surveyed. Recruiter workloads also increased to a median of 25 open requisitions per recruiter.
There is limited independent public research that directly compares the financial results of industry-specialized search firms with general recruiting agencies. The available hiring data does show why specialization can matter. Food manufacturing production managers earned a median annual wage of $107,500 in May 2024, and the BLS projects approximately 17,100 industrial production management openings each year across manufacturing through 2034. These positions require responsibility for employees, equipment, production schedules, budgets, safety, quality, suppliers, and operational improvement. Evaluating that level of responsibility requires more than matching titles and keywords.
A specialized search firm can supplement an internal hiring team by dedicating resources to market research, directly approaching accomplished passive candidates, and evaluating achievements within the context of food production, protein processing, agriculture, and distribution. For RJ Executive Search, that means examining whether a candidate has actually improved margin, increased yield, reduced waste, stabilized a workforce, integrated an acquisition, strengthened a supply chain, or successfully implemented technology. A more targeted process can reduce time spent interviewing poorly aligned candidates and help companies focus their resources on leaders with relevant, measurable experience.
Sources
- Citrin Cooperman, From Disruption to Opportunity: 2025 Food and Beverage Subsector Outlook.
- Grassi, 2025 Food & Beverage Survey.
- U.S. Department of Agriculture Economic Research Service, Food Price Outlook, July 2026.
- RSM US, Margin Pressures and Private Label Growth Reshape the Food and Beverage Competitive Landscape.
- Institute of Food Technologists, Outlook 2025: Technology Trends.
- Food Processing, 2025 Capital Spending Outlook.
- Society for Human Resource Management, 2026 Recruiting Executives Benchmarking: Attracting Critical Talent.
- U.S. Bureau of Labor Statistics, Industrial Production Managers, Occupational Outlook Handbook.