Food and beverage outlook: Regulatory pressures meet AI innovation

The food and beverage industry is entering a transformative era. Two key forces—regulatory complexity and artificial intelligence—are reshaping how companies operate, compete and connect with consumers. Businesses must exercise agility and adapt quickly to avoid falling behind competitors, especially in the middle market space, where businesses are jockeying for attention from consumers feeling increasing economic strain.

Regulatory complexity: A new era of compliance

Supply chains are facing unprecedented scrutiny. Heightened traceability, stricter ingredient sourcing and expanded documentation are no longer optional—they’re becoming the norm. Make America Healthy Again (MAHA) initiatives are driving sweeping reforms that continue to redefine food safety expectations. Already, the MAHA movement has introduced significant changes, including the tiered phaseout of petroleum-based food dyes. As a result, businesses must respond quickly while building resilience to navigate additional changes on the horizon.

For many companies, this could require reengineering operational processes from the ground up. Flexible systems that enable rapid product reformulation and automated compliance reporting are now essential to protect margins and maintain market access. Real-time tracking and supplier verification tools are no longer optional—they’re critical for survival. At the same time, these changes present an opportunity to build scalable enterprise solutions, adopting data strategies to give operational stakeholders faster access to the information they need. These efforts are required not only to enable agile forecasting, but to meet compliance obligations related to tax; environmental, social and governance; and other regulatory functions with greater speed and confidence.

Smaller and middle market businesses face an uphill battle. Limited resources make it harder for them to absorb compliance costs and invest in technology. Yet strategic digital investments can level the playing field. By prioritizing automation and analytics, these companies can streamline operations, mitigate risk and position themselves for long-term competitiveness.

AI takes the aisle: The future of grocery shopping

Artificial intelligence is transforming the consumer experience and raising the stakes for brands. According to Acosta Group research, 70% of shoppers have already used an AI tool to assist with their everyday shopping. Generative AI now influences which products consumers see in their favorite grocery apps, shaping decisions at every stage of the shopping journey.

Consumers rely on these tools to compare products, find the best prices and predict future needs based on prior purchase history. But visibility is limited. AI platforms often highlight only top-ranked options, creating unevenly distributed exposure for those not at the top of the list. For brands, this means optimizing their digital presence and adapting marketing strategies to thrive in an AI-driven environment. One example is creating AI-friendly content, such as short videos optimized for social media that showcase product benefits and sustainability stories. These formats are favored by AI-curated feeds, increasing the likelihood of brands appearing in recommendations and search results.

This shift comes at a time when consumers are facing mounting financial pressure. The U.S. labor market is showing signs of weakening, and inflation continues to push grocery prices higher. Both food-at-home and food-away-from-home costs have been rising since the start of 2025, with the consumer price index for food at home climbing to 2.7% in September, well above the postpandemic low of 0.9% in August 2024.

As a result, shoppers are becoming far more selective when stocking their pantries, prioritizing value above all else. For food and beverage businesses, this underscores the importance of understanding their target market and tailoring promotions and digital strategies to reach them effectively. Companies that embrace this shift and invest in data-driven engagement will be well positioned to gain a competitive edge.

Managing risk at the intersection of regulation and technology

The convergence of regulatory demands and AI adoption introduces new operational risks. Data privacy, cybersecurity and compliance challenges now intersect, requiring businesses to manage them concurrently. Success depends on building cross-functional teams that blend expertise in regulatory compliance, data management and supply chain management. Strategic investment in both technology and talent is critical not just to mitigate risk, but to drive innovation.

At the same time, companies must maintain consumer appeal amid spending pressures, such as more stringent SNAP (Supplemental Nutrition Assistance Program) eligibility requirements under the One Big Beautiful Bill Act. Balancing compliance, technological transformation and market responsiveness will be essential for resilience and growth. Maintaining margins in an environment of accelerating costs will require disciplined cost management, operational efficiency and innovative approaches to value creation.

The path forward for the food and beverage sector

Food and beverage companies’ success will hinge on adaptability, strategic investment and building resilient systems that meet regulatory and compliance requirements while satisfying evolving consumer expectations. Those that embrace change and leverage technology will be best positioned for sustainable growth.