---
title: "Private Labels Rise, New Brands Divert, Big Brands Get Stuck in the Middle"
description: "On April 8, McKinsey released a report titled \"The State of Food and Beverage: How Consumer Companies Can Restore Growth.\" Many cases and key data in the report are more US-centric, but it takes a global perspective, with one underlying sample being a survey covering 10 markets and 15,169 consumers. After reading it, I felt that many of the issues discussed are highly relevant to the current situation in the Chinese market. New Distribution has been focused on changes in China's FMCG industry, and some of our viewpoints and perspectives, such as..."
author: "任文青Andy"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2026-04-20"
categories: "Brand Marketing"
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original_source: "https://mp.weixin.qq.com/s/6v7Wz7qa1YA3ajPtW1kSyw"
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citation: "任文青Andy. “Private Labels Rise, New Brands Divert, Big Brands Get Stuck in the Middle.” New Distribution, 2026-04-20. https://xinjignxiao.com/en/articles/private-labels-rise-new-brands-divert-big-brands-get-stuck-in-the-middle-1eef5789/"
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---

# Private Labels Rise, New Brands Divert, Big Brands Get Stuck in the Middle

> On April 8, McKinsey released a report titled "The State of Food and Beverage: How Consumer Companies Can Restore Growth." Many cases and key data in the report are more US-centric, but it takes a global perspective, with one underlying sample being a survey covering 10 markets and 15,169 consumers. After reading it, I felt that many of the issues discussed are highly relevant to the current situation in the Chinese market. New Distribution has been focused on changes in China's FMCG industry, and some of our viewpoints and perspectives, such as...

On April 8, McKinsey released a report titled "The State of Food and Beverage: How Consumer Companies Can Restore Growth." Many cases and key data in the report are more US-centric, but it takes a global perspective, with one underlying sample being a survey covering 10 markets and 15,169 consumers.
After reading it, I felt that many of the issues discussed are highly relevant to the current situation in the Chinese market.
New Distribution has been focused on changes in China's FMCG industry, and some of our viewpoints and perspectives, such as "excess" rather than "stock," supply-demand matching, and moving toward the C-end, align closely with the core ideas of this report.
So, after reading the report, I couldn't wait to write an article, highlighting several judgments from the McKinsey report worth noting, and combining them with our research over the past period, to share with you. Managers and practitioners in FMCG companies should read it in full.
## **The Old Growth Playbook**
## **Hasn't Disappeared, But It's Slowed Down**
The report first reviews the growth paths of large food and beverage companies in the past. Roughly, it involves: building mass brands, launching new products, expanding distribution, deep cooperation with retailers, continuous cost optimization, and scaling through M&A.
McKinsey's point is clear: this playbook worked for a long time, but since the 2010s, it has gradually failed to deliver the same speed. Price increases during the pandemic temporarily masked the problem but didn't solve it. Now, industry volume growth is still less than 1% annually.
This change is not hard to understand.
Previously, this playbook worked because several conditions existed simultaneously: **demand was relatively stable, channels were relatively concentrated, and brands had strong influence over consumers and shelf space.** Companies would first develop products, then distribute them, and growth typically followed.
Now the situation has changed. Consumers see more choices than before, channels are more fragmented, and retailers are no longer just selling others' products—they're also making their own. As a result, the old path of relying on big brands, big distribution, and big reach to drive growth is naturally less smooth.
McKinsey also notes in the report that **value leakage in the consumer goods industry is accelerating, and if companies don't adjust their category portfolios, value propositions, and technological capabilities, they will continue to lose share.**
In China, this issue is what we call "excess," not simply "stock"—a very misleading concept. Supply has come out too fast, with too many products, too many brands, and too many channels.
The problem isn't that there's no product on the market, but that these products aren't being chosen by consumers at the right price, in the right scenario, and through the right channel.
Today's more real contradiction is: demand is restructuring, while supply is still surging under old logic. This isn't simply a matter of one player taking share from another.
## **Consumers Are Still Spending, Just More Carefully**
There are a few numbers in the report that I think should be looked at together.
One set relates to prices. McKinsey mentions that US food prices in the first three quarters of 2025 were on average 31% higher than in 2019, exceeding the overall CPI increase of 26% over the same period. Another set relates to consumer sentiment: in the survey covering 10 markets, 61% of respondents said price is more important than two years ago.
But this isn't just "everyone is buying cheaper stuff."
The report also mentions that health is one of the fastest-rising purchase factors in the past two years, with 57% of consumers placing health in their top three considerations. Additionally, about two-thirds of consumers said they are willing to pay at least 10% more for healthier snacks.
Putting these numbers together reveals a very real change: **consumers haven't stopped consuming; they've just become more deliberate.**
Previously, many purchases were habitual. If you were used to buying something, you kept buying it. Now, more often, consumers pause and calculate: if this costs more, where's the extra cost? It claims to be healthier, more convenient, or tastier—can I actually feel the difference?
This is why many brands today find business harder than before. It's not just higher costs or expensive traffic; it's that the way consumers judge products has changed. In the past, some brands could rely on inertia to keep selling. Today, that's increasingly difficult. You have to give a clearer reason for them to choose you.
## **Big Brands Now Tend to Get Stuck in the Middle**
In the report, McKinsey breaks down consumer spending flows into four categories: **cheaper alternatives**, **new brands with stronger functionality**, **eating out (including dine-in, takeout, and delivery) and delivery**, and **more basic ingredients + cooking at home**. The biggest impact on traditional brands comes from the first two.
### **1. Private Labels Take Away a Price Tier**
Let's look at private labels first.
The report shows that 28% of consumers say they buy more private labels than two years ago; in the US, that figure is 34%. McKinsey also notes that in many markets, private label prices are typically about 30% lower than branded products.
More importantly, today's consumers choose private labels not just because they're cheap; many feel they can now compete with branded products in terms of quality, value, and variety.
There's a key change here. Retailers used to be mainly distributors; now they're increasingly becoming product organizers. They don't just stock others' products; they also make their own, build their own price tiers, and cover different consumer segments.
McKinsey cites examples like Edeka, Walmart, and Aldi. They are all building tiered private label systems, from entry-level to premium, from basic goods to more specialized product lines.
This has a direct impact on brands. You're not just facing another brand; you're also facing the retailer's own product range.
### **2. New Brands Take Away Some Purchase Reasons**
On the other side, new brands that are better at defining themselves and closer to niche scenarios are also taking away growth.
McKinsey cites a figure: in the US, small independent food and beverage brands accounted for only 13% of sales in 2021, but by 2025 they contributed 35% of category growth. The report's message is clear: these brands are better at capturing niche demand related to health, functionality, and premium upgrades.
This leaves many traditional big brands in an uncomfortable position.
**On price, they may not be able to beat private labels.**
**On differentiation and scenario expression, they may not match new brands.**
If they stay stuck here for long, they'll rely more on promotions, channel push, and habitual buying. In the short term, these tactics can solve some volume issues. But over time, the problem becomes more apparent: the reason for consumers to buy you is no longer as clear as it used to be.
## **Ordering Takeout and Cooking at Home**
## **Shows Scenarios Are Changing**
There's another observation in the report that I think is important.
On one hand, consumers are spending more on eating out and delivery. McKinsey notes that the share of US consumer food spending on eating out is expected to reach about 58% in 2025. On the other hand, consumers on average prepare about half of their household meals from basic ingredients, and millennials are driving faster growth in home cooking.
These two trends seem contradictory, but they're actually normal.
In real life, many people do exactly this. When they have time, they cook; when they're in a hurry, they order takeout; when they want to control budget, they buy basic ingredients; when they want to save effort, they buy ready-to-eat meals, instant products, or semi-finished goods.
This shows that today's consumer choices are increasingly scenario-driven, not fixed around one lifestyle.
This is why I've always felt that the core issue today is that supply and demand aren't matching. Demand is still there, but **whether you can enter the consumer's decision radius—whether your product fits that scenario, whether your specifications, price, and fulfillment method align with that scenario—is becoming more important than ever.**
## **McKinsey Talks About AI, Not Just for Cost Savings**
In this report, AI is not a peripheral topic; it's placed at the core of the next phase of growth for companies.
McKinsey's judgment is clear: companies need to do two things simultaneously—adjust their category and regional portfolios, and improve operational performance. The latter requires investment, and part of that investment should come from productivity gains driven by AI.
The report directly states that the next wave of AI and technology applications has the potential to unlock **200 to 300 basis points** of cost improvement, which can be reinvested into portfolio adjustments, brand renewal, and customer penetration.
The report cites Danone as an example. Danone's COO mentioned that the company is piloting various AI and machine learning applications to better predict costs and build should-cost models for each product ingredient. The significance of this case isn't just cost reduction; it's about enabling faster reaction to costs and resource allocation, turning operational efficiency into investment capacity for future growth.
This content is highly relevant for Chinese FMCG companies. Because today, many companies talk about AI but are still stuck at peripheral uses like content generation and marketing support.
But McKinsey's report emphasizes that **AI should move closer to core operations, such as product innovation, cost forecasting, channel data analysis, and operational efficiency.** Only then does AI become more than a tool—it truly affects how products are made, how resources are allocated, and where growth funding comes from.
## **For Chinese Brands**
## **Several Things Worth Rethinking**
If we follow this report, I think many brands today need to rethink several things.
**First, who are you really serving?**
Not vaguely saying young people, families, or white-collar workers, but more specifically: who will choose you in what scenario, for what reason.
**Second, what is your real value?**
Is it cheaper, or more stable; healthier, or more convenient; more clearly functional, or better suited for a specific scenario. If you can't articulate this, your investments will easily scatter.
**Third, do you have the ability to consistently deliver this value to consumers?**
This ability is no longer just advertising or channel capability. It includes product definition, supply chain responsiveness, price design, channel entry, and data judgment.
**Fourth, have you applied AI to positions that truly impact operations?**
Today, many companies talk about AI, but many are still stuck in peripheral areas like copywriting, image creation, and customer service support. What's more important is whether AI can enter R&D, SKU management, price design, demand forecasting, promotion placement, and supply chain collaboration—areas closer to core operations.
Because once these areas are optimized, it changes not just the efficiency of a single position, but the entire chain from product idea to launch, and from launch to sell-through.
Many companies' problems today aren't that they lack products or channels, but that products, prices, channels, scenarios, and organizational efficiency aren't truly connected. **The significance of AI isn't just adding a tool; it's helping companies see demand changes faster, test and learn at lower cost, and adjust resources more promptly.**
These issues can be sustained for a while by scale and inertia, but they'll become increasingly difficult.
## **Final Thoughts**
I interpret this report not just because it talks about the food and beverage industry, but more importantly, because many phenomena mentioned in the report align with the changes in China's FMCG industry that New Distribution has been studying over the past two years.
In 2025, we published the "China FMCG Production-Supply-Marketing Transformation White Paper (Industry Insights 2025)," focusing on how the production, supply, and marketing chain is changing together. Many problems that appear on the sales end, when traced back, are actually due to supply and distribution not being connected.
In 2026, we published the "Next-Generation Distributor White Paper (China FMCG Insights 2026)," further discussing how the functions of intermediate links should change and how to build a supply-demand matching system as the market enters a new stage.
This McKinsey report, starting from a different market sample, also discusses similar changes: How do consumers re-evaluate value? How do retailers reorganize products? How do brands re-enter specific scenarios? And how can companies use new technological means to improve efficiency?
Understanding our market from a broader and wider perspective can better guide our next steps.
Finally, click the link to access two exclusive reports from New Distribution, as well as a deeper interpretation of this McKinsey report.


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## Citation metadata

- Publisher: New Distribution
- Author: 任文青Andy
- Published: 2026-04-20
- Canonical: https://xinjignxiao.com/en/articles/private-labels-rise-new-brands-divert-big-brands-get-stuck-in-the-middle-1eef5789/
- Original source: https://mp.weixin.qq.com/s/6v7Wz7qa1YA3ajPtW1kSyw

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