Published on: September 3, 2025

The wave of turbulence post COVID marches on, and looks to be magnifying some of the factors already in the market, while also shaping new ones.  Tariffs, inflation, and wage pressure are squeezing margin and forcing companies to get either very creative, or make some difficult decisions.  These pressures don’t appear to be temporary either (though tariffs could be).  They seem like structural shifts that are causing a wider divide in the marketplace between the haves and the have-nots.  Not only are we seeing some of this play out in the headlines, but we’re seeing it firsthand in the conversations we’re having everyday with industry participants.

The Forces Driving Bifurcation

Wage pressure and inflation have already been driving up both raw and finished goods costs over a number of years.   They came into full force during the pandemic, and are here to stay for the foreseeable future.  The Trump administration’s latest tariff push has redrawn global supply chains.  Some suppliers are stacking up inventory as quickly as possible, essentially front-running policy changes from the white house, while others are opportunistically using the confusion as a profit-taking incentive.  The long term effects obviously have yet to be seen.  These forces are exacerbating the wealth gap and creating a new normal for smaller upstarts in food & beverage (whether they be manufacturers or CPG companies).

The Result? Fiercer competition for an ever dwindling pie of premium consumers needed to grow their business.

The Rise of Extreme Differentiation—and Its Pitfalls

For CPG companies, this bifurcation could spell trouble.  The mass market is commoditizing at breakneck speed.  The segments of the market once thought to be hyper-niche may not cut it anymore (think keto-friendly and plant based).  Market differentiation might now look like a better-for-you gluten free vegan snack bar focused on people with a specific autoimmune issue (for example).  Loyalty might be fierce for that group, but scale is limited.

But what if you are still dreaming of mass market adoption with billion dollar valuations?  This is where funding comes in.

Funding: The New Gatekeeper of Success

That romantic notion of bootstrapping a pasta sauce business from your garage, a local favorite to a national icon, is becoming exceedingly rare.

Financing growth (raw goods, inventory, trade spend, marketing, etc) is expensive.

An affluent customer base is needed so these scrappy upstarts can garner the margins needed to grow their business.   With this customer base dwindling, entrepreneurs are going to require outside infusions of capital (VC or otherwise) to scale effectively.

Navigating the Future: Adapt or Die

It isn’t all doom and gloom.  If the future is a high-stakes arena where the winners are few and the losers are many, how do companies navigate?  We see three areas primarily:

1. Traditional Scaling– For those eyeing mass market adoption and empire-building, capital isn’t fuel; it’s oxygen.  Exploiting this path is still viable, just requires a different skill set (i.e. raising money).  I once had a founder tell me that a CEO peer he knew (a very large venture-backed household name) said that “raising money is a form of revenue”. Pretty much tells you everything you need to know.
2. Differentiated Distribution Focus – if companies can shed the ego associated with being on every shelf at Whole Foods or Costco, there are opportunities abound.  Focusing on segments like foodservice or DTC can meaningfully increase volumes without destroying margins.
3. Social Media/Influencer Economy – every influencer worth their salt seems to start a coffee brand once they have enough followers (maybe we should start one too once we have enough followers?).  Some are going this route and skipping traditional distribution entirely.  What you lose in volumes, you gain in margins and retain in control.

We certainly don’t have a crystal ball. At Rockledge we like to say that we take an “absurdly” long view. Helps us stay away from distractions and stay focused on fundamentals.

What are your thoughts on this shift? Share in the comments below—I’d love to if others in the are seeing the same thing we are.