The “New” CPG Funding Landscape
It’s April 2025, and we’ve been seeing one headline-making CPG deal after another – Siete, Simple Mills, Poppi, and most recently Sour Strips, which Hershey’s reportedly acquired for around $75M. I’ve been forwarded these articles and asked with each one: Does this signal a rebound? Are investors getting active again? What does this mean for my brand?
Looking at the size and nature of most of these transactions – Simple Mills, for example, selling for $795M off of $240M in revenue – it validates the trajectory the CPG industry has been on over the past 4-5 years – a return to the way it was pre-2010s.
Many of the founders I talk with struggle to understand why the goalposts investors set seem to keep shifting out of reach. They’re growing revenue, expanding distribution, improving margins, etc. but still find themselves navigating an increasingly difficult funding environment. The reality is, it’s not just about them or their brands, it’s about the larger capital markets and the shifting motivations of investors.
The goal of this post is to help founders make sense of what’s happening behind the scenes, why investors are making the decisions they are making, how the macroeconomic landscape is influencing those decisions, and how they might adapt to keep building successfully and maintain stable cash flow.
How We Got Here
For more than a decade, the CPG funding environment benefited from macroeconomic conditions that made risk-taking more attractive. Following the 2008 financial crisis, the Federal Reserve slashed interest rates and introduced Quantitative Easing, flooding the market with cheap money. With bond yields near zero, institutional investors (e.g. pension funds, endowments, and insurance companies) looked for higher returns elsewhere, which made VCs and private equity a key focus.
As the economy began to stabilize in the 2010s, the financial products and conditions the collapse created remained, and larger strategics began acquiring upstart CPG brands as a way to innovate and secure market share. Given the strategic lens of these acquisitions (i.e. a company like General Mills could theoretically acquire a $30M brand and plug it into its distribution system to 10x it within a year) and the availability of cash, valuations were astronomical.
VCs took notice and suits began to flood Expo West. CPG brands, once considered too slow-growing for venture-style funding, suddenly found themselves raising money at 8-12x revenue, fueled by the expectation that topline revenue was all that mattered and a strategic buyer would eventually bail them out. For years, this cycle thrived as long as capital was flowing – from early-stage VCs to later-stage growth funds to the strategics or public markets validating all of these markups with big cash transactions.
One of the earlier signals of this era was Hershey’s 2015 acquisition of Krave Jerky at nearly 10x revenue – a move that helped kick off a wave of VC capital flowing into the space. But in 2022, that flow slowed significantly.
Public Market Sentiment Brings A Period of Correction
Investors price private companies based on their publicly traded counterparts. Over the past few years, several high-profile CPG brands have seen their valuations decline dramatically, reinforcing investor skepticism around high-growth, low-profitability businesses:
Beyond Meat (BYND) – Once valued at nearly $14 billion in 2019 off the backs of exciting partnerships with the likes of Burger King, Beyond Meat’s market cap has collapsed to below $1 billion now due to declining sales, increased competition, and shifting consumer sentiment around plant-based alternatives.
Oatly (OTLY) – The oat milk pioneer IPO’d in 2021 at a $10 billion valuation but has since seen its stock drop over 85% as supply chain struggles, slowing demand, and ongoing profitability concerns weigh on investor confidence.
Tattooed Chef (TTCF) – A retail investor darling with an amazing 2021 Expo West booth in the frozen plant-based food category, the company filed for bankruptcy in late 2023 after failing to secure additional financing.
Honest Company (HNST) – Jessica Alba’s consumer goods brand went public in 2021 at a $1.4 billion valuation but has seen significant declines as profitability remains out of reach.
Public investors and strategics alike have grown tired of long paths to profitability, shaky operations buoyed by VC capital, and the underperformance of many upstart brands post-acquisition. Without public enthusiasm as a signal of future value, it’s become harder for private brands to justify premium valuations when seeking investment or acquisition.
Rising Interest Rates Didn’t Help
As of April 2025, the Federal Reserve’s benchmark interest rate sits at 5.25%-5.50%, with the 10-year Treasury yield hovering around 4%. Compare that to the near-zero rates of the 2010s, and the shift is clear. Institutional investors who once had to chase riskier bets in venture to hit their return targets can now earn 5%+ on safe, fairly liquid assets. That means capital is being allocated more conservatively, making it more difficult for VCs and PE firms to raise their funds from their once-willing LPs.
With these LPs shifting their focus to safer investments, a venture firm’s ability to raise its next fund is directly tied to the performance of its current one. If you're not familiar with fund lifecycles in venture, here is a TL;DR. If you are, skip ahead:
VCs typically raise capital from LPs (Limited Partners) – the aforementioned pension funds, endowments, and other institutional investors – to deploy into startups through distinct funds.
Each fund usually operates on a 7-10 year timeline, during which the VC is expected to invest, grow, and return this capital. The lifecycle generally breaks into three rough phases:
The first couple of years are for initial investments
Years 3-5 are for follow-ons and select later-stage opportunities
Years 5-10 are focused on liquidity.
So when a VC is midway through a fund and still deploying capital, they're often prioritizing companies that they believe can sell in the next 2-4 years. Investing in a brand doing $1-3M in sales that might take a decade to get to a 10x outcome doesn't pencil out within the fund's remaining runway. This dynamic is why CPG wasn’t very popular in venture before the financial crisis, and has led many VCs to favor later-stage investments with clearer paths to profitability and acquisition, making early-stage fundraising more challenging in many cases.
What This Means for CPG Founders
While capital is still out there, the criteria for securing it has come back down to earth. Some trends founders should be aware of, if not already:
Profitability is becoming more important – While growth is still valued, many investors are placing greater emphasis on strong unit economics and sustainable operations.
Alternative financing is playing a bigger role – With equity harder to raise, more brands are turning to revenue-based financing, asset-backed loans, and strategic partnerships.
Strategic buyers are looking for scale – Many larger CPG players that once acquired brands at $30M in revenue are now prioritizing acquisitions at $200M+ where the impact is more meaningful. That said, financial buyers – including private equity, family offices, and search funds – continue to pursue smaller deals, though valuations and deal structures have shifted toward favoring earn-outs and equity transactions.
Some outliers are worth watching – Deals like Hershey’s acquisition of Sour Strips (~$75M) are exciting, but still an outlier in terms of size and strategic rationale. These transactions likely stem from category-specific pressures (i.e. skyrocketing chocolate prices) and Hershey’s desire to creatively reach new consumer segments. They don’t signal a broad return to high-multiple acquisitions, but they do prove there's still strategic appetite under the right conditions.
How Founders Can Adapt
The funding landscape is evolving, and while it presents new challenges, it also opens up opportunities for founders who can adapt. Some ways to navigate the shift:
Extend your runway – If profitability isn’t within reach yet, look at ways to lower burn and improve margins to give yourself more time. Your gross margins are your best investor, and the money going out is just as important as the money coming in.
Can you change your pack size? Expand into a new channel that has less trade spend? Negotiate with suppliers? Increase your prices?
Test more profitable channels – Retail and DTC aren’t the only ways to grow. While it’s difficult to break from distribution in certain channels like frozen, you don’t need to be at the mercy of UNFI, KeHE, and Meta to scale.
Can you make a SKU for foodservice? Private label? How can you get your current customers to refer you to new ones?
Explore alternative capital sources – Bank loans, venture debt, and revenue-based financing may be viable options depending on your stage, profitability, and growth trajectory.
There are many SBA options for companies who have been in business for 2+ years or even for acquiring another company.
Focus less on funds and more on patient capital – Rather than focusing solely on institutional venture funds, consider building relationships with angel investors, family offices, or operators who understand your mission and are willing to be in it for the long haul. These groups aren’t constrained by a fund lifecycle and may be more flexible in how they support your business – whether through friendly debt, credit lines, or hybrid investment structures.
Think beyond traditional exits – If selling to a large strategic isn’t the most realistic near-term option, consider alternative paths, such as financial buyers or finding a complementary brand, manufacturer, supplier, etc. to merge with.
Who are your competitors, manufacturers, or adjacent players? Are there synergies you can explore to create one stronger entity?
Operational efficiency matters more than ever – Investors and potential acquirers are scrutinizing supply chains, gross margins, and scalability more closely.
How can you shave off a few percentage points across every line item on your P&L?
Let’s Chat
The easy money of the past decade is less accessible, but strong businesses are still finding ways to thrive. If you want to talk through your specific situation and make sure your capital strategy is dialed in, I’d love to connect. There’s no one-size-fits-all solution, but there’s always a path forward.
