Australian retail & FMCG face uneven growth amid rising costs

Australia's fast-moving consumer goods (FMCG) and retail sectors continue to experience uneven growth, as companies adapt to shifting consumer behaviour, intense competition, and significant changes in value perception. Analysis from Circana reveals that while some segments and brands are gaining momentum through strategic pricing and new product development, others face increasing challenges from rising costs and supply-chain issues.

Market pressures

Australian retail and FMCG businesses operate in a landscape marked by variable growth across different product categories and between online and offline channels. The sectors collectively account for more than AUD $175 billion in annual consumer spending. Companies are managing through ongoing cost pressures while competition remains fierce. Those able to recalibrate how they define and deliver value see opportunities, while others struggle to maintain pace with transformations in consumer demand and behaviour.

"The Australian FMCG landscape - with more than AUD $175 billion in annual spend - is evolving faster than ever. Growth is uneven, and while cost and competition pressures persist, the opportunities lie in how the industry redefines value, leverages technology, and connects meaningfully with shoppers. The convergence of economic, behavioural, and technological change means adaptability is now the industry's most valuable currency. Those that innovate with insight will lead the way into 2026," said Daniel Bone, Insights Director - Australia, Circana.

Crime and complexity

Retail crime, including theft and illicit trade, has become a growing concern within the industry. These activities are not only increasing operational costs for retailers but are also distorting industry performance benchmarks and hindering overall topline results. In response, businesses are investing more in security measures, in-store technology, and staff training to protect both assets and customer experience.

Promotional shifts

Australian retailers and manufacturers are adjusting to a new climate marked by a record level of product promotions. A greater share of goods is now sold on promotion, which is influencing where consumers choose to shop. The elevated significance of promotions is also impacting shopper loyalty. Companies are now reassessing how they balance competitive pricing, the perception of value, and the need for sustainable margins.

Redefining value

Some businesses are seeking to move beyond price-driven competition, aiming to grow market share by focusing on quality, innovation, brand reputation, and customer experience. There is a shift towards building long-term differentiation in an effort to create sustained value and connect with consumers beyond short-term price cuts or incentives.

Changing consumption

The increasing use of GLP-1 medications, which are now present in a significant percentage of Australian households, is producing ripple effects in FMCG categories. These pharmaceuticals have started to influence patterns of food and beverage consumption, health-related purchasing, and even marketing strategies as brands respond to shifts in consumer habits and attitudes.

Technology's role

Artificial intelligence is playing a more active part in the FMCG and retail environment. Circana expects that AI will soon shift from a primarily analytical tool to becoming a direct participant in consumer shopping, making purchase and media choices on behalf of shoppers. Such changes have the potential to disrupt established approaches to marketing, product promotion, and retail pricing.

Emerging trends

Companies achieving growth are responding to evolving consumer interests that emphasise attributes like hydration, energy, social uniqueness, protein intake, nostalgia, enjoyment within limits, and premium private label options. These trends suggest Australian shoppers are looking for more tailored product experiences that combine simplicity, trust, and individual preference.

"Staying on top of data and trends is crucial for businesses seeking to anticipate changing consumer needs and identify new opportunities for growth," said Bone.