In Focus:
A whole new (regionalized) world—consumer brands adapt to new trade realities

After five straight months of decline, The Conference Board reported that U.S. consumer confidence rose in May, but remains below the range that has persisted since 2022, as consumers pull back in the face of trade uncertainties and the likely adverse impact on the global economy.

Historically, consumer confidence has been closely correlated with forward consumer spending. The Conference Board’s June survey revealed consumer confidence about business conditions and future employment prospects fell again , while expectations for future income improved slightly in July.

Source: BCA Research 2025

While consumer confidence data is important, it can also pivot quickly. Job numbers are our top metric to watch in the coming months. The Dow dropping 1,000 points may make consumers jittery, but as we saw in the spring it can bounce back swiftly. However, companies laying off thousands of employees would drive very rapid pullbacks in consumers’ actual spending and job losses are much slower to reverse trend. While high-net-worth individuals’ (who represent the marginal consumer dollar today) purchasing behaviors tend to track the public equity market, driven by a sense of how wealthy they feel, the other 50% of consumer spending is heavily linked to job security and the likelihood an individual will continue to have his or her job. An environment of pervasive job losses would be psychologically dampening and have a direct impact on the average consumer’s willingness to make non-essential purchases.

The outcome of the trade war and ultimate tariff water-level is still unknown (at least to these authors residing outside of the Oval Office), however one thing is increasingly clear to us: as the tide of nationalism rises around the globe brands will increasingly be consumed regionally not globally. This has broad implications for consumer brands, marketers, and supply chains.

THE RISE OF REGIONALISM

A new global economy is taking shape, but it will take time to materialize. Supply chains, like battleships, do not change course quickly. The new global tariff framework will incentivize continued re-shoring, but this trend has been evident for some time driven by advances in manufacturing automation and related technologies and new U.S. factories still cannot be built overnight. In the meantime, costs increase in real time—faster than businesses can adjust their supply chains or retail prices—so management teams will need to prioritize cost discipline and optimization measures to protect margins with headcount reductions as a last resort.

In the next couple of quarters, we expect tariffs will decrease corporate profitability in the consumer and retail sector. Global operators with multiple regionally focused brand portfolios and supply chains that can sell products outside of the U.S. market, such as L’Oreal, will perform better due to the smaller impact of tariffs.

In our view, the world is moving to a regionally-oriented reality driven by geopolitics, trade barriers, and a rising sense of nationalism around the world. The legacy, globally-dominant consumer brands will face eroding market share and consumers will increasingly favor regionalized challenger brands. U.S. brands will be favored in U.S. markets, European brands in European markets, and Chinese brands in Chinese markets.

Once the dust settles this will represent opportunities for the consumer M&A market. International organic growth will be harder to achieve and corporate acquirers will turn to M&A to acquire niche regional brands with robust regional supply chains. In particular, global strategics will be incentivized to acquire U.S. brands to gain deeper access to the market here.

In tandem, we expect to see the rise of more patriotic shopping. The question is how far consumers will be willing to go and whether they will be able to afford the elevated pricing of more nationalistic brands. If a Ralph Lauren suit is produced domestically but more expensive than a foreign-made alternative, will consumers be willing and able to buy it?

QUALITY AND ON-DEMAND PRODUCTION

The brands that will thrive in this new world order are ones that are able to preserve their margins by raising prices and maintaining their perception as high quality while tariffs inflate product costs. In the early readout of our 2025 Cascadia Consumer Brand Preferences survey, the number one brand value respondents look for when making personal discretionary purchases is quality.

On-demand or other more dynamic production models will also benefit from all of the change and uncertainty. As an immediate reaction to tariffs, many big brands cancelled product orders in anticipation of reduced demand. They did not want to bring in products (subject to tariffs) that they cannot confidently sell at full price.  A few days after Trump’s April 2nd tariff announcement, global logistics company Flexport reported 28% of its customers said they are pausing all ocean freight bookings from Asia “until there is more clarity on where tariffs will end up.” Some brands do not have that luxury since their supply chains are locked into fixed timelines—for example, a typical European fashion brand is already committed to delivering its Fall 2025 collection.

If the Federal Reserve cuts rates later this year and liquidity is flooding the market again and spurring consumption, many products will not be available because orders were not placed in Q2. Companies with on-demand production models will have a huge advantage in that scenario. At the same time, we anticipate DTC-centric businesses (most able to tap into on-demand production) will re-emerge as winners after a sluggish couple of years. They are inherently more nimble and able to utilize variable cost fulfillment models (instead of incurring fixed costs and regular mark-downs), and their marketing spend is more directly correlated with revenues than in traditional brick-and-mortar businesses. The better positioned companies are to adapt to rapid changes in costs and demand, the stronger they will be.

Consumer and retail trends to watch in 2025

Beauty and personal care

  • We expect this will be the most resilient consumer and retail sector this year since these brands have the highest margin profiles (cost of product 10-15% of retail price) and are the least affected by the increased costs of goods. The risk in this sector may lie in packaging costs.
  • Consumers increasingly care about feeling good and healthy, not just looking good. Longevity and longer-term benefits are more important factors in consumer personal care purchases at the higher end of the market.
  • Problem-solving brands will command attention and wallet share as consumers search for solutions to specific issues such as acne, sleep, digestion issues, and hair loss.

Apparel, accessories, and footwear

  • We think consumers’ perceived ratio of value versus cost will top the macro-environment as the greatest challenge these categories face this year.
  • Purchases will continue for items that cannot be postponed (e.g., school and team uniforms, items for growing kids, and replacement goods).
  • The competition for wallet share that has heated up substantially over the last 30 years will be even fiercer in the coming months, particularly between material goods (e.g., iPhones and other technology) and experiences (e.g., trips and dinners).

Enthusiast sectors

  • We anticipate consumers will continue to spend on hobbies and passions they consider to be a lifestyle necessity rather than a discretionary purchase—from sporting goods and crafting supplies to niche products like beekeeping supplies.
  • Purchase decisions will be driven by a willingness to pay up for quality (albeit with a moderating purchase cadence) and the perception of good value. Brands should be very careful about being overly promotional in a choppy trading environment and diluting consumer perception.
  • Enthusiast purchases are the new indulgence. Consumers are embracing feel-good spending on personal passions—less “treat yourself” and more “fuel what fulfills you.”

Three priorities in a shifting environment

To stay competitive in a challenging and dynamic market, we recommend businesses in the consumer and retail sector focus on three critical things in 2025:

  1. 1. Prioritize cash and liquidity. Every brand will benefit from being over-capitalized. Review your capital structure and ensure you have both defensive and opportunistic liquidity. Cascadia has a strong track record of working with growth and founder-owned brands, bringing equity growth partners to brands to meet their objectives. The good news is capital markets are open and available this year; we guide our clients on how to access capital most strategically.
  2. 2. Understand the market. The operating environment for businesses will not get simpler as we move forward. We expect the complexities to keep increasing. While it is easy to get consumed by the news cycle and short-term market movements, it is crucial to remember that they are not reflective of real value in the private markets. Large and rapid market swings are a product of trading, not investing, and are driven by technical factors including flights to safety and large institutions funding ongoing cash obligations due to declines in their portfolios.Founder-owned brands need to assess the world with clear eyes, focus on what matters most, and identify the most effective strategies to pursue your ambitions—whether that means finding a growth partner, securing capital, or selling your business. Our team is in constant dialogue with active strategic and financial buyers and investors in the consumer sector, enabling us to best position our clients for an optimal outcome. Our team is here to help you distill this complex environment and craft an action plan to navigate it.
  3. 3. Map out clear growth goals. We believe opportunities spring from chaos—but only if companies are ready to pursue them. Having clear organic and non-organic growth goals and staying laser-focused on profitability will be paramount in the coming months.

Cascadia’s Consumer, Retail & E-commerce group has extensive industry knowledge and investment banking experience delivering M&A and capital raising services to our clients. Leveraging our deep understanding of the underlying consumer trends driving disruptive change in our core sectors of focus, we help our clients cut through the noise.

To discuss how Cascadia can help you achieve your objectives in a rapidly changing world, contact us:

James Cartales
James Cartales
Juvenile, Home & Pet
Enthusiast & Outdoor Living
Connect		 Ilya Seglin
Ilya Seglin
Beauty & Wellness
Connect		 William Susman
William Susman
Fashion & Lifestyle Brands
Beauty & Wellness
Industry Disruptors
Connect
Loading