Everyone is talking about AI. It’s going to change software, eliminate jobs and destroy entire industries, and if you spend time around venture capitalists, you’d think every dollar is headed into an AI company. So where does that leave consumer packaged goods?

Is CPG dead? Obviously not. People still need to eat, drink and buy skincare, supplements, clothing and household products. The better question is whether CPG innovation is dead, and whether investors will stop funding the next generation of consumer brands.

It sure seemed like it just a year ago. Now,I don’t think so. I’ve invested in more than 50 consumer and CPG companies, and after recently talking with both AI investors and consumer investors, I believe AI might end up being one of the best things to happen to CPG.

First, CPG needed a valuation reset

For a while, consumer brands got valuations that looked like technology companies. That never made sense. Software has very high incremental margins. A chocolate company has to buy ingredients, make the product, package it, ship it, and leave every retailer along the way enough margin to make the system work. CPG is a physical business, and for a while investors forgot that. Valuations have come back to earth, and that’s healthy.

The reason to invest hasn’t gone away. Big companies like Procter & Gamble and Nestlé still rely on acquisitions to bring in new brands and customers. What’s changing is how the next generation gets built.

AI finds CPG efficiencies

The biggest opportunity is running these businesses with fewer people and far more effectively. Take supply chain: suppliers, co-manufacturers, warehouses, inventory, forecasting, carriers, retailers. A huge amount of manual work has always held it together. AI can connect these systems more tightly, improve demand forecasting, flag inventory problems earlier, analyze supplier performance and automate the reporting people used to build in spreadsheets. That all shows up in margin.

It reaches well beyond supply chain. Marketing creative, briefs, research, customer service, e-commerce, analytics and even packaging and nutritional-label workflows can move faster, with the appropriate human and regulatory review. I’ve talked to CPG companies approaching $50 million in annual revenue with five or six full-time employees. In the past, that company might have needed 15 or more. They’ve essentially AI’d the company.

AI increases exit value

Remember: CPG doesn’t have software margins. A $100 million chocolate company, after ingredients, manufacturing, freight, warehousing, marketing, returns and everyone else’s cut, might produce only a few million dollars of EBITDA. So every point of margin matters.

Take a business at a 9% margin trying to reach 12%. That’s a 33% increase in EBITDA, or about $3 million more a year on $100 million of revenue. At an 8x acquisition multiple, that’s $24 million of added enterprise value. At 10x, it’s $30 million. This is where AI stops being a technology story and becomes an enterprise-value story.

Buyers won’t pay a magical “AI premium” because you have 47 AI agents running around. They’ll care about results. Picture two $100 million companies in the same category. One has a 9% margin. The other has 12%, ships faster, carries inventory more efficiently and keeps growing without adding overhead. Which would you rather own? The technology isn’t the asset. The operating leverage is.

AI isn’t going to kill CPG

Most AI conversations end up being about what it will destroy. CPG may be a counterexample. AI isn’t replacing chocolate, beverages, skincare or apparel. It’s changing the economics of the companies that make them. The last generation was built on digital distribution. The next may be built on AI-powered operating leverage: smaller teams, faster product development, better forecasting, leaner supply chains and higher margins.

So no, CPG isn’t dead. And if AI can turn a 9% margin into 12%, founders should see those three points as potentially $30 million of exit value.

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Why AI is Fueling CPGs Rise from the Dead