Challenger Brands Gain Ground as AI Transforms Product Discovery
Artificial intelligence is redefining the competitive landscape for consumer packaged goods (CPG) brands, according to a new analysis by NielsenIQ and Kearney. The report, titled “The New Growth Frontier,” reveals that AI is reshaping innovation, product discovery, and the consumer path to purchase, with significant implications for market share dynamics.
Key Insights at a Glance
- Market Share Shift: Established niche brands increased US market share by 1.5 percentage points (2022–2025), while large and mid-size national brands declined by 2.1 percentage points.
- AI Adoption: 74% of shoppers use AI for product discovery, 54% for research, and 20% for direct shopping.
- Agility Over Scale: Competitive advantage now depends on agility, precision, and AI-driven discoverability.
- Agentic Commerce: AI systems prioritize clarity and relevance, influencing product visibility and consumer decisions.
The Rise of Challenger Brands
Over the past three years, established niche brands have seen a significant increase in market share, growing by 1.5 percentage points. This shift is particularly pronounced in categories like Pet Care, Personal Care, and Health & Wellness, where AI-led innovation and discovery are accelerating. According to NIQ retail measurement data, large and mid-size national brands have experienced a decline of 2.1 percentage points during the same period. This data signals a structural shift in the CPG industry, where scale is no longer the sole determinant of success.
AI Democratizes Innovation
AI is democratizing capabilities that once required significant investment, from concept testing and formulation optimization to creative iteration and scenario modeling. Challenger brands are leveraging these tools to enhance their historical strengths, such as moving quickly, leading digitally, and aligning with consumer trends. Marta Cyhan-Bowles, Chief Communications Officer and Global Head of Marketing at NIQ, emphasizes, “We are entering a precision era in CPG. The growth levers that larger brands have come to rely on—like mergers and acquisitions—are no longer reliable paths to sustainable, long-term growth.”
Agentic Commerce: The New Discovery Pathway
The rise of agentic commerce, where AI systems filter options, generate recommendations, and influence purchasing decisions, is reshaping the consumer path to purchase. AI assistants are increasingly embedded in retailer websites, search tools, and shopping platforms, changing how products are surfaced and ranked. Katherine Black, Partner at Kearney, notes, “AI systems prioritize clarity and relevance. Brands that ensure their products are legible to AI with structured data, defined need states, and credible signals are better positioned to surface in these new discovery pathways.”
Future Outlook
As AI continues to reshape both innovation and discovery, traditional growth strategies are under pressure. Line extensions often redistribute share rather than expand categories, and acquisitions are becoming more complex in a market defined by shifting consumer expectations and AI-accelerated competition. Sustainable growth in the AI era will depend on grounding innovation in validated, unmet consumer needs, optimizing product content for AI-driven discovery, and integrating AI strategically across ideation, testing, and activation.
Conclusion
The convergence of AI-driven innovation and AI-mediated discovery is raising the bar across the CPG ecosystem. Large, established brands must modernize and refocus innovation pipelines to maintain momentum, while emerging brands can leverage AI to accelerate experimentation and trial. Join the conversation in the comments below.
About NIQ:
NielsenIQ (NIQ) is a leading consumer intelligence company, delivering the most complete understanding of consumer buying behavior and revealing new pathways to growth. Our global reach spans over 90 countries covering approximately 85% of the world’s population and more than $7.2 trillion in global consumer spend. With a holistic retail read and the most comprehensive consumer insights—delivered with advanced analytics through state-of-the-art platforms—NIQ delivers the Full View™. For more information, please visit niq.com.
About Kearney:
For 100 years, Kearney has been a leading management consulting firm and trusted partner to three-quarters of the Fortune Global 500 and governments around the world. With a presence across more than 40 countries, our people make us who we are. We work impact first, tackling your toughest challenges with original thinking and a commitment to making change happen together. By your side, we deliver—value, results, impact.
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