The consumer economy is tightening, and late-stage consumer brands are feeling the squeeze, from scarcer capital and rising COGS due to tariffs to slower conversions despite increased CAC. At MFG, we help brands execute, measure, and win using advertising inventory as growth equity.

In this New Growth Playbook for Consumer Brands, we break down the structural shifts behind today’s margin pressure, the real risks of cutting advertising too early, and why brands are turning to alternative capital models, such as media for equity to stay visible, preserve runway, and outgrow competitors in a down market.

Navigating the Margin Squeeze: The Macro Market

Wage growth is slowing. After a robust recovery period post-COVID, wage and income growth have decelerated. This deceleration is putting pressure on discretionary spending, especially in middle- and lower-income segments.

Inflation has cooled, but not without cost. While inflationary pressure has been partially tamed, it came at the price of higher interest rates, tighter liquidity, and more cautious spending. As a result, consumer sentiment has dipped to new lows in early 2025, with retail spending down 3–5% year-over-year.

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Tariffs are redefining cost structures. The April 2025 tariff overhaul has introduced new layers of volatility to the cost of goods sold (COGS) for consumer brands. A flat 10% tariff now applies to most U.S. imports, and rates as high as 30% target Chinese goods, including apparel, electronics, and packaging. The removal of the de minimis exemption—once a key lifeline for direct-to-consumer brands—further exacerbates this pressure, along with extended payback windows. Brands that, for instance, modeled a 15-month payback period are now grappling with a window that could extend to 24-30 months. Hence, liquidity is tighter than before.

CAC is climbing, while conversion drops. Customer acquisition costs (CAC) are up 20–40% since 2022. Click costs on Google rose 15%, Meta CPMs are up 20%, and TikTok CPCs surged 25%¹. At the same time, conversion rates and customer lifetime values (LTVs) have stagnated or declined due to softer demand, higher returns, and delayed repurchase cycles.
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‍Venture capital is retreating

Traditional VC dollars are drying up. Consumer brands now receive just 1 in 16 dollars from top investors, down from 1 in 3 a decade ago². As median payback periods stretch to 24-30 months, many VCs are turning to sectors with faster returns, leaving consumer companies in a liquidity bind.
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In Q1 2025, at the Seed and Series A stages, deal sizes increased, even as the overall number of deals declined by 26% compared to Q4 2024, suggesting a flight to quality.
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Seed & Series A: Flight to quality with dollars slightly up and deal count down
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Meanwhile, Series A round sizes grew more than post-money valuations, indicating higher dilution for founders.

Seed round size & post-money increased proportionately
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The result: Marketing is squeezed. Margins are compressed. And the pressure to cut costs, starting with advertising, is stronger than ever.

How Are Consumer Brands Responding to Tariff Pressures?

Faced with tightening margins and fading capital access, consumer brands are making tough trade-offs, and some of those choices are creating bigger problems than they solve.

Ad budgets are being slashed

According to the Interactive Advertising Bureau, 94% of U.S. advertisers are concerned that tariffs will force ad budget cuts. 

Nearly half expect reductions of 6–10%, and another 22% anticipate cuts of 11–20%³. For many early-stage brands, this is a reflexive move to preserve runway, but the consequences are severe.
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Social media appears to be one of the biggest losers, being the segment with the second-highest expected spending cuts due to rising CAC and declining conversion rates. Several underlying factors are driving this shift:

• Increased competition has led to higher ad costs across major platforms, making it more expensive to reach the same audiences.

• Audience saturation is reducing engagement, as users become desensitized to repetitive content and brand messaging.

• Algorithm changes are limiting organic visibility, forcing brands to rely even more heavily on paid placements.

• Privacy regulations and tracking limitations have made audience targeting less precise, diminishing the efficiency of performance-driven campaigns.

As these pressures mount, many advertisers are reevaluating the ROI of social media investments and reallocating budgets toward channels with more predictable and sustainable returns.

The Hidden Economics of Stop-Start Advertising

Shein and Temu proved the power of brand presence by losing it. When Temu pulled back its Google ad spend in early 2024, app store rankings collapsed overnight. For Shein, a similar dip in visibility translated to lost momentum in U.S. market share. In both cases, the takeaway is clear: advertising drives consumer behavior, and going dark comes at a cost.

Inaction doesn’t just slow growth, it hands opportunity to competitors. Add to that, cutting marketing puts your brand at a serious disadvantage when the economy recovers.

When Peloton slashed marketing by 19% in early 2022 to curb cash burn, sales fell by 40% within six months. CAC rose 30%⁴. The brand lost momentum that it couldn’t easily regain.

Marketing isn’t a discretionary line item, it’s survival capital. A 2023 Kantar study found that consumer startups that cut marketing saw a 15-20% sales drop within six months, with recovery trailing peers by 18-24 months.

Why Visibility Is a Financial Advantage

As major players reduce ad spend, consumer mindshare becomes more available and cheaper to capture. History shows that brands increasing their share of voice during downturns typically gain a disproportionate share of the market as the economy recovers. Investing in brand building also helps reduce price sensitivity, so that even financially-challenged consumers will be likely to choose your brand. For example: 

• In 2008, Procter & Gamble maintained ad spend while Unilever cut back. P&G gained 2% market share; Unilever stood still⁵.

• During the same crisis, Amazon increased marketing by 25%, leading to a 28% jump in revenue⁶.

• A MarketSense study during the 1989-1991 period states that due to ongoing campaigns, Jif Peanut Butter and Kraft Salad Dressing experienced sales increases of 57% and 70%, respectively, while Pizza Hut's sales rose by 61%. In contrast, McDonald's reduced its advertising budget and saw sales decline by 28%⁸.

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The lesson: Invisibility costs more than visibility, just not in cash. And the brands that understand this are building smarter paths to sustained exposure, even when capital is constrained.

Turning to Alternative Capital Models

Warren Buffett’s timeless advice rings especially true for consumer brands navigating today’s volatility. When peers retreat, the stage is set for bold brands to capture lasting advantage, not just in market share, but in customer trust and enterprise value.

Brands are increasingly turning to funding models that align more closely with their operating realities. For instance, revenue-based financing grew from $3.38B in 2023 to $5.78B in 2024, while venture debt accounted for nearly 19% of total VC activity in Q1 2024⁹. Media for equity is also rising in relevance as founders seek alternative ways to stay visible.

1. Revenue-Based Financing (RBF)

• Injects upfront capital in exchange for a fixed share of future revenue.

• Preserves equity and flexes with seasonal performance.

• Works well for high-margin, post-product-market-fit brands.

• Case in point: Wing secured $1.4M in RBF to expand its marketing in 2023, driving 210% growth without equity dilution¹⁰.
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2. Venture Debt

• A precision tool for companies with strong customer lifetime value visibility.

• Provides non-dilutive capital to growth-stage companies with strong revenue traction.

• Allows acquisition scaling without immediate equity cost.

• But carries fixed repayment obligations and high interest rates (10–14%).
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3. Media Capital ("Media for Equity")

Media for equity is a form of investment where a media company provides advertising space and expertise to an emerging brand in exchange for an equity stake in the company. Rather than providing cash or financing, the media company invests its advertising inventory in helping the brand amplify reach and cover customer acquisition costs.

• Moves marketing spend from P&L to the balance sheet, acting as strategic growth capital.

• Helps founders preserve liquidity while building brand equity.

• Allows brands to extend operational runway and reallocate budgets to other needs and unpredictable risks, such as rising COGS.

• Best suited for consumer-facing brands with growing marketing spend, operating in competitive markets, competing against large incumbents. 
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Data from MFG’s State of Media Capital 2025 report shows that:

• Media capital-backed brands reach mass-market penetration five years earlier than those following traditional growth models.

• 30% exit rate of all media capital investments in the last 15 years, 7% exited via an IPO.

• The 43 companies that IPO-ed after raising media capital achieved this milestone 12 months faster than typical B2C companies¹¹.

• In the last 15 years, 34 unicorns have emerged through media capital investments, including Airbnb, Uber, Coursera, Zalando, About You, Pinterest, among others. 
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Explore recent case studies 

MFG’s Model: Unrivalled Reach, One Partner 

What sets MFG apart is its diverse set of media assets and international network of media partners and investors. 

With over $30M in media assets under management and reaching 80% of US Households, we’re a strategic capital provider for growth-stage consumer brands to scale into global household names. 

The MFG fund pools top-tier advertising inventory across TV, streaming, digital, print, and Out-of-Home under one roof, reaching 80% of US households and providing brands with unrivalled reach and a diverse set of media assets. We’re the US’s leading media capital fund with over $30M in media assets under management, backing growth-stage consumer brands on their journey to becoming global household names.What sets MFG apart is its diverse set of media assets and international network of media partners and investors.‍

How We Invest

• We invest $1–5M via flexible tranches, with optionality for follow-on investments.

• Media allocation is tailored to each brand’s needs across TV, digital, streaming, and more.

• We co-invest using equity, SAFE, or convertible notes, typically as a minority investor.
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At MFG, we don’t just fund CACs, we help brands execute, measure, and win using media as growth equity. We go beyond capital, offering media planning, creative support, performance tracking, and direct access to top marketing experts. 

Through focused growth sprints, we help each brand shape the right media strategy and deal structure to scale.

Conclusion

Downturns reshape markets, but they also reshuffle opportunity. As larger incumbents retreat, pause ad spend, and conserve cash, agile consumer brands have a rare window to break through the noise, claim visibility, and build lasting equity.

The brands that will emerge stronger are the ones that act decisively:

• Reallocating spend from unstable CAC channels to durable brand assets.

• Preserving cash by shifting marketing from P&L to the balance sheet.

• Choosing capital partners who understand that marketing is not overhead, it’s fuel for brand growth.

When customer acquisition costs surge, conversion slows, and capital dries up, visibility becomes a competitive advantage, and trust becomes your most defensible moat.

At MFG, we believe brand building is an indispensable lever for consumer brands to grow into household names and achieve a clear path to profitability. It’s also a strategic financial option to help leapfrog large incumbents.  Our fund pairs media capital with hands-on strategic support across planning, creative, and measurement. We help brands stay present without burning cash, shift marketing from the P&L to the balance sheet, and unlock real growth when others are shrinking.

When the market lies dormant, bold brands continue to build.
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References

¹ Digital Ads Benchmark Report Q4 2024

² DealRoom and “State of European Tech Report”, 2024, Atomico

³ EMARKETER: The retail media squeeze: Navigating tariffs, budget cuts, and performance pressure

⁴ Industry Dive: Peloton projects nearly 10% sales decline for the year

⁵ Fortune: Procter & Gamble shows that increasing spending during a recession is worth it

⁶ Nova: The History Of Advertising In A Recession

⁷ ABC News: Nike sales booming after Colin Kaepernick ad, invalidating critics

⁸ Tracksuit: Marketing in economic downturns: Why you shouldn't cut brand investment

⁹ PitchBook Data

¹⁰ Efficient Capital Labs: How Wing Achieved 210% Growth with ECL

¹¹ Analysis of 44 S-1 filings of e-commerce, marketplaces, gaming, social media and content distributors vs 43 companies who raised media capital and IPO-ed in the last two decades.