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The Kaluza-Klein reduction of 11-dimensional supergravity on G2 manifolds (notably Freund-Rubin compactifications and variants) yields an effective $N=1$ 4-dimensional supergravity. This construction is the lift to M-theory of the KK-compactification of string theory on Calabi-Yau manifolds (see at string phenomenology).
In order for this to yield phenomenologically interesting effective physics the compactification space must be an orbifold (hence an orbifold of special holonomy), its stabilizer groups will encode the nonabelian gauge group of the effective theory by “geometric engineering of quantum field theory” (Acharya 98, Atiyah-Witten 01, section 6). Specifically for discussion of string phenomenology obtaining or approximating the standard model of particle physics by this procedure see at G2-MSSM.
Genuine G2-manifold/orbifold fibers, these having vanishing Ricci curvature, correspond to vacuum solutions of the Einstein equations of 11d supergravity, i.e. with vanishing field strength of the gravitino and the supergravity C-field (see e.g. Acharya 02, p. 9). (If one includes non-vanishing $C$-field strength one finds “weak $G_2$-holonomy” instead, see below).
Notice that vanishing gravitino field strength (i.e. covariant derivative) means that the torsion of the super-vielbein is in each tangent space the canonical torsion of the super Minkowski spacetime. This torsion constraint already just for the bosonic part $(E^a)$ of the super-vielbein $(E^a, E^\alpha)$ already implies (together with the Bianchi identities) the equations of motion of supergravity, hence here the vacuum Einstein equations in the 11d spacetime.
In compactifications with weak G2 holonomy it is the defining 4-form $\phi_4$ (the one which for strict G2 manifolds is the Hodge dual of the associative 3-form) which is the flux/field strength of the supergravity C-field. See for instance (Bilal-Serendinger-Sfetos 02, section 6):
Consider a KK-compactification-Ansatz $X_{11} = (X_4,g_4) \times (X_7,g_7)$ and
$F_4 = f vol_{X_4}$;
$F_7 = \tilde g e_7^\ast \phi_4$
where $e_4$, $e_7$ are given vielbein fields on $X_4$ and $X_7$ and $\phi_4$ is the Hodge dual of the associative 3-form. Then the Einstein equations of 11-dimensional supergravity give
(where $g_4$, $g_7$ is the metric tensor) saying that both spaces are Einstein manifolds (BSS 02, (5.4)). The equations of motion for the supergravity C-field is
for $\phi = e_7^\ast \phi_3$ the pullback of the associative 3-form (BSS 02, (5.5)), saying that $\phi \propto \star F_7$ exhibits weak G2-holonomy with weakness parameter given by the component of the C-field on $X_4$.
For realistic field content after Kaluza-Klein compactification one needs to consider not smooth (weak) G2-manifolds but conical singularities and orbifolds of these. see the first page of (Acharya-Denef-Hofman-Lambert) for discussion of phenomenology for such orbifold $G_2$ models and further pointers and see (Achary 98) for general discussion of orbifolds with $G_2$-structure.
The KK-compactification of 11d supergravity of fibers of special holonomy was originally considered in
Leonardo Castellani, Riccardo D'Auria, Pietro Fré, chapter V.6 of Supergravity and Superstrings - A Geometric Perspective, World Scientific (1991)
George Papadopoulos, Paul Townsend, Compactification of D=11 supergravity on spaces of exceptional holonomy, Phys.Lett.B357:300-306,1995 (arXiv:hep-th/9506150)
Specifically string phenomenology for the case of compactification on G2-manifolds (or rather orbifolds ) goes back to
Bobby Acharya, M theory, Joyce Orbifolds and Super Yang-Mills, Adv.Theor.Math.Phys. 3 (1999) 227-248 (arXiv:hep-th/9812205)
Bobby Acharya, On Realising $N=1$ Super Yang-Mills in M theory (arXiv:hep-th/0011089)
Michael Atiyah, Edward Witten $M$-Theory dynamics on a manifold of $G_2$-holonomy, Adv. Theor. Math. Phys. 6 (2001) (arXiv:hep-th/0107177)
Bobby Acharya, Edward Witten, Chiral Fermions from Manifolds of G2 Holonomy (arXiv:hep-th/0109152)
See also
Mirjam Cvetic, Gary Gibbons, H. Lü and C.N. Pope, Supersymmetric M3-branes and G2 Manifolds (pdf)
Bobby Acharya, F. Denef, C. Hofman, Neil Lambert, Freund-Rubin Revisited (arXiv:hep-th/0308046)
Discussion of Freund-Rubin compactification on $\mathbb{R}^4 \times X_7$ “with flux”, hence non-vanishing supergravity C-field and how they preserve one supersymmetry if $X_7$ is of weak G2 holonomy with $\lambda$ = cosmological constant = C-field strength on $\mathbb{R}^4$ is in
Adel Bilal, J.-P. Derendinger, K. Sfetsos, (Weak) $G_2$ Holonomy from Self-duality, Flux and Supersymmetry, Nucl.Phys. B628 (2002) 112-132 (arXiv:hep-th/0111274)
Thomas House, Andrei Micu, M-theory Compactifications on Manifolds with $G_2$ Structure (arXiv:hep-th/0412006)
Survey and further discussion includes
Michael Duff, M-theory on manifolds of G2 holonomy: the first twenty years (arXiv:hep-th/0201062)
Sergei Gukov, M-theory on manifolds with exceptional holonomy, Fortschr. Phys. 51 (2003), 719–731 (pdf)
Bobby Acharya, M Theory, $G_2$-manifolds and Four Dimensional Physics, Classical and Quantum Gravity Volume 19 Number 22, 2002 (pdf)
Adil Belhaj, M-theory on G2 manifolds and the method of (p, q) brane webs (2004) (web)
Adam B. Barrett, M-Theory on Manifolds with $G_2$ Holonomy (arXiv:hep-th/0612096)
James Halverson, David Morrison, The Landscape of M-theory Compactifications on Seven-Manifolds with $G_2$ Holonomy (arXiv:1412.4123)
The corresponding membrane instanton corrections to the superpotential? are discussed in
The hierarchy problem in the context of $G_2$-compactifications is discussed in
A survey of the corresponding string phenomenology is in