How Trump’s Tariffs Are Driving Food and Beverage Giants to Adapt: What You Need to Know

Snack food makers, like those behind Oreos and Slim Jims, are getting ready for potential new tariffs under the Trump administration. Although many in the food and beverage industry don’t expect heavy losses, they are still making backup plans.

There’s a lot of uncertainty about whether the White House will impose hefty tariffs of 25% on imports from Canada and Mexico. If these tariffs kick in, it’s unclear how long they would last. Companies that produce snacks and frozen foods say they need to prepare for various outcomes.

Sean Connolly, the CEO of Conagra Brands, which makes Slim Jims, expressed this ongoing uncertainty. He mentioned how managers are always planning for different scenarios to handle unexpected challenges. Similarly, Dirk Van de Put, CEO of Mondelēz International, which produces Oreos and Triscuit, is ramping up preparations for possible tariffs. “It’s imminent, and it would affect us,” he admitted, noting their focus on offsetting costs wherever possible.

Mondelēz manufactures some products in Canada and Mexico, and the potential tariffs could raise their costs. While increasing prices for U.S. consumers might be an option, rising inflation makes this less appealing, according to Van de Put. Instead, the company plans to promote their brands, hoping that higher sales volumes can help absorb the added costs.

Most food companies source their products locally, but many also import some ingredients or items. Since Donald Trump’s presidency began, tariffs, particularly a 10% duty on Chinese goods, have been introduced. If the 25% tariffs on Canada and Mexico start on March 4, companies will need to act fast.

Brittany Quatrochi, an analyst from Edward Jones, pointed out that predicting tariff outcomes is tricky. Companies are actively working on strategies to adapt. If tariffs are enforced, it’s likely that they may raise prices for consumers. However, Quatrochi doesn’t see this as a significant barrier to business, as organizations strive to maneuver through uncertain times.

Ingredion, a company specializing in ingredient solutions, has scenarios planned out in case tariffs take effect. Despite sourcing most of its materials from within Mexico and Canada, certain tariffs could still disrupt the supply of raw ingredients like corn.

Jim Gray, Ingredion’s CFO, emphasized the need to maintain supply chains. He said, “Our customers don’t just stop,” underlining that businesses need to remain nimble to ensure product delivery.

General Mills is in a similar boat, with around 95% of their products sourced domestically. Still, they would feel the effects of tariffs, especially on imports like oats. Packaging costs could also rise due to tariffs on steel. As CEO Jeff Harmening mentioned, clearer insights will come in a few weeks, and companies continue to analyze their positions.

Coca-Cola is also preparing for changes. CEO James Quincey noted that they might switch from aluminum cans to plastic bottles if metal prices continue to climb.

Some businesses are already warning of serious impacts. Diageo, known for its spirits like Don Julio tequila, stated that tariffs from Mexico and Canada could cut their operating profits by $200 million. CEO Debra Crew shared that they are taking steps to lessen the potential disruptions caused by these tariffs and are engaging with the U.S. government about the wider effects on the economy.

A recent study by Numerator revealed that many shoppers are concerned about prices rising due to tariffs, especially for essential items like groceries. About 76% of consumers plan to change their shopping habits to cope with these potential price hikes. Many are looking for sales or planning to stock up before prices go up.