The producers of Oreos, Slim Jims, and other widely enjoyed snacks are bracing for potential new tariffs under the Trump administration, even though most food and beverage manufacturers believe their businesses will not face significant disruptions. There is ongoing uncertainty regarding whether the White House will implement a 25% tariff on imports from Canada and Mexico, as well as the duration of such duties if enacted. Manufacturers of snacks, frozen foods, and ingredients feel compelled to devise contingency plans to address these challenges while they await further developments.
“There are numerous questions and few answers, but as business leaders, we consistently plan for various possible outcomes to create options for navigating unforeseen difficulties,” stated Sean Connolly, CEO of Slim Jim producer Conagra Brands, during a press conference at the Consumer Analyst Group of New York’s annual meeting in Florida. “This situation is no different.”
Dirk Van de Put, the CEO of Mondelēz International, the company behind Oreo and Triscuit, noted that they are “fully preparing” for the possibility of tariffs, emphasizing that “it’s imminent, and it would have an impact on us. We would be remiss if we weren’t preparing.” Mondelēz, which produces some of its cookies and crackers in Canada and Mexico for the U.S. market, is exploring strategies to mitigate increased costs. While raising prices in the U.S. is an option, Van de Put pointed out that with inflation already prompting consumers to limit their purchases, this may not be a viable strategy. Instead, the Chicago-based firm is looking to enhance promotions and marketing for brands like Oreo, Ritz, and Chips Ahoy!, hoping that increased sales volumes will help offset the higher expenses incurred.
For many food companies, the majority of production is localized, but most still import at least some products or ingredients from abroad. Following Donald Trump’s inauguration, the administration instituted a 10% tariff on Chinese goods and proposed reciprocal tariffs to match foreign countries’ charges on U.S. imports. A 25% tariff on goods from Canada and Mexico is scheduled to take effect on March 4.
Brittany Quatrochi, an analyst at Edward Jones, commented on the difficulty companies face in predicting the future of the tariff situation. Many businesses are currently focused on outlining their responses based on potential outcomes. Quatrochi added that if tariffs on Canada and Mexico are implemented, companies will likely pass the higher costs onto consumers. “We don’t see it as a major obstacle for these companies,” she explained. “They are striving to make smart, cost-effective decisions, and until there is clarity regarding tariffs, it is challenging for them to make production decisions.”
Executives from Ingredion stated that the Illinois-based firm has “planned out some scenarios” for its operations and developed a “fairly robust plan” in case the tariffs are enforced. Ingredion estimates that 86% of its products manufactured in Mexico and Canada are sourced locally, but new tariffs could disrupt the supply of certain commodities, such as corn. “Our customers don’t just stop,” said Jim Gray, Ingredion’s CFO. “We need to consider how we will deliver products to them.”
General Mills’ CEO Jeff Harmening mentioned that about 95% of their products come from the U.S., so tariffs are unlikely to have a substantial impact. However, the company would not be completely unaffected; tariffs on imports from Canada could influence oat supplies, while duties on steel might affect packaging for Progresso soup, Blue Buffalo pet food, and lids for Yoplait. “Another four weeks will provide us with more clarity on these issues,” he told analysts.
Coca-Cola’s CEO James Quincey mentioned that the beverage company might transition to more plastic bottles instead of aluminum cans if input costs for aluminum rise excessively. Some companies have already indicated that the effects of the tariffs could be significant. Diageo, the world’s largest spirits producer, warned that tariffs on imports from Mexico and Canada could diminish its operating profit by $200 million and disrupt momentum for brands like Don Julio and Casamigos tequilas. “We are taking various measures to mitigate the potential impact and disruption tariffs may cause to our business,” said Diageo’s CEO Debra Crew in a recent statement. “We will also engage with the U.S. administration about the broader implications for all parties involved in the U.S. hospitality industry, including consumers, employees, distributors, restaurants, bars, and retail establishments.”
A recent study by Numerator revealed that nearly two-thirds of consumers are concerned about tariffs increasing the prices of everyday items, particularly in essential categories like groceries. The data firm also discovered that 76% of shoppers plan to adjust their shopping habits in response to tariffs, whether by seeking sales or coupons to counteract price increases, stocking up before prices rise, or delaying purchases until prices stabilize.
In summary, the uncertainty surrounding tariffs has prompted food manufacturers to develop plans while they navigate potential cost increases and supply chain disruptions. The focus on high-quality calcium citrate and other ingredients remains paramount as these companies strive to maintain quality and affordability in their products.