Threat of Trump’s tariffs force food and beverage giants to prepare

The makers of Oreos, Slim Jims and other popular snack foods are preparing for the possibility of new tariffs under the Trump administration even as most food and beverage manufacturers say they don't expect a major hit to their business.

Uncertainly looms as to whether the White House will move forward with 25% tariffs on Canada and Mexico and how long the duties will remain in place if they were to go into effect. Snack, frozen food and ingredients makers say they have little choice but to develop contingency plans for how they will respond — even as they wait to carry out the initiative across their operations.

“There are a lot of questions. There are not a lot of answers, but we as managers of the business are always contingency planning for an array of possible outcomes to create options for ourselves to navigate curve balls that might come our way,” Sean Connolly, CEO of Slim Jim manufacturer Conagra Brands, told reporters at the Consumer Analyst Group of New York’s annual gathering in Florida. “This is no different.”

Dirk Van de Put, CEO of Oreo and Triscuit maker Mondelēz International, said in an interview that the company is “in full preparation” for possible tariffs. “It's imminent, and it would affect us,” he said. “We would not be doing our job if we're not preparing.”

Mondelēz, which makes some of its cookies and crackers in Canada and Mexico for the U.S. market, is looking for ways to offset the higher costs.

It could increase prices in the U.S., but with inflation already causing consumers to cut back on purchases, it’s unlikely to be a major tool, Van de Put said. Instead, the Chicago-based company is preparing to boost promotions and marketing for some of its brands like Oreo, Ritz and Chips Ahoy!, with higher volumes offsetting the elevated costs incurred by Mondelēz.

‘Our customers don't just stop’

The majority of production is localized for many food companies but most import at least a small amount of products or ingredients from other countries. Since Donald Trump's inauguration, the White House has placed a 10% duty on products from China and rolled out a plan for reciprocal tariffs to match what other countries charge the U.S. for imports. Tariffs of 25% against goods coming from Canada and Mexico are set to go into effect on March 4.

Brittany Quatrochi, an analyst with Edward Jones, said it's “very challenging” for companies to predict how the tariff situation will unfold. Many businesses are focused on outlining how they would respond depending on the outcome. She added that if duties on Canada and Mexico were implemented, companies would likely pass on the higher costs to consumers.

“We don't see it as a major headwind for these companies,” Quatrochi said. “They're trying to make smart, cost-effective decisions, and until there's clarity around tariffs, it's very difficult for them to do anything production-wise.”

Executives with Ingredion said the Illinois company has “planned out some scenarios” on its business and has a “fairly robust plan” should the tariffs go into effect. The ingredients company estimated 86% of its products made in Mexico and Canada are sourced within those respective countries, but new duties could impact the movement of some commodities Ingredion uses like corn.

“Our customers don't just stop,” Jim Gray, Ingredion’s CFO, said in an interview. “We have to be able to think about how we're going to get product to our customers.”

General Mills CEO Jeff Harmening said about 95% of its products are sourced in the U.S. so tariffs are unlikely to be “really meaningful.” Still, the company wouldn’t be immune either. Taxes on imports from Canada would impact oats that General Mills imports from Canada, while duties on steel could affect packaging for Progresso soup, Blue Buffalo pet food and lids for Yoplait.

“Another four weeks will give us some more clarity on all these things,” he told analysts.

Coca-Cola CEO James Quincey said earlier this month the beverage maker could switch to more plastic bottles from aluminum cans if input costs for the commodity become too expensive.

Some companies have already warned that the impacts of the tariffs could be severe.