Trade Wars Mean Food And Beverage Prices Will Go Up...And Down
August 7, 2018
(Industry Intelligence Inc.)
– Every week, it seems to me, Donald Trump is threatening more trade tariffs on various countries for reasons I still don’t really understand, while those countries threaten more tariffs of their own in retaliation.
But what do these trade wars mean for the food and beverage industry? Specifically, are my favorite foods going to go up in price? Is the cost of my favorite hot dogs going to double? Am I going to have to reach into my pocket a bit further for my 2-liter bottles of Diet Coke?
According to several experts cited in a recent USA Today article, the answer is yes…and no. It simply depends on the industry. Here’s the breakdown:
Donald Trump’s 10% tariff on aluminum, which he signed in March, is forcing soda manufacturers to raise their prices. Coca-Cola CEO James Quincey, for example, recently disclosed that the company will need to raise its prices specifically because of this increased tariff.
Like the soda industry, beer manufacturers also rely heavily on aluminum. About 60% of beer made and sold in the U.S. comes in aluminum cans or bottles. And that means, according to the Beer Institute, that brewers could be saddled with $348 million in additional cost.
That’s why brewers like Boston Beer have already announced that they’re raising prices, with the company saying retail costs will go up by 2% in the second half of 2018 due to the tariffs.
The trade wars may actually mean lower dairy prices. Mexico buys nearly a quarter of all dairy products exported by the U.S., and the American dairy industry is reeling from $387 million in Mexican tariffs of between 15 and 25% on cheese.
That means U.S. consumers may see a price drop of up to 5% initially on dairy products and then as much as 10%, according to Burt Flickinger III, managing director of the Strategic Resource Group, a New York-based retail and consumer goods consulting firm.
Beef, Poultry and Pork
Just like dairy, meat prices may be lower because of the trade wars, at least at first. Grocery shoppers will see prices down fall up to 5% initially, but it could max out at 12%, Flickinger said.
"There's oversupply and insufficient demand in the U.S. to consume the oversupply and contracting export markets," he said.
Nevin Barich is the Food and Beverage Analyst for Industry Intelligence, which can help YOU better address your own industry challenges. We invite you to come take a look at our service. Call us today at 310-553-0008 and we’ll schedule you for a 15-minute demo.