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Facing "Tarifflation" - F&B Companies Need To Manage Margins

forbes.com -- Friday, August 15, 2025, 1:28:20 PM Eastern Daylight Time
Categories: U.S.–China Relations, Economic Policy & Jobs, Presidential Campaigns
Facing "Tarifflation" - F&B Companies Need To Manage Margins

Forbes contributors publish independent expert analyses and insights.

When Mondelez International reported results for its quarter ending June 30, 2025, the company indicated "significantly higher operating costs." They faced growing labor and raw material expenses, and something else. Tariffs were taking a bite out of their business as a kind of "tarifflation" forces companies to monitor and manage margins.

Mondelez said significant portions of products in the United States are "imported from other jurisdictions," so there could be significant adverse impacts "on our business operations and financial performance" amid "protectionist trade measures." While inflation can be a drag on earnings, "tarifflation" can wreak havoc with F&B margins, impacting everything from demand to sourcing, and putting pressure on a need for increased efficiency.

Tariffs are protectionist measures that often do not protect the increasingly international F&B industry from manufacturers to retailers. They can lead to higher prices and lower demand or chip away at margins.

On the most basic level, the U.S. imports tomatoes, bell peppers, cucumbers, and other vegetables from Mexico. About 90% of avocados reportedly come from that nation. Bananas, berries, mangoes, and more come from Latin America, the Caribbean, and Southeast Asia. We bring in all sorts of fruits and vegetables from Canada, as well as fish from Chile and China. We also export, leading to hits from retaliatory tariffs. Food companies and even restaurants are often international regardless of their product, making monitoring margins crucial amid fluctuating costs.

"A lot of organizations in food and beverage are going to get squeezed relative to their profit margins, because it's creating margin pressures that you simply can't plan for," Alex Kushnir, a Partner in the Consumer Goods and Retail Practice at Baringa Management Consulting, told the Food Institute.

Feeling the Squeeze

Margins are based on knowing costs, and constantly changing tariffs -- or what one might call "tarifflation" -- makes that more challenging. WK Kellogg recently reported an $8 million second quarter profit, down from $37 million a year ago, as sales dropped 8.8% to $613 million. The culprit? The company cited increasing costs, including tariffs, and lower consumer demand.

"If you're bringing in ingredients or products from overseas, you're already feeling it in your margins," Joe Camberato, CEO of National Business Capital, told the Food Institute.

A survey by Endeavor Business Intelligence found that 60% of business leaders said their operations had already been significantly affected by new tariffs. The number is likely higher for F&B, where U.S. tariffs and retaliations have huge impacts. Heinz, General Mills, Danone, Hershey, and Mondelez International all face tariffs and potential pressure on margins, as well as a need for strategies to manage them.

"Tariffs can squeeze profit margins as brands struggle to absorb additional costs without raising retail prices," according to Food Logistics, which said big brands may be better "equipped to absorb tariffs than lesser-known or regional brands."

Tariffs can have a big impact on F&B, since margins are "notoriously thin to begin with," according to Food Logistics, which said the industry is particularly vulnerable to these impacts.

Tariff Time

Tariffs keep changing faster than the number on a roulette wheel, adding volatility and making it hard to predict or factor in costs, as margins take hits -- or recover. How do you plan around what you can't predict? President Trump recently signed executive orders imposing tariffs between 10% and 41%, including 25% on Mexico, 39% on Switzerland, and 20% on Taiwan -- actually down from 32%.

The European Union and Japan faced 15% tariffs. The Food Institute notes that these increase "input costs at every stage," including raw ingredients, packaging, transportation, and labor. The Food Institute gives simple advice. "Watch your margins," the Institute indicates.

Wise words indeed, but that means carefully monitoring costs and sources all along the way. Efficiency matters even more during tough times. Companies may be able to shift sourcing, save money, or otherwise compensate. But margins go far beyond products.

While product prices go up, packaging is getting hit hard, especially for F&B companies using aluminum. Campbell's and Hormel were hit hard when aluminum prices rose due to tariffs. Coca-Cola, the Institute said, moved more beverages from cans to plastic and used less metal. So tariffs are not only impacting packaging costs, but packaging itself.

The Uncertainty Factor

Tariffs make planning tougher, potentially impacting deals. So the effects are not just financial, but structural. The Food Institute, for instance, found that tariffs are making business leaders "hesitant to act," due to uncertainty.

According to the Institute, many executives are "pumping the brakes a bit, taking a wait-and-see approach." Short-term uncertainty can impact longer-term decisions. Be prepared, so you can react more rapidly. Agility becomes not just a virtue but a necessity amid volatility.

Taking Stock

Tariffs aren't only impacting costs and sales, but also stock prices. Salt Lake City, Utah-based grill maker Traeger primarily imports from China and Vietnam, both of which were hit hard by margins. The company reported a recent $7.4 million quarterly loss, up from $2.6 million a year ago, with tarifflation taking its toll as part of that. "Our second quarter results reflect tariff related dynamics," CEO Jeremy Andrus said.

While sales and income took hits, the stock dropped 20% in early August, as tariffs impacted earnings. The company said it would take measures to seek to compensate for millions in tariff exposure. Companies seek strategies to compensate for, if they can't simply pass on, all costs.

Bringing It On Home

One way to beat tariffs is to manufacture in the United States, which is what tariffs are designed to encourage. According to Manufacturing Dive, Kraft Heinz is investing $3 billion in expanding U.S. manufacturing. The site called it "the largest investment in its plants in decades." That, of course, will take time and cost. And who knows what tariffs will look like in a month, a year, or two years?

Technology can be the best way to battle tarifflation, along with price hikes, or possibly smaller portions. It's possible to increase efficiency, to partly compensate for increased tariffs. The Food Institute suggested using analytical tools, AI, and predictive technology. "Build a strong data foundation that keeps all parties informed," the Institute suggested. The more you know about the costs, the easier it is to adapt.

Winners

There are likely winners to tariff troubles, which can push up costs, even if many brands have to battle it out with suppliers and balance the risk of raised prices with consumers against the margin risk. But a big winner may be private label, which is already going strong. Private label has "made big gains in recent years," in 2024, reaching a record 22.9% of total unit volume and 20.4% in sales, according to Food Logistics. Tariffs could put more fuel in the private label rocket.

"Industry leaders feel private-label products could benefit," according to the Food Institute.

Mitigating Factors

Companies can do many things to protect margins amid protectionist measures whether they hike prices or otherwise seek savings. They can set up supply chains to nations with lower tariffs, manufacture in the United States, figure out ways to get others, if possible, to not pass on tariffs due to temporary cost increases, or simply pass on costs. Technology can be a powerful tariff weapon.

Software can identify "potential disruptions early on, so brands can pivot and explore alternative vendors or sourcing options," according to Food Logistics. It's always a good time to have a good window into your business. Tariffs are just another reason that tech can help. So tariffs and tarifflation can cause trouble. But companies that adapt can find ways to save and grow stronger, even as we all wait to see whether tariffs will diminish and what the new normal will be.

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Opinion:

The concept of "tarifflation" highlighted in recent analyses of the food and beverage (F&B) industry underscores not only the complexities of modern trade policies but also the direct impact these policies have on workers and consumers alike. As companies like Mondelez International report significant profit squeezes due to tariffs and rising operating costs, it becomes increasingly clear that these economic pressures resonate far beyond corporate balance sheets. They are emblematic of a broader struggle for economic justice and sustainability that has historical roots in the intertwining of trade, labor rights, and consumer welfare.

Historically, tariffs have been employed as protective measures intended to shield domestic industries from foreign competition. However, as globalization has reshaped economies, the efficacy of these measures has come into question. The modern F&B sector, characterized by its reliance on international supply chains, illustrates this paradox: while tariffs are designed to protect local jobs, they often exacerbate economic disparities and lead to inflated prices for consumers. This dilemma is particularly pronounced in the realm of essential goods, such as food, where increases in import costs can translate directly to higher prices at the grocery store. As domestic producers grapple with these rising costs, the financial burden frequently falls on the most vulnerable populations, exacerbating food insecurity.

In the context of ongoing social struggles, the implications of tarifflation extend well beyond economic metrics. When companies report declining profits due to these external pressures, the immediate reaction is often cost-cutting measures, which can include layoffs or reduced hours for employees. It is crucial to recognize that these decisions disproportionately affect working-class individuals who are already facing the brunt of economic instability. As major corporations like Kellogg and Heinz announce profit declines, the narrative often shifts to corporate survival rather than the impacts on frontline workers who are the backbone of these industries. This fosters a cycle of insecurity that feeds into broader labor movements advocating for fair wages and better working conditions—issues that are increasingly relevant in today's socio-political landscape.

Moreover, the concept of "tarifflation" as articulated by industry analysts invites a critical examination of the effects of protectionist policies in a globalized economy. While some argue that these tariffs are necessary to safeguard American jobs, the reality is that they often hurt the very workers they aim to protect. As noted, a staggering 60% of business leaders reported that their operations have been significantly impacted by new tariffs. This statistic serves as a vital reminder that economic policies must be scrutinized not just for their intended outcomes but also for their unintended consequences. When tariffs lead to reduced operational capacity, they not only threaten the viability of businesses but also undermine the job security of countless workers.

In light of these realities, it is essential for consumers and advocates alike to engage in conversations about the implications of tarifflation and the broader trade policies that shape our economy. By prioritizing discussions around sustainable practices and ethical sourcing, we can begin to shift the focus from mere profit margins to the welfare of workers and communities. Advocacy for policies that foster equitable trade practices and prioritize labor rights can provide a framework for addressing the challenges posed by tarifflation. This includes supporting local agriculture, promoting fair trade, and pushing for regulations that hold corporations accountable for the socio-economic impacts of their business decisions.

Ultimately, the rise of tarifflation in the F&B sector serves as a microcosm of larger economic challenges facing our society. As we navigate these turbulent waters, it is imperative to champion policies that protect not just corporate profits but also the rights and livelihoods of workers and consumers. By fostering a dialogue that prioritizes equity and justice in our economic systems, we can work towards a future that is both sustainable and just for all.

Action:

The recent economic phenomenon termed "tarifflation" illustrates how tariffs, ostensibly designed to protect domestic industries, can have the opposite effect, particularly in the food and beverage (F&B) sector. Companies such as Mondelez International and Kellogg are reporting increased operating costs that are being exacerbated by the volatility of tariffs on imported goods. These trade policies not only threaten profit margins but also have broader implications for the economy as a whole. The complexities of the modern global supply chain mean that many F&B companies rely heavily on ingredients sourced from abroad, creating a precarious balance between cost management and product pricing. This scenario reveals a critical need for consumers and advocates to engage more actively with the political and economic factors that contribute to such instability.

Historically, tariffs have often been justified as a means to protect American jobs and industries. However, the current reality presents a contradiction to this narrative. As companies struggle with the financial pressures applied by tariffs, these costs are frequently passed down to consumers in the form of higher prices. The impact extends beyond mere financial metrics; it affects livelihoods, food accessibility, and overall consumer behavior. As we've seen in various economic downturns, such as the Great Recession, when the cost of basic goods rises, it disproportionately affects lower-income households, exacerbating existing inequalities. Thus, understanding the interconnectedness of tariffs and consumer experience is vital, as it can inform discussions on the efficacy of protectionist trade policies.

To address these challenges, we must first advocate for a more informed public discourse around trade and tariffs. By engaging in conversations with those who might hold differing views, we can unpack the complexities of these issues. Many right-wing arguments center on the benefit of protecting domestic jobs, but it is essential to challenge these assumptions by highlighting the negative consequences that tariffs impose on consumers. For example, discussing how tariff-induced price increases on essential goods can lead to food insecurity or reduced dietary diversity can help shift the narrative. Engaging in community forums, leveraging social media platforms, and writing to local representatives are all avenues through which we can advocate for a more nuanced understanding of trade policies.

Moreover, as consumers, we hold significant power. By making informed purchasing decisions, we can support companies that prioritize ethical sourcing and labor practices. This consumer activism can encourage businesses to adopt more sustainable practices and lobby for fairer trade policies. For instance, supporting local farmers and producers not only mitigates the impact of tariffs but also strengthens local economies. Additionally, engaging with community-supported agriculture (CSA) initiatives can create a more resilient food system that is less vulnerable to the whims of international trade policies. The more we understand our role as consumers, the more we can push for systemic change in the way food is produced and distributed.

Finally, education plays a crucial role in fostering a more equitable economic landscape. Initiatives aimed at educating the public about the implications of tariffs and trade policies should be prioritized. This includes workshops, informational campaigns, and partnerships with educational institutions that focus on economics, trade, and social justice. By equipping individuals with knowledge, we empower them to engage critically with the systems that govern their lives. The more we can communicate the tangible impacts of "tarifflation" on everyday life, the more likely we are to catalyze change that benefits not just a few, but the broader community.

In conclusion, the issue of tarifflation in the F&B sector is a multifaceted problem that requires a concerted effort from consumers, advocates, and policymakers alike. By fostering informed public discourse, promoting ethical consumerism, and prioritizing educational initiatives, we can mitigate the adverse effects of tariffs and push for a fairer economic system. It is crucial to recognize that while protectionist measures may promise to safeguard domestic industries, they can inadvertently harm the very populace they are meant to protect. Thus, a collective effort to engage with these issues can pave the way for a more inclusive and sustainable future.

To Do:

The article highlights the complex challenges faced by food and beverage companies due to "tarifflation," which refers to the inflationary pressures resulting from tariffs imposed on imported goods. This situation affects not only businesses but also consumers, as higher costs may lead to increased prices for everyday products. Here’s how we can take action in response to this issue:

### What Can We Personally Do About This? 1. **Educate Ourselves and Others**: Understanding the implications of tariffs and the economic principles behind them can help us make informed decisions and advocate for change. Share knowledge within your community and social networks.

2. **Support Local Agriculture**: Prioritize purchasing locally grown and produced foods to lessen reliance on imported goods, which are affected by tariffs. This can also help support local economies.

3. **Advocate for Fair Trade Policies**: Push for trade policies that prioritize fair trade practices and equitable treatment for workers in all countries involved in the supply chain.

4. **Engage with Food and Beverage Companies**: Communicate with companies about their sourcing practices and encourage them to adopt more sustainable and ethical practices.

5. **Participate in Campaigns and Petitions**: Join campaigns that advocate for reduced tariffs or more equitable trade policies.

### Exact Actions We Can Personally Take 1. **Sign Petitions**: - **Change.org**: Find petitions related to fair trade practices and tariff reforms. - Example: Search for petitions advocating against tariff increases on specific food products or promoting local farmers.

2. **Write to Your Representatives**: - **Who to Write**: Your local congressional representatives and senators. - **Example Addresses**: - **Senator Alex Padilla (CA)**: 112 Hart Senate Office Building, Washington, DC 20510 - **Representative Nancy Pelosi (CA-12)**: 1236 Longworth House Office Building, Washington, DC 20515 - **Contact Information**: Visit [Congress.gov](https://www.congress.gov/) for up-to-date email addresses and contact forms. - **What to Say**: Express your concerns regarding the impact of tariffs on food prices and local economies. Suggest advocating for trade policies that support local agriculture and fair labor practices.

3. **Engage with Local Farmers Markets and Co-Ops**: - Support and promote local farmers and food co-ops that prioritize sustainable practices and minimize reliance on imported goods.

4. **Join Local Advocacy Groups**: - Find local organizations focused on food justice, fair trade, or agricultural reform. Examples include: - **Food First**: [foodfirst.org](https://foodfirst.org/) - **Farmers Union**: [nfu.org](https://nfu.org/)

5. **Utilize Social Media**: - Use platforms like Twitter, Facebook, and Instagram to advocate for fair trade, share information about tariff impacts, and promote local food systems. Tag relevant companies and policymakers to raise awareness.

6. **Attend Town Hall Meetings**: - Engage with local government by attending town hall meetings to voice your concerns about tariffs and their impact on the community.

### Key Messaging Points - Emphasize the impact of tariffs on food prices and local economies. - Advocate for trade policies that prioritize sustainability and fairness for workers. - Encourage the support of local agriculture to reduce reliance on imported goods affected by tariffs. - Highlight the need for companies to adopt ethical sourcing practices.

By taking these actions, we can contribute to a broader movement toward fair trade and sustainable food systems while addressing the immediate challenges posed by tarifflation.


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