Canned food companies to increase prices to combat aluminum tariffs

6802news.com
August 7, 2018
Tara Deschamps

Soup, soda and beer makers can’t seem to put a lid on the effects of the recent aluminum tariffs.

The 10 per cent fees that were slapped on imports of the metal by U.S. President Donald Trump in early July are making cans more expensive and forcing food and beverage companies that rely on them for packaging to consider price increases and other ways to offset the costs.

The Campbell Company of Canada, which produces canned soup at its soon-to-close Etobicoke plant, is set to jack up prices in late August on a “broad range of products.”

The exact amount by which prices will be increased is still under consideration, but the tariffs combined with raising freight, packaging and ingredient costs are to blame, company spokesperson Alexandra Sockett told The Canadian Press in an email.

Molson Coors Brewing Company admitted on its most recent earnings call that it might be forced to make a similar move.

“We’ve made no secret about the fact that aluminum tariffs and freight and the unjustified increase in the Midwest premium (aluminum surcharge) are having a negative impact on our cost structure and they may factor into future pricing decisions,” said Gavin Hattersley, president and chief executive officer of Molson Coors subsidiary MillerCoors.

Coca-Cola’s CEO James Quincey similarly told U.S. media recently that it too will raise prices because of the tariffs and rising labour costs, but in a statement, spokesperson Shannon Denny said in Canada the company faces “similar cost pressures as the U.S.” but isn’t sure if it will implement the same increases here.

Mike von Massow, an associate professor of food, agricultural and resource economics at the University of Guelph, said all companies selling products packaged in aluminum are facing pressure, but not all companies will publicize the increases.

“It has been a competitive few years in the food business so this might give companies the cover to raise if they haven’t raised prices,” he said.

He suspects companies that do most of their business domestically and have long-term can contracts might not be affected by tariffs as much as others.

In the wake of the tariffs, he has heard of a craft brewery having trouble getting access to cans and expects to see small companies with domestic can contracts squeezed if big companies that source cans from outside countries start looking at homegrown alternatives.

There’s often flexibility from companies, he said, when food producers are putting labels on their products at their plants, but beer or soda cans are often printed at specific suppliers, making it harder to switch amid a tariff war.

None of the companies that spoke to The Canadian Press for this story mentioned ending their can contracts for domestic options, but Mississauga-based Cott Corporation, which produces water, coffee and colas, said it has instead applied for tariff exemptions for some of its products and is looking at alternative suppliers to mitigate costs.

Thomas Harrington, Cott’s president of services and chief executive officer of its DSS bottled water and coffee business unit, said the company is facing tariff-related costs because it procures coolers for product distribution from China, which has imposed about $60 billion of tariffs on products from the U.S., where Cott does plenty of business.

As a result, he said, Cott is working towards “relatively modest” price increases for the coolers customers can rent from the company.

“While we’ve preferred not to see these types of costs impact our business, we understand that these external factors come and go all the time,” he said. “We are well positioned to manage these types of issues.”