Brands Brace for Shrinkflation: The Double-Impact of Tariffs on Steel and Aluminum
The landscape of consumer goods is shifting dramatically. As tariffs explode to 50% on steel and aluminum, the ramifications stretch far beyond the auto industry. Experts warn that your favorite canned foods and beverages may soon become pricier, regardless of their country of origin.
The Rising Tide of Costs
According to Mark Burstein, Senior VP at Inspectorio, "Food and beverage prices are expected to rise across most categories due to newly imposed tariffs and ongoing global trade volatility." The potential price surge isn’t limited to domestic products; imported goods like French wine, Scotch whisky, Australian beef, seafood, coffee, and fresh produce are all on the chopping block.
Grocery Sticker Shock: A Repercussion of Tariffs
A recent report from Octus predicts that 2025 will be a challenging year for Consumer Packaged Goods (CPG) companies. Retailers are already destocking, leading some public companies to report revenue declines. Consumer habits are also changing, with a marked shift away from premium products across all income brackets.
Michael Moeller, founder of Kentucky Hop Water, articulated his concerns: "This [the tariffs] would sharply increase packaging costs, which are already one of our biggest expenses." Many smaller brands like his may face immediate pressures that larger corporations can more easily absorb. “Larger companies might adjust by shrinking can sizes, switching materials, or quietly raising prices, but for small brands, the impact is felt right away,” Moeller explains.
Navigating the Price Hikes: Food Giants’ Strategies
With tariffs rolling out on June 4, doubling previous levies, companies are bracing for impact. Prior to these changes, tariffs varied by country, but now they apply uniformly.
President Trump believes these tariffs will incentivize U.S. production, but many companies are struggling to find specialized products domestically. International sales expert Kathryn Read highlights that industry giants like Conagra have a few options at their disposal: absorb the increased costs, raise prices, or enhance their brand narrative around sustainability.
Another potential avenue is exploring alternative packaging options, such as plastic or glass. However, one age-old tactic seems to linger on the horizon: shrinkflation.
Sid Malladi, CEO of Nuvo, noted, “Companies like Conagra and Campbell’s rely heavily on tin-plated steel and aluminum for packaging, making them particularly vulnerable to such cost hikes.” The dual challenge they face includes price volatility in metal markets coupled with compressed margins in a price-sensitive consumer landscape.
“Short-term strategies might involve hedging raw material costs or boosting operational efficiency,” Malladi suggests. Yet over time, these pressures are likely to culminate in higher shelf prices, smaller package sizes, or reduced promotional incentives—essentially a double whammy for consumers.
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With the intricate dynamics of tariffs, pricing strategies, and consumer behavior at play, brands must adapt swiftly. Whether through shrinkflation or other innovative strategies, the industry is set for significant transformation. The question remains: how will consumers respond when their favorite products become smaller or pricier?
