From cans to cartons: how Trump's metals duties affect packages on shelves

U.S. tariffs on imported steel and aluminum, recently doubled to 50%, are significantly elevating input costs for domestic food and beverage manufacturers, with some like Pacific Coast Producers facing projected 24% tariff-induced cost increases for their cans. This surge is compelling companies to explore alternative packaging solutions, including plastic, glass, and aseptic cartons, creating opportunities for suppliers in those segments. However, a broad industry shift is currently limited by logistical complexities, higher comparative costs of alternatives, and widespread uncertainty regarding the long-term duration of the tariffs, leading many firms to delay substantial strategic investments.

Analysis

The recent doubling of U.S. tariffs on imported steel and aluminum to 50% is creating a significant operational and financial headwind for domestic food and beverage manufacturers. Companies reliant on metal can packaging are facing direct margin pressure, as exemplified by Pacific Coast Producers, which anticipates a 24% tariff-induced cost increase on its cans and is attempting to pass on $8-$10 million in new costs. This has prompted a strategic re-evaluation of packaging, with firms like Coca-Cola (KO) signaling a potential increased emphasis on plastic, where it already has a 50% packaging mix. Consequently, suppliers of alternative packaging, such as SIG Group (SIG), perceive a market share opportunity. However, a rapid, industry-wide shift away from metal is constrained by several factors. Major players like Anheuser-Busch InBev (BUD) have stated the impact is "not relevant" due to their high use of recycled aluminum, which is not subject to the tariffs. Furthermore, logistical hurdles, the higher cost of alternatives like glass, and the substantial capital expenditure required to retool production lines are significant deterrents. The prevailing uncertainty about the permanence of these trade policies has led most companies to adopt a cautious, wait-and-see approach, delaying major strategic investments in new packaging infrastructure.

Key Decisions for Investors

• Evaluate portfolio exposure to food and beverage companies heavily reliant on steel and aluminum packaging, as firms like Campbell (CPB) that are committed to steel cans may face sustained margin compression.
• Consider companies with diversified packaging strategies, such as Coca-Cola (KO) and PepsiCo (PEP), or alternative packaging suppliers like SIG Group (SIG), as they are better positioned to mitigate or benefit from these specific input cost pressures.
• Investors in the beverage sector should note that companies like Anheuser-Busch InBev (BUD) appear well-insulated due to high recycled content usage and domestic sourcing, making them more defensive plays against this particular tariff impact.
• Monitor company earnings calls for commentary on capital expenditure plans and the pass-through of costs, as a prolonged tariff environment could force strategic shifts and separate long-term winners from losers in both the consumer-packaged goods and packaging industries.