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

Cans of Coca-Cola on display at a grocery store, on April 24, 2022. (Gene J. Puskar / AP)

NEW YORK/LONDON — Andy Russick, who sells canned fruit and tomatoes to top U.S. grocers like Kroger, hospitals and schools, shares the stated aim behind U.S. President Donald Trump‘s trade war - fighting cheap Chinese imports.

Yet when U.S. tariffs on imported steel and aluminum doubled to 50 per cent on June 4, his company, canned-food maker Pacific Coast Producers, became collateral damage in the crossfire of Trump’s erratic trade policies.

The problem is that since 2017, Chinese fruit cocktails, vegetables and similar canned-food imports from across Southeast Asia and Europe have been flooding the shelves of U.S. supermarkets, undercutting the price of comparable products from the United States.

That trend is now set to accelerate as the cost of the specialty steel used to preserve food jumps by about six per cent for Lodi, California-based Pacific Coast, due to the latest round of tariffs on the metal, Russick said.

“We’re getting caught up in that brush fire,” said Russick, vice president of sales and marketing at Pacific Coast, a significant supplier of white label long-life products in the U.S.

The new duties on steel and aluminum, metals used in the packaging of food, beverages and personal care products like shaving cream, are sparking a reckoning for companies, who are now facing higher costs, forcing them to look at alternatives like glass, plastic or fiber-based containers.

The makers of alternative packaging, at the same time, see a new opportunity to gain more business.

Russick expects in the next few years to shift some packaging to aseptic cartons, like those produced by Swedish Swiss Tetra Pak and Swiss-listed SIG Group, or to sell more tomato sauce in cheaper foil pouches to restaurants to save on costs.

Coca-Cola CEO James Quincey told investors in February, when tariffs on aluminum and steel were set to rise to 25 per cent, that the soft-drinks maker could put more emphasis on plastic if cans became more expensive.

“The trade war is fueling the conversation that we need to get rid of aluminum in beverage packages,” said SIG Group CEO Samuel Sigrist, whose company offers aluminum-free aseptic cartons.

Campbell Co., whose soup cans became famous artworks, said in a statement that it was working to mitigate cost increases from tariffs and will continue to rely on steel cans for packaging.

Glass bottle makers are also hoping to win market share from aluminum cans used for beers due to the tariffs, said Scott DeFife, head of the U.S. Glass Packaging Institute, which represents the manufacturers.

“If these tariffs persist, tighter margins will eventually force a response,” said Zak Stambor, an analyst with eMarketer. “In the longer term, companies may have to rethink their packaging strategies.”

Pacific Coast’s Russick is currently looking to pass along US$8 million to $10 million in new costs stemming from tariffs on the specialty steel used for cans to his customers, a figure the company projects to jump to $40 million next year.

By next spring, the cost of cans delivered to Pacific Coast for the upcoming harvest may have a 24 per cent tariff-induced cost increase, Russick said.

Hurdles

But those possible shifts from aluminum and steel to aseptic cartons or glass come with logistical and cost hurdles.

Most glass bottles are still costlier than aluminum because they are heavier to ship.

Aluminum cans also already have a stronghold in some U.S. beverages: about 64 per cent of beer sold in 2023 was in aluminum cans, according to the Beer Institute. Such cans are also common in fast-growing beverage categories: energy drinks like Molson Coors’ Zoa, still-water brands including wildly popular Liquid Death and pre-mixed cocktails.

Much of the aluminum used to make those cans is recycled and not subject to tariffs, said Jack Buffington, director of supply chain and sustainability at First Key consulting, which advises the brewing and beverage industries.

The average U.S. beverage can already contain about 71 per cent recycled content, according to the Aluminum Association. The figure could climb higher if U.S. consumers practiced recycling more diligently.

Anheuser-Busch InBev’s chief financial officer, Fernando Tennenbaum, told Reuters in May, before aluminum tariffs doubled, that the financial impact of levies affecting cans was “not relevant” for the company.

AB InBev, which sources the vast majority of its cans in the U.S., had no plans to make changes to its packaging, he said. The company declined to comment for this story.

Companies like Coke that already use a variety of packaging may have an easier time responding to aluminum tariffs. By contrast, brewers that have been closing bottling lines to focus on cans would have to make hefty investments to retool their operations, Buffington said.

Plastic already makes up nearly 50 per cent of Coca-Cola’s packaging globally, according to the company’s 2023 environmental report, against 26 per cent for aluminum and steel. Only eight per cent of rival PepsiCo’s products were packaged in aluminum, in 2023, the company said.

Coca-Cola and PepsiCo did not respond to requests for comment.

Top packaging technology company Krones of Germany, whose products include glass bottling lines, said so far it has not seen any significant shift toward glass.

A fast, widespread move to other forms of packaging is unlikely during heightened uncertainty, with companies hesitant to make significant financial or strategic decisions based on policies they think could change, the U.S. Glass Packaging Institute’s DeFife said.

“I think some people are really waiting to see what sticks, what doesn’t stick,” he said. “A 30-day thing is not a threat to your supply chain immediately.”

(Reporting by Emma Rumney in London and Jessica DiNapoli in New York; Additional reporting by Lisa Jucca in Milan and Anuja Bharat Mistry in Bengaluru; Editing by Lisa Jucca and Matthew Lewis)