Nobody knows how the Trump Tariffs Saga will play out. Or how long it will take. Much less what the soft drink sector may look like when the… fizz settles. But one issue with long-range global repercussions is already bubbling up…
If you’re Coca Cola, and word reaches your board room that the new President is considering placing 25 percent tariffs on imports to the US, which could raise the cost of all canned food and beverage products by 15 percent or more… Your first thought may well be: “Where can I save a few cents a unit to help offset increased costs?”
The options are few. But you have to look at the all the possibilities. And decide which makes the most sense for you in light of your corporate obligation to maximize returns for your shareholders.
In Coke’s case, one of the dimensions of your business which is secondary to the the actual product itself is primary to its cost. That’s packaging. And the President wants to place a tariff on aluminum that will send the cost of beverage cans into the stratosphere.
Obvious choices
Your choices are obvious: Revert to glass bottles. Take a serious look at new paper-based packages that are infiltrating the wine trade. Or increase your (unpopular) reliance on plastic bottles.
Unfortunately, you’ve made big, brave, high-profile, public promises to the environmentalists to reduce your use of plastic. Specifically, you’ve set a target to be using 50 percent recycled materials in your packaging by 2030. Nevertheless, plastic remains the most functionally and fiscally sensible replacement for aluminum.
Bad optics
The ‘consumer ‘optics’ of what would amount to an overall increase in the use of plastics use would be bad for your corporate image. Really bad. And it would give the environmental lobby gasoline to throw onto the plastics ‘fire’ it’s lit under your whole industry.
Add to that, anti-pollution forces have made you the poster child for their righteous rage… And you wonder why you even bother to get out of bed in the morning.
But wait! You already ‘scaled back’ your plastics promise last December, from 5o percent by 2030 to 35-40 percent by 3035… And that really narrows your wiggle room.
My take
Last time Trump declared potentially ruinous tariffs on foreign imports was during his first term, in 2018.At that time, various players in various industries lined up to beg exclusions from the measures. Can makers got their wish. But this time, Trump says there will be no exclusions, for any industry.
What really gets your goat is, you had planned to increase your use of aluminum cans to help you decrease your reliance on plastic containers over the coming years.
My recommendation? Get a new pair of really dark glasses, stop wearing red, and be seen drinking nothing but straight-up black coffee until further notice!
~ Maggie J.