March 13, 2025 - Suddenly, Coca-Cola is considering a switch back to plastic bottles, and Diageo pulled its sales forecast, citing the uncertainty around tariffs. If enacted, President Trump’s 25% tariff on imports from Canada and Mexico will increase the costs of raw materials, production, packaging, and transportation.

Food and beverage (F&B) businesses that do not prepare, risk serious disruptions to their operations and revenue. That is why these giant multinational corporations are already mapping out strategies to minimize the impact – and why you should too.

This article is part two of our scenario planning series for F&B companies. Here, we break down how to protect your business at every stage of the supply chain, including sourcing raw materials to production, compliance, logistics, transportation, inventory management, and distribution.

Check out part one, where we explain how these tariffs could affect the industry – read it here.

How To Prepare Your F&B Supply Chain for the Proposed Tariffs

Recommended Actions for the Sourcing Stage

Many producers and retailers are on a buying binge to stockpile shelf-stable ingredients and packaging materials. An Italian cheesemaker that usually imports 20,000-30,000 liters of extra virgin olive oil to the U.S. three times a year wants to import 50,000 liters a month before the tariffs take effect. If you have the capital, consider doing the same.

You can also use a cooperative purchasing agreement (CPA) to bulk-purchase goods alongside other buyers at better prices. While this will not prevent future supply shortages, it will give you time to assess your next steps carefully rather than making rushed decisions under pressure.

Next, diversify your suppliers. Where feasible, source ingredients from domestic or non-tariff-affected suppliers who can provide the same materials at competitive prices. If this happens, Frans Muller, CEO of Ahold Delhaize, one of the world’s largest food retail groups, is considering sourcing more products from the West Coast and Florida.

Recommended Actions for the Production Stage

Cut costs where you can. This might be reformulating products to reduce reliance on imported ingredients or finding cost-effective ingredients and packaging substitutes.

For instance, Coca-Cola is considering switching back to plastic bottles — which is admittedly bad for the environment — but will offset the increased aluminum costs. You can also reduce production costs by automating some processes to help lower labor costs or eliminating redundant steps in the supply chain.

If you rely on fresh fruits and vegetables from Mexico, you might not be able to adjust your supply chains in response to this rising cost for now because of the sensitivity of your materials. In this case, you might have no option but to pass the costs on to consumers or reduce package sizes while maintaining the same price — also known as shrinkflation — to preserve margins without alienating price-sensitive customers.

Recommended Actions for the Compliance Stage

Compliance is straightforward — follow all FDA regulations without cutting corners. Non-compliance can lead to fines, recalls, or regulatory action. If you reformulate or switch to alternative ingredients, ensure they meet FDA standards and update your labeling accordingly. Keep documentation current to avoid compliance issues that could disrupt your operations.

Recommended Actions for the Logistics and Transportation Stage

Ship and store products in bonded warehouses under U.S. Customs and Border Protection (CBP) supervision — they are tariff-free while in storage. This allows you to delay duties and wait for more favorable market conditions before distributing your goods.

Another option is to import goods into Foreign-Trade Zones (FTZs), where you can manufacture, store, and process products with reduced or deferred tariffs. This can help lower costs.

For transportation, negotiate better cross-border trucking rates with logistics providers or secure long-term contracts to lock in pricing. Transportation costs will likely rise since the tariffs also affect motor vehicles and parts. Work with logistics companies that offer cold storage warehouses and refrigerated trucks to keep perishable items fresh during longer transit times.

Over the long term, invest in supply chain visibility technologies such as AI, GPS tracking, RFID tags, and IoT sensors. These tools help monitor shipments, identify delays, and resolve issues before they disrupt operations. In our experience, companies that successfully implement these new technologies across their supply chains can reduce recovery time and cut new product lead times.

Recommended Actions for the Inventory Management Stage

With tariffs driving up costs and customs delays disrupting supply chains, you may need to shift from just-in-time (JIT) inventory management to holding more stock. While this reduces the risk of shortages, it also increases warehousing costs and financial risks.

You have a few options here:

• Optimize existing storage: Purchase only as much inventory as your current warehouse space allows, as Butterfly Bakery of Vermont, a natural condiments manufacturer, did. “Back in November, we did a whole truckload so that we could stock up to get ahead of any new tariffs… It quickly became clear that if these tariffs were going to last four years, we definitely can't buy four years' worth of worth of glass because there's nowhere to put it,” says CEO Claire Georges.
• Expand storage capacity: Lease additional warehouse space in cost-effective locations.
• Use third-party logistics (3PL) providers: Partner with 3PL companies that offer flexible warehousing solutions.

While the last two options may be more expensive upfront, they could save money in the long run by preventing stockouts and mitigating price fluctuations. Weigh the trade-offs and choose the best strategy for your business.

Recommended Actions for the Distribution and Retail Stage

Since the affected countries are likely to retaliate with their tariffs — Canada already responded with levies on over $100 billion worth of American goods — you need a proactive international distribution strategy.

Collaborate with distributors in Canada, Mexico, and other affected countries to adjust pricing and ensure products remain competitive despite higher tariffs. At the same time, reduce reliance on any single region and expand into new international markets unaffected by retaliatory tariffs.

Domestic transportation costs might also increase because of the tariffs on motor vehicles and automotive parts. To mitigate this, renegotiate distributor contracts and explore regional distribution centers to reduce long-haul shipping expenses.

What Should Be Your Immediate Next Steps?

Stay updated on trade policies and tariff negotiations. Work with industry groups and policymakers to advocate for policies supporting your business, like Diageo does. While doing that, consult your stakeholders and meet with your team to assess risks, align priorities, and create an action plan.

Also, run financial impact assessments to understand how increased costs from tariffs and supply chain disruptions will affect margins. This will then help you identify how to save costs.

Citrin Cooperman’s Food and Beverage Industry Practice is here to provide specific guidance and help tailored to your business. For more information, please contact your Citrin Cooperman representative.