Tariffs Have Mixed Effects on Grocery Industry, Shoppers

The new tariffs born of the trade war between the United States and China have had positive and negative effects on the grocery industry, with future impacts still unknown, according to a new report from CPG industry sales and marketing agency Acosta. “The Impact of U.S. Tariffs on the Grocery Industry” shows how tariffs have shaped grocery item prices since late summer 2019 and presents the perspectives of consumers, manufacturers and retailers.

“Tariffs are already impacting the average consumer and are expected to escalate,” said Colin Stewart, EVP, business intelligence at Jacksonville, Fla.-based Acosta. “U.S. tariffs imposed on China have cost the average American household $600 per year, and that impact is expected to rise to $1,000 per year if the late 2019 tariffs take effect. It’s a difficult situation for manufacturers and retailers as well. Manufacturers are at the mercy of government decisions, and it is creating friction between manufacturers and retailers as to who will bear the costs of price increases.”

The report delves into the effects of tariffs as follows:

Shoppers

• Consumers are already paying more for various grocery items, including 6% more on pork, 5% more on yogurt and writing tools/supplies and 4% more on fruit.

• 40% of shoppers believe that tariffs are a negative for the country.
• Most shoppers are concerned about price hikes, with only 11% saying they’re not worried about tariffs making products more expensive.
• Seven in 10 shoppers think that tariffs have raised prices on everyday grocery products.

Manufacturers

• The impact on manufacturers depends greatly on the product line, sourcing and manufacturing location; CPG companies with U.S.-based manufacturing are seeing an advantage.
• Giving retailers adequate notice on price increases can be difficult, because companies are at the mercy of government decisions, which are often released with limited or no notice.

Retailers

• Willingness to accept price increases varies by retailer, with many expecting manufacturers to bear the cost.
• Most retailers compare potential price increases to commodity costs on their private-brand items.

“The Impact of U.S. Tariffs on the Grocery Industry” was compiled from industry data and proprietary information sources, including online surveys of the Acosta’s proprietary shopper community, manufacturers and retailers. The full report is available online.