Canned Costs: How Steel Tariffs Are Rattling Consumer Packaged Goods and Shaking Up Investment Opportunities

The U.S. canned food industry is at a crossroads. A cocktail of 50% steel tariffs, declining domestic tinplate production, and global supply chain fragility has pushed packaging costs to unprecedented heights. For consumer packaged goods (CPG) firms, this is no longer a theoretical risk—it's a present-day crisis threatening profit margins, employment, and consumer loyalty. As brands scramble to offset rising tinplate expenses, investors should focus on the companies best positioned to capitalize on this disruption: plastic packaging specialists and innovators in alternative food storage solutions.

The Tariff Tsunami: Why Canned Food Costs Are Exploding

The Trump-era steel tariffs, now at 50%, have created a perfect storm for canned food manufacturers. Tinplate steel—a thin, coated steel used for can linings—is predominantly imported, with 80% of U.S. supply sourced from countries like Canada, South Korea, and China. Domestic production has collapsed by 75% since 2018, leaving manufacturers no choice but to absorb tariff-driven price hikes.

The math is stark: the Consumer Brands Association (CBA) estimates canned food prices could rise by 9-15% in 2025 alone. Companies like Campbell's Soup (CPB) and ConAgra Brands (CAG) have already warned of margin compression, with Campbell's projecting a 3-5 cent per-share earnings hit. Even beverage giants like Coca-Cola (KO) are reconsidering packaging, eyeing PET plastic bottles to avoid tinplate costs.

Supply Chain Vulnerabilities: Jobs and Brand Loyalty at Risk

The ripple effects extend beyond pricing. The CBA warns that up to 20,000 U.S. food manufacturing jobs could be lost if consumers balk at higher prices or brands switch to cheaper alternatives. This isn't just about cost—it's about brand trust. When PepsiCo (PEP) or General Mills (GIS) alter packaging, they risk alienating customers accustomed to iconic tin cans.

Meanwhile, the European Union's retaliatory tariffs—targeting $24 billion in U.S. goods—add geopolitical tension. If agricultural exports face penalties, CPG firms may face further cost pressures, squeezing profits further.

Consumer Price Elasticity: A Double-Edged Sword

Consumer price sensitivity is the wild card. If canned food prices rise sharply, shoppers might pivot to alternatives like frozen meals, fresh produce, or bulk goods. A 2023 USDA study found that households cut canned food purchases by 12% after a 10% price hike. This could accelerate demand for plastic pouches, vacuum-sealed containers, or shelf-stable products that avoid tinplate entirely.

However, not all categories are equally vulnerable. High-margin, premium products (e.g., organic soups) may retain loyal customers, while commodity brands could see market share erode.

Investment Opportunities: Betting on the New Packaging Economy

The tariff-driven upheaval creates clear investment themes:

1. Plastic Packaging Leaders

• Berry Global (BERY): A diversified plastics manufacturer with expertise in flexible packaging, including PET containers.
• WestRock (WRK): Supplies folding cartons and alternative packaging materials.
• Ball Corporation ( BALL): While known for metal cans, Ball also produces glass jars and aseptic packaging, which could gain traction as brands seek tinplate alternatives.

2. Alternative Food Storage Innovators

• Reynolds Consumer Products (part of Unilever): Maker of Reynolds Wrap and other airtight packaging solutions.
• Ziploc (part of Procter & Gamble): Vacuum-sealed storage bags could see demand rise as households seek to extend food freshness.

3. Recycling and Circular Economy Plays

• TerraCycle (TCY): Specializes in recycling hard-to-process materials, including plastics. A tariff-induced shift to plastic could boost demand for recycling infrastructure.

4. ETFs to Monitor

• SPDR S&P Packaging & Containers ETF (PACK): Tracks companies across metal, plastic, and paper packaging.

Risks and Caveats

Investors must weigh the risks:
- Tariff Reversals: If the U.S. eases steel tariffs under new trade deals, tinplate prices could stabilize, reducing urgency for plastic alternatives.
- Inflationary Backlash: Higher food prices could spur regulatory scrutiny or consumer boycotts.
- Supply Chain Gaps: Shifting to plastic may strain existing capacity; bottlenecks could limit scalability.

Conclusion: Navigating the New Normal

The steel tariff crisis is more than a temporary squeeze—it's a structural shift in packaging economics. For investors, the playbook is clear:
1. Short Tinplate-Dependent CPG Stocks: Consider underweighting firms like CPB or CAG until they prove they can mitigate costs.
2. Overweight Plastic and Alternative Packaging Stocks: BERY, BALL, and WRK are well-positioned to benefit from the shift.
3. Monitor Macro Developments: Watch for tariff negotiations, inflation data, and consumer spending trends to time entry/exit points.

The canned food industry's vulnerability is an investor's advantage. Those who bet on the companies solving its packaging crisis today could reap rewards as this disruption reshapes the food sector's future.