Kraft Heinz’s 60-Day Tariff Gambit: Navigating Stormy Seas in Coffee Trade

In early 2025, U.S. coffee imports faced an unprecedented challenge: a 10% universal tariff on all imported goods, the first such levy on coffee since colonial times. For Kraft Heinz, the nation’s largest coffee roaster, the policy triggered a strategic shift. The company mandated that suppliers provide 60 days’ advance notice before passing tariff-related cost increases to buyers—a move designed to stabilize pricing amid unpredictable trade policies. This policy, detailed in an internal document reviewed by Reuters, underscores the high-stakes balancing act facing consumer goods giants in an era of economic uncertainty.

The Tariff Timeline and Supplier Dynamics

The 10% tariff, introduced in early 2025, forced Kraft Heinz to confront a stark reality: its coffee division, which accounts for 3% of total net sales ($835 million in fiscal 2024), faced rising input costs at a time when sales growth had already stagnated. Under the Green Coffee Association contract, Kraft Heinz is legally obligated to absorb tariffs imposed at the destination market—a burden that now threatens margins.

The 60-day notice period was crafted to address two key risks:
1. Uncertainty over tariff permanence: By delaying price adjustments, Kraft Heinz could assess whether tariffs were temporary or permanent.
2. Contractual mismatch: Coffee buyers typically lock in prices months in advance. The sudden tariff created a timing gap, as existing contracts did not account for these costs.

Analysts note that this policy reflects a broader corporate challenge: even large buyers like Kraft Heinz have limited leverage in volatile markets. As one internal document stated, suppliers were instructed to reverse price hikes “immediately” if tariffs were lifted—a clause highlighting the company’s desperation to retain control over costs.

Financial Pressures Mount

The tariff’s timing coincided with a surge in raw coffee bean prices, which nearly doubled over 2024 due to crop shortages and climate disruptions. These dual pressures pushed Kraft Heinz’s projected annual input cost increases to 5%—up from an initial 3%—further squeezing margins.

The strain was evident in Q1 2025 results: sales and volumes fell sharply, prompting the company to slash its full-year sales and profit forecasts. Meanwhile, its iconic Maxwell House brand—a staple priced at ~21 cents per cup—faces intensifying competition from private-label and startup rivals, eroding market share.

The Trade Policy Wild Card

While the U.S. paused plans for steeper tariffs (excluding Chinese imports) in April 2025, the 10% levy remains in place for most goods, including coffee. The Trump administration’s focus on bilateral trade deals adds another layer of uncertainty, as suppliers may seek tariff exemptions through individual agreements.

For investors, this creates a dual dilemma:
- Short-term volatility: The coffee division’s stagnation and margin pressures weigh on KHC’s valuation.
- Long-term risks: If tariffs persist, Kraft Heinz may need to further reallocate capital from coffee to higher-growth brands, risking its market dominance in the segment.

Conclusion: A Brewing Storm for Investors

Kraft Heinz’s 60-day notice policy is a symptom of a deeper problem: the company’s vulnerability to external shocks in a fragmented market. With coffee sales contributing just 3% of revenue but facing 5% cost inflation, the division’s future hinges on tariff resolution and pricing power.

Analysts warn that unless the tariff is reversed or offset by strategic pricing, the coffee business could become a persistent drag. Investors should monitor two key metrics:
1. Tariff developments: A removal of the 10% levy would immediately reduce input costs.
2. Sales recovery: If Maxwell House and other brands can regain momentum against competitors, margins may stabilize.

In the meantime, Kraft Heinz’s stock—already down 15% year-to-date as of April 2025—reflects investor skepticism. For now, the company’s gamble on 60-day notice periods is a stopgap, not a solution. The real test lies in whether it can navigate the perfect storm of tariffs, climate volatility, and shifting consumer preferences—or become the next casualty of a changing landscape.