Canadians are being urged to brace for higher prices on a wide variety of food and beverage products as manufacturers begin to feel the impact of the U.S.-Canada trade war and pass on the cost of aluminum and other tariffs to retailers.
PepsiCo Beverages Canada recently advised retailers that it planned to raise its prices by about a penny per can, starting at the end of July.
In a letter sent to retailers in late June, the beverage giant cited tariffs the Canadian government recently implemented on a range of products, including the aluminum that makes the cans that holds the company's drinks.
Those tariffs were themselves in retaliation for levies the Trump administration put on Canadian metal products, specifically a 25% tax on steel and a 10% tax on aluminum.
Almost 90% of the Pepsi products consumed in this country are made at one of the company's six Canadian manufacturing plants. But the supply chain criss-crosses the border multiple times, which is how tariffs come into play.
Whether stores raise prices for their own customers is up to them.
In its earnings last week, Coca-Cola (NYSE: KO) CEO James Quincey revealed that it, too, had recently hiked prices for canned beverages across North America.
Food companies are feeling the pinch, too. Campbell Company of Canada, which has been dealing with some big changes including plant closures and a departing CEO, said it has been "acutely impacted" by ongoing trade issues.
The company said the cost of freight, packaging and ingredients are increasing — and so are prices. The company wouldn't give details about its pending price hike, which is expected to go into effect in late August.
The Canadian government dropped mustard from its final list of retaliatory tariffs on U.S. goods.
That's good news for consumers now, say experts, because it means retailers will be less likely to try to raise prices on a product they're already having trouble selling.
On paper, a 10% increase in aluminum might translate to a hike of between 2% to 3% once it filters down to the retail level. But grocery chains have more leeway with canned goods on pricing, because they aren't perishable like other items.
On its most recent quarterly earnings, Loblaw Cos. Ltd. (TSX: L) CEO Galen G. Weston said tariffs are one of many factors squeezing the company on the expenses side.
Another factor in all of this is the value of the Canadian loonie, which is impacting consumers just as much as it is hitting grocery chains who import goods.
