CPG Companies Seek Efficiencies and Diversification to Mitigate Tariff Challenges
Consumer packaged goods (CPG) companies are working to add efficiencies and diversify their sourcing as they deal with the effects of current and potential future tariffs.
Procter & Gamble (P&G) executives said during a Thursday (April 24) earnings call that the biggest impacts the company is experiencing so far are on its imports of raw and packaging materials and some finished products from China and its exports of finished products from the U.S. to Canada, due to that country’s responsive tariffs.
On the demand side, P&G has seen consumers “pause” in response to not only tariffs but also uncertainty in the markets and the job market, leading to lower consumption levels, P&G Chief Financial Officer Andre Schulten said Thursday during the company’s quarterly earnings call.
“We will be looking for every opportunity to mitigate the impact, including sourcing flexibility and productivity improvements,” Schulten said. “We also need to consider some level of consumer pricing in affected categories and markets.”
PepsiCo said Thursday during its earnings report that it expects to see elevated levels of volatility and uncertainty in the macroeconomic environment, pockets of geopolitical tension, and incremental supply chain costs related to tariffs through the end of 2025.
In prepared management remarks attributed to both Chairman and CEO Ramon Laguarta and Executive Vice President and Chief Financial Officer Jamie Caulfield, PepsiCo said it expects these pressures to keep consumers “choiceful and value conscious.”
“We are actively working on mitigation strategies to reduce these incremental costs over time, including driving greater cost savings, adjusting sourcing of key inputs, and sharpening our revenue management tactics,” the executives said in the remarks.
PepsiCo will also continue to invest in digital capabilities that will enhance its consumer insights, trade promotion management, demand forecast and supply planning, per the remarks.
Bloomberg reported Thursday that both Unilever and Nestle have already raised prices in response to higher commodity costs and will continue to do so if tariffs drive those costs even higher.
Nestle CEO Laurent Freixe told journalists, per the report, “We are trying to take as much price as we can to cover our costs while being mindful of the consumer response in a competitive environment.”
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