This article explains the impact tariffs will have on the Consumer Packaged Goods (CPG) industry in 2025. Tariffs are taxes on imported goods, and they are expected to increase significantly in 2025. This will disrupt CPG supply chains, increase production costs, and lead to sourcing and procurement challenges.
The Consumer Packaged Goods (CPG) industry is one of the global leading economic forces, with an estimated worth of around $3 trillion. However, despite its size, this industry giant won’t be saved from the proposed tariff increase. On the contrary, the expected impact of tariffs on CPG industry is huge, and companies must prepare to mitigate the risks this change will bring for companies.
In this blog, we thoroughly analyze the effect tariffs will have on the CPG industry in 2025. We also look at how tariffs affect experiential consumer experiences and field marketing.
After a decade of slow growth, the consumer packaged goods (CPG) industry is rebounding, driven by rising consumer demand and shifting market trends. Procter & Gamble, Unilever, Coca-Cola, Mondelez International, and PepsiCo lead the sector, with other major players following suit.
Global expansion and international distribution are critical components of the CPG business, making the industry especially sensitive to tariffs. These taxes raise the cost of imported goods and restrict their volume, which in turn limits international sales and can weaken a company’s competitive edge in the global marketplace.
The upcoming year will see a drastic increase in tariffs in the U.S. President Trump has announced that he will raise tariffs on international imports by 10% to 20% (the exact figure has not been confirmed as of this writing). He has also proposed an additional 25% tariff on imports from Canada and Mexico, as well as a 10% tariff on imports from China, with implementation expected as soon as the 1st quarter of 2025.
The impact of tariffs on the CPG industry in the U.S. will be felt in the import supply chains. It’ll cause other countries to take retaliatory actions and/or under the WTO agreements and increase tariffs on U.S. exports.
The 2025 tariff changes will primarily impact food, beverage, personal care, and household product categories since many raw materials and ingredients must be sourced internationally. For example, black pepper cannot be grown in the U.S. and is only found in Southeast Asia, making it subject to increased import taxes.
The newly proposed tariffs will negatively affect CPG supply chains, causing various troubles for CPG manufacturers. Fortunately, there are ways to mitigate these effects.
Increased tariffs will largely impact the global trade, disrupting the supply chain management. These changes are expected to cause delays in supply and increased costs of sourced raw materials and goods. It’s because the production costs for companies using imported materials will increase and they’ll be forced to find other suppliers and change their source chain.
One way to reduce the risks of supply chain disruptions in the CPG industry is to diversify it. Instead of sourcing only from one supplier or country, companies should expand their supply chains across various locations.
Implementing or increasing CPG import tariffs will increase import costs. For companies that rely on imported goods and materials, this means increased production costs. They’ll be forced to either absorb or pass the costs on to consumers.
If they choose to absorb the costs, they will have to reduce the profit margin which will lead to lower profit or potentially a loss. On the other hand, if they choose to pass the costs to the consumers, they’ll have to increase their prices. This will result in reduced demand for those goods, hence less profit or loss to the manufacturer.
While supply chain diversification might be the answer to reducing the risk of import delays and increased costs, it’s not that simple.
Companies that decide to find other suppliers must research the market thoroughly to find new ones. They must evaluate the cost and quality of the supplies potential new suppliers offer as well as the geopolitical landscape.
Some manufacturers may even look for suppliers outside the tariff-imposed countries, like India. This shift requires a lot of time, resources, and risk assessments, as manufacturers must ensure that the suppliers meet quality standards and can handle the required volume.
Other businesses might consider relocating their production to avoid tariffs and the complexities of searching for offshore suppliers/manufacturers. Relocating offers companies better control over quality and production times and increases the local economy.
However, this may increase production costs due to higher taxes, energy costs, and raw material/goods costs. Also, there are higher labor costs, especially in countries where there’s a shortage of skilled workers.
Rising tariffs will inevitably drive up the cost of imported consumer packaged goods - or any products that rely on imported raw materials. While actual price increases depend on factors like demand, substitute availability, and overall market competition, they typically mirror the tariff rate.
For instance, if tariffs on CPGs from China jump by 20%, consumers could see at least a 20% increase in retail prices.
The impact extends beyond foreign goods as well. Domestic product prices may also rise due to the “price umbrella effect.” Because domestic producers face less pressure to keep costs low, they can increase their prices while still remaining cheaper than their tariff-inflated international competitors.
Consumer packaged goods most affected by the tariff increase include:
While consumers’ reaction to price increases depends on factors like income levels, personal preferences, and the product's perceived value, they’re more price-sensitive regarding essential goods like food and personal care products.
These products have an elastic demand, which means the higher the price, the lower the demand. Since consumers can’t give up essential goods, they will seek more affordable alternatives, resulting in shifting brands. They may purchase goods from brands offering more affordable products or decrease the use of some products.
Under tariff influence, consumer behavior is expected to change dramatically because no one likes to pay more. As a result of a tariff hike, consumers will either switch brands, choosing those offering the same product at a lower price or reduce their consumption of non-essential items like snacks and candy.
Consumers also use budget-friendly strategies, such as shopping in bulk, searching for sales, the best deals, and coupons, and joining loyalty programs.
The higher prices and global economic crisis have shifted consumers’ priorities, with people buying goods with lower prices rather than goods of higher quality. They don’t care if the products are from a well-known brand or a private label - they are primarily interested in their price.
As a matter of fact, a 2022 survey shows that 24% of consumers worldwide regularly looked for products from a private label and low-cost goods, with this number continuously increasing each year.
Rising tariffs will drive up prices in the consumer packaged goods (CPG) sector, influencing consumer buying habits and intensifying market competition. In response, many brands may absorb some of the extra cost or switch suppliers to keep prices more affordable. They will also compete on marketing outreach and pricing strategies, each vying to offer the best value and attract loyal customers.
When tariffs rise, domestic producers often gain an edge because their prices stay lower than those of foreign brands. This cost advantage can boost local market share and drive consumers toward domestic goods, giving local companies a clear foothold.
Innovation is vital for businesses to adapt and thrive during sudden shifts like tariff hikes or global disruptions (e.g., the COVID-19 pandemic). Brands that consistently deliver fresh, improved offerings stand out in challenging times, attract new customers, retain existing ones, and grow their market share. By developing unique product features or services, companies can maintain a competitive edge - even when market conditions are in flux.
Apart from higher product prices, we’ll also see tariff influence on marketing strategies.
Brands can mitigate tariff effects on marketing campaigns and stay relevant in the market by adapting them to current market conditions. Instead of simply promoting their products to the audience, they should focus on creating quality products with appealing designs and offering stellar customer service. They should also build a network to bring their products closer to consumers.
One way to achieve this is by shifting from common digital marketing practices and investing in field marketing.
Field marketing is the perfect solution for bringing your goods close to consumers, as it creates experiential experiences. By experiencing or trying the product firsthand, consumers learn more about it and become aware of the brand and its offerings.
Incorporating field marketing into a brand’s marketing strategy helps increase brand awareness, build personal connections with the target audience, and drive sales. Companies can use it to educate consumers on the benefits of your product(s) and gain their trust.
Tariffs force businesses to prioritize high-impact, low-cost campaigns over traditional marketing strategies.
Digital marketing strategies, such as social media and email marketing, can be very effective in reaching the target audience and promoting a brand’s consumer goods. They are cost-effective marketing alternatives to traditional TV and print advertising and offer a wider reach, which makes them more valuable.
Additionally, they can be optimized for maximum effect using data analytics. Investing in data analytics tools can help companies precisely target their audience, create the best-performing campaigns, and maximize ROI even in challenging times like these.
Optimizing marketing efforts is the best way to save on marketing without compromising campaigns’ efficacy.
The first step of campaign optimization is redefining your target audience. CRM tools can help you track consumers' data and learn about their purchasing behavior. Organize the data and analyze it to understand their behavior, preferences, and shopping patterns. Then, use it to create targeted campaigns that address the audience’s needs, desires, and/or pain points.
Another thing to consider is personalized consumer interaction. Tailoring marketing messages based on consumers’ needs, wants, and stages in the buyer’s journey will help you provide campaigns valuable for them.
Additionally, you can leverage AI and machine learning to create audience segments and create tailored messages that resonate with them. These technologies can analyze customer data based on which companies can create highly targeted campaigns.
Targeting specific consumer segments with personalized messages is proven to be highly effective in enhancing the outcomes of marketing campaigns.
The significant 2025 tariff increases are expected to affect experiential events that brands use to draw new customers. By raising the cost of imported materials, tariffs may drive up ticket prices or require scaled-down brand activations. Consequently, higher ticket costs could deter consumers from attending these events.
To mitigate the tariff consequences for brand activations, companies can source materials locally and opt for smaller, more localized in-person events, virtual gatherings, or pop-up experiences. They can also leverage interactive technologies like virtual reality (VR), augmented reality (AR), and gamified apps to deliver impactful, customized events while minimizing the effects of tariffs on consumer engagement.
Here are two examples of how two gigantic brands deal with tariff increases.
P&G used to source steel for Gillette razors from Sweden and Japan. However, due to the imminent tariff increase, they’ve switched suppliers to Jindal Stainless, a Delhi-based manufacturer. This transition is their way of mitigating the impact the higher tariffs will have on steel’s cost.
Unilever has decided to adjust its supply chain strategies. In the past period, it increased its imports from Mexico by over 60,000 kilograms of personal care products. At the same time, it decreased its imports from China by around 24%.
The company also plans to build a manufacturing plant in Nuevo Leon, a state bordering Mexico.
The impact of tariffs on the CPG industry will be great. The increase in tariffs will negatively affect both CPG companies and consumers, leading to supply chain disruptions and higher prices.
These changes will also impact CPG brands’ marketing and consumers’ behaviors.
To navigate through these challenging times, companies will have to adjust their entire operation. They’ll have to diversify their supply chain or absorb the added cost and scale down their experiential events and advertising to stay competitive in the market and attract and retain a loyal customer base.
Attack Marketing can help CPG brands sail through the challenges that 2025 tariffs are expected to bring. We can help you bring your products close to your target audience and increase brand awareness by organizing unforgettable experiential events.
Check out some of the brand activations we’ve organized for our clients and read about their success stories.
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Yes. The tariff increase will increase the cost of imported goods. It will also disrupt the supply chain, forcing companies to change their suppliers, which often leads to supply delays and higher operational costs.
By employing AI technologies, CPG companies can change the sourcing country, absorb the tariff costs, and reduce operational costs. They can also adjust their marketing strategies, such as focusing on field marketing to connect with their target audience.
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Christian Jurinka serves as the CEO and oversees the business development and strategic vision for the agency. Attack! connects brands with consumers, driving loyalty, purchase and velocity through comprehensive, ROI-focused field marketing services.
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