In This Article:
US President Donald Trump's tariffs are expected to increase food costs for consumers. Bank of America Securities food and beverage analyst Peter Galbo joins Morning Brief with Seana Smith to discuss the impact of tariffs on food products.
The analyst says two food categories are "most exposed" to tariffs: proteins and produce. For grocery stores, Galbo says tariffs will add additional pricing pressures as consumers are sensitive to food inflation. "These companies are either going to have to look to put in additional pricing or kind of take it on the margin hit."
He highlights the increased costs are likely to be passed on to consumers for coffee (KC=F), cocoa (CC=F), cattle, and chicken, which he calls the "four Cs."
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
This post was written by Naomi Buchanan.
new tariffs imposed on goods from Mexico and Canada are expected to increase prices for Americans across industries with food expected to be one of the hardest hit. Joining me now, I want to bring in Peter Galbo. He is a B of A securities food and beverage analyst. And Peter, we want to dive into specific names here, but I think just more broadly speaking, as investors are trying to assess the potential economic impact or the potential impact to themselves here from these tariffs, what does it mean for those within your coverage and and and who is most exposed?
Yeah, hey, Seana, good to be speaking with you again. Look, as these tariffs news came out about a month ago, we really did a pretty deep dive analysis across the coverage trying to understand, you know, potential positives and negatives or winners and losers of potential tariff impact. And and really what it comes down to if you're thinking about the food categories, I would kind of characterize it in two big buckets. One being kind of the proteins space where there's a lot of trade flow that goes back and forth between Mexico, Canada and the US, and the other is going to be produce. Um again, think about seasonal items that we maybe source from places like Mexico when growing conditions are not necessarily optimal in the US and kind of vice versa when we're sending, you know, our produce abroad as well. So again, as we think about broader buckets, it's probably those two that are the most exposed.
Peter, what does pricing power look like just more broadly speaking across the industry and the ability at this point to pass along some of those price increases to consumers?
Yeah, no, at this point, look, the consumer is has been very full on price, probably for the past, you know, 18 to 24 months, and this is a question that we're facing as inflation potentially kind of reaccelerates and you get to a point where these companies are either going to have to look to put in additional pricing or kind of take it on the margin hit. Now there's a few categories that we're looking at specifically. Uh we call them the four C's, so that would be coffee, cocoa for chocolate, cattle, and then chickens, where we've seen the most inflationary pressure. And really it becomes a question of for some of these categories that are more pass through in nature, can the companies look to kind of pass that pricing on? Historically, then when the prices come down, they take pricing down. But for other, uh, you know, more more stable categories, call it, you know, cereal, more center of the aisle, if there are inflationary pressures, it's going to be tougher to pass on additional price increases.
