4 years of upheaval, not a 30 day reprieve
Not sure about you, but last weekend was probably the most unsettled I have felt in a while. When the economic giant, supported by the world’s most powerful military, ruled by an unpredictable President next door threatens your way of life, you must feel something. Across Canada we saw examples of people looking to change a lot of things that had become a way of life for us. Whether it was in business, their own shopping or travel or the anthem at a hockey game, Canadians sent the message we need to take action.
We do have to be clear. The decision on the tariffs had little, if anything to do with our response. At some point, the people who lead the businesses that drive the U.S. economy had to get through to the very top to let them know this would be very bad for all of us. The border has little if anything to do with it. The reality is he wants our natural resources and energy. As much as we are dependent on them, they are dependent on us. The Canadian philosophy is to negotiate and try to find a fair deal. His philosophy is how do we bring them to their knees, so they have to join the madness.
Things have changed and we need to accept that. We have let too much of our economy depend on the U.S. market, both for inputs and export. We understand why, but this should be a wakeup call to make change. It is good the tariffs did not get applied-this time. The threat will remain as long as the leadership in the U.S. is in place. The mandate is absolute for the next 2 years and then we will see what happens.
Our plan was to continue with our 2025 trends this week. We have changed it up because we felt it was more value to let people know what we think you should be working on during this brief reprieve from the threat of tariffs.
Some considerations for the next 26 days
Who knows what will happen the first week of March when the 30 days are up. Right now, Trump appears to be focused on building the next Club Med in the Middle East so that might take priority over the dismantling of the North American economy. We do not control what he will do. We do control what we can influence and different things happening in your business.
We would suggest you focus on some of these initiatives.
- Protect the sales you have
Regardless of whether you sell into the U.S. or not you could be impacted. Many Canadian companies who do sell into the U.S. are looking for opportunities to reduce this risk. Some of these customers might be the ones you supply. There is a chance they might go after Canadian business being done by someone one else. If you do sell into the U.S. you have time to figure out the plan. Talk to your American customers to understand the impact of a 25% price increase. Finally, it seems like business in the U.S. understands Canada is nay paying the tariff. Perhaps there are some things you can do to offset some of the increase. Full loads of product, more on a pallet, bigger orders less frequently.
Talk to your customers, all of them. Make sure you are in a good place. If you have had some lingering issues recently, get them cleaned up. You do not want any excuses out there for them to consider ‘other options.’
- Review your sourcing of any inputs from U.S.
We did see a swift response from Canada to apply counter tariffs. From a patriotic perspective, it is great and something we probably have to do. Unfortunately, it will drive up your cost of goods and force you to absorb higher costs for inputs or get a price increase through. With this time, review all sourcing to understand the options. Perhaps when you made the decision to source from U.S. there was a close second from Canada or somewhere else. Might be time to go back to those decisions. The volatility will remain so remove the angst of dependence on the U.S.
- Understand the impact of a lower Canadian $ and interest rates
We always say at this point we are not economists…It is ironic when the Canadian dollar loses value exporting is more attractive. We saw the Canadian dollar drop by 2-3 cents, but it did recover part of that. It will cost you more to buy commodities priced in U.S. $. Equipment purchases might cost more. We will probably see more inflation in grocery stores as +/- 20% of what they buy comes from U.S.
Interest rates will probably stay lower. We need to keep the Canadian economy moving and they will be afraid to slow it down with higher rates. The lower rate on a loan for equipment might offset the currency.
- Changes to inter provincial trade barriers
Many in smaller provinces have been fighting for this for a long time. You have heard me say before it is not fair or make any sense that a food business in Ontario has access to a market of 15,000,000 people with the same inspections and food safety standards as a business in PEI with a market of 160,000 people.
If they do remove some of these barriers it could change the dynamics in some categories. We might see Canadian food and beverage businesses looking to sell into other provinces.
- Retailers looking for more Canadian products
It has been interesting to see the reaction from retailers. Specialty stores have been all over the issue. A great strategy for them to differentiate and react quickly. Support your customers in these stores. Loblaw have been the most vocal of the big players. Sobeys have been surprisingly quiet. Metro have warned about higher prices, but they already do a lot to promote Quebec products. Walmart and Costco are probably hoping this will blow over. U.S. based with more direct ties to U.S. consumer packaged goods companies and private label manufacturing. We will never see the real numbers, but it would probably be a good assumption the U.S. retailers would have more U.S. made products on their shelves.
This is definitely an opportunity for Canadian manufacturers. We all know what the leaders say in the media and what happens in a category manager’s office can be different, but now is the time to leverage the opportunity. If you did not get to the shelf last time or into new markets, now is the time to try again. Show them what you are doing, that includes giving the retailer credit to illustrate to consumers you are Canadian and drive sales.
- Private label is an opportunity
As we see consumers posting all over about Canadian products private label is a mystery. Many products say “produced for” but there is no clear origin. Retailers will be looking to reduce the risk of higher prices and also some good publicity.
If you have the capability and food safety requirements now is the time to get in there and make your case. After the bad publicity of inflation retailers would be happy to make the claim “we switched 15% of our private label volume to Canadian manufacturers”.
- Does your packaging clearly indicate you are Canadian?
We assume you meet the legal, regulatory requirements. Now look at it from the consumer’s perspective. When they see your product on the shelf is it clear you are Canadian? Don’t make them pick it up or read the fine print. Win on the shelf. Right now, this is something that will change buying habits.
Consumers loyal to brands are switching. People are looking in other people’s carts to see if they have any U.S. products. Changing packaging is not something you can just run out and do next week but you can look at inventories and make some changes to your next print run. Perhaps a maple leaf on the front or something that is not a complete re-design.
- Reinforce participation in ‘local programs’
Many provinces have their own buy local program. Make sure the signage is on your products and that you are identified online as part of the buy local. In the past you might have felt this was a positive but not a game changer. The dynamics have changed. People want to know.
- Exemptions for ‘only available from U.S.’
When the Canadian government announced the counter tariffs, they did indicate products coming into Canada that were only available from the U.S. could be exempt from tariffs. Now you have some time to review this and determine if your inputs would qualify for this.
We did not see the process to apply for this but there could be some work you could do in advance of the beginning of March to understand if this is an opportunity. You might also want to buy in some extra inputs in advance of March. Hopefully we will not see the tariffs but it is all volatile.
- Understand how the tariffs would work
Our sense was a lot of people were scrambling once we got into the weekend and it looked like this was actually going to happen. You do have some time now to talk to your customs brokers and others to understand the mechanics of this.
You also have time to talk to your U.S. customers to really determine what will happen to sales. Do not go through the next 4 weeks hoping this does not happen.
Cash flow is very important if you are going to have to pay the duties to customs brokers up front.
- Explore U.S. co packers
We know of some Canadian companies exporting to U.S., who have explored partnerships with U.S. based companies to co-pack for them. Product is made there so would not be subject to tariffs. This is not an ideal solution because production will leave and impact the operations of your business. There is the potential to earn something form managing the sales and the customer relationship.
- Push government, retailers and other manufacturers to support ‘Buy Canadian’ programs.
This will help in some cases but never make up for the lost volume going to U.S. There is demand from consumers so let’s make it easy for them.
- Put pressure on our Canadian regulators
Now is the time to reduce the cost of doing business in Canada. We are over regulated and with companies probably facing lost volume, the bottom line will be even tougher. This is the time to get attention and improve our ability to compete globally.
- Explore new export markets.
This is much easier said than done and it takes time, money and persistence. Given the protectionist approach being pursued in the U.S. it is possible some countries will be less interested in U.S. products. Explore export markets where your product could work and look for U.S. made products on the shelf. They might be looking for a friendlier alternative from Canada. We do need to diversify our export volume so perhaps now is the time to explore something you had put lower on the priority list.
- Talk to your customers
We know the appetite for a cost increase is very low, given the period of food inflation we have been through. The reality is you need to know your costs and if this will impact your business. Be proactive with your current Canadian customers and let them know the impact on your cost of goods. For example, if you are going to incur a 25% increase in ingredient cost from U.S. because of tariffs that is a reality you and they need to reflect.
- Participate in the dialogue
There is an appetite from industry trade associations and bureaucrats to talk about the impact and options. Make sure they understand your business. They can only advocate for you when they understand your position.
- Don’t go back to business as usual
We all must accept we are operating in a different environment. Do not breathe a big sigh of relief and go back to what you were doing.
Take advantage of the time so you do not have the same feeling for the next 2-4 years, you had last weekend.
SKUFood Recipes for Success Podcast
In this episode, we’re excited to feature Carzan Local Meats, a family-owned business from Southey, Saskatchewan, dedicated to producing premium grass-fed beef and jerky products. Founded on the principles of sustainability and regenerative ranching, Carzan has become known for its locally raised meats and innovative flavour offerings in their growing jerky business.
Join us as we delve into their journey with Carter and Carmen, from their family roots to their commitment to providing top-tier products that reflect their passion for sustainability and community.
Get ready to hear the inspiring story behind Carzan Local Meats.
Canadian tax holiday has little impact on spending
Moneris, a Canadian payment provider has released some data to illustrate purchasing has not changed much, if at all, because of the tax holiday introduced by the federal government. This should not be a surprise. There did not seem to be much thought put into the idea. It was introduced at the last minute, industry had to scramble and all it did was really reduce tax revenue. Tax revenue that will have to come from somewhere else or be added to the deficit.
It is an illustration of how little politicians understand about industry and consumer behaviour. Perhaps they understand voter behaviour. Hopefully they learn their lesson and consult industry and look for an effective solution.
FCC Distributor event in B.C.
Join Coby Palidwar National Sales Manager, Left Coast Naturals, and me as we discuss the ins and outs of working with a distributor.
From knowing when your business is ready to make a move and what to look for when choosing a distributor to communicate and work with in a way that generates the most value, you’ll learn actionable insights you can bring back to your business.
N.S. Ministers conference
Interested in the new technologies and innovations shaping agriculture? Ready to boost your business’ presence online and build trust in your product?
Join us for Digital Harvest and the 2025 Minister’s Conference: Innovations in Agriculture, two back-to-back events in February hosted in collaboration with the Nova Scotia Department of Agriculture and Perennia.
Network with peers, hear from experts, and learn about the latest trends in agriculture in the field and on social media.
Sell Successfully to Food Service
Gain the knowledge & tools you need to become a supplier of choice to the Food Service sector. This highly rated business learning program includes:
- Interactive virtual workshops by sector experts
- Ready to use tools and templates
- Tips for improved communication skills
- One-on-one coaching support
I do have travel coming up to Toronto, Calgary, Lethbridge and Niagara Falls so if you want to connect or have an event in any of these locations give me a call or send me an email.