All of this begs the question: What happens when tariffs threaten your bottom line and your company risks losing millions of customers overnight?

One country in a global marketplace may seem like a small risk, particularly for major brands, but in today’s volatile consumer goods environment, it’s not just a drop in the bucket. Canada’s shifting shopping routines come at an already challenging time for consumers and consumer products brands. Shoppers coping with inflation have shifted buying habits, purchasing fewer goods and cutting back on big name brands in favor of cheaper alternatives. Meanwhile, consumer products companies have seen top-line growth erode over the last decade, a challenge that’s been exacerbated recently by commodity volatility, retailer penalties, supply chain challenges, and marketplace disruptions unrelated to tariffs. Now, demand in the world’s sixth largest food importer, accounting for over $50 billion worth of goods sold each year, is shifting.  

Food and beverage companies are faced with a serious dilemma: Is Canada’s changing consumption a bellwether for other regions of the world as tariffs expand? And if so, how should businesses respond in a fast-changing and unpredictable global market?

Short-term consumer product strategies for tariffs and regional demand shifts  

In the short-term, U.S. and international brands have treated Canada as a test ground for solutions to tariffs and shifting shopping trends, and what consumers see in stores reflects what’s happening across the supply chain. Behind the scenes, CPG brands are strategically balancing cost cutting measures with supply chain investments to ensure preparedness for continuing market shifts. Capabilities like advanced analytics, real-time scenario planning, and AI-powered demand forecasting are enabling fast, agile responses, so brands can minimize their risk exposure, optimize costs, and preserve or increase growth margins.  

Solutions that simulate multiple tariff outcomes and their costs are especially powerful in this volatile environment. For example, following the White House’s initial tariff memo in January, what-if scenario usage among CPG companies surged 406%, highlighting how quickly trade disruptions are forcing supply chain leaders to rethink sourcing strategies.  

Those who have integrated supply chain planning and execution are able to pull multiple levers across their end-to-end network to optimize their responses. Such tactics include:  

Dynamic pricing strategies

Canadian’s shopping bills have dropped, at least in the short term, because many brands and retailers are keeping prices competitive to attract and retain customers in the short term. Others have expanded loyalty or rewards programs to personalize pricing and preserve relationships.  

Lesson: Consumer products brands that can leverage data analytics to balance competitiveness with cost absorption will protect margins and appeal to cost-conscious consumers. As tariffs expand, be prepared to mirror these strategies in other regions.

Retailer consultations

Some major Canadian retailers and distributors have canceled or curtailed orders from consumer products brands in response to tariffs, fluctuating exchange rates, and declining demand, with one company reporting purchases of U.S. goods were “rapidly dropping.” Others are negotiating price reductions or short-term increases in inventory to avoid disappointing customers with increased costs or temporary stockouts.    

Lesson: Collaboration and transparency with retailers will be key to preserving margins while maintaining relationships. Consumer products brands may use scenario planning in consultation with retailers and distributors to find a cost-sharing solution that won't harm bottom lines or the consumer. Scenario planning may also help balance demands across your entire network of retail partners, so you can remain profitable even if some require you to absorb the full costs of tariffs.  

Alternative sourcing and supplier diversification

Within weeks of tariff announcements and the launch of the “buy Canadian” movement, global food and beverage brands with suppliers and manufacturers in local or non-tariffed countries began shifting production or highlighting their Canadian bona fides to preserve consumer loyalty. Others are actively seeking suppliers within Canada and globally, especially in areas with the lowest tariffs, to keep prices low.  

Lesson: Global consumer product brands with highly distributed supply chains have an advantage when it comes to sourcing and suppliers since they can quickly re-balance manufacturing and inventory across multiple geographies. However, it will become more challenging to minimize exposure to multiple international trade policies as other regions are impacted. Orchestrated supply chains, collaboration, and agility will be enduring advantages, particularly as competition for diverse sources and suppliers heats up.

Updating packaging

Proud displays of national origins aren’t the only product redesigns to rapidly hit shelves. Consumer product companies have also started to make changes for cost optimization as paper, plastics, and metals are tariffed, with some advocacy groups asking for packaging exemptions and companies indicating they will reconsider production of certain goods to avoid tariffs on costly materials, like aluminum. Others may change product volumes or quantities to ensure goods remain on shelves without inflating consumer prices, as many previously did during post-pandemic inflationary periods.    

Lesson: Consumer products companies will try to avoid impressions of shrinkflation after pushback from consumers in 2022 and 2023. They will instead focus on reducing waste within the packaging process itself, whether that’s by cutting back on the volume of packaging, updating the materials it’s made with, or using changing markets as an opportunity to debut more sustainable options that might have felt risky at another moment.  

Integrating financial and operational planning

Finally, some consumer products companies will integrate financial and operational planning to optimize tariff responses⏤if they haven’t already. Canadian food and beverage businesses have been encouraged to practice some of these responses even prior to tariffs, but many will double down. These could include measures like using currency hedging to mitigate exchange rate fluctuations, using predictive analytics to identify proper responses to trade policy shifts before they occur, evaluating and renegotiating contracts to include price adjustment clauses, and locking in contracts while exchange rates are advantageous.  

Lesson: Integrating financial and operational planning allows businesses to make financial and supply chain adjustments simultaneously, providing maximum protection against tariff impacts.  

Long-term consumer products strategies for tariffs and regional demand shifts

In the long term, consumer products companies are responding to tariffs and regional demand shifts with more structural changes to their supply chains. These approaches require significant upfront investment, but done right, they will provide better stability and opportunity for years to come. These tactics include:

Localizing or diversifying geographic production

Companies concerned about tariffs’ longevity are making fundamental changes to their supply chains. Some global brands have already established or expanded facilities to localize production, while others may pursue strategic acquisitions of regional manufacturers.  

Reformulating products

Product reformulation has emerged as another strategy for navigating tariffs. Consumer products brands are reformulating products to incorporate cheaper or locally sourced ingredients, and some are creating market-specific variants. This approach often involves collaboration between R&D, procurement, and marketing teams to ensure reformulated products maintain quality standards while highlighting their local credentials.

Strategic partnerships  

For many global food and beverage brands, licensing and franchising models could also provide market access without the complications of direct cross-border operations. By transferring production know-how and brand rights to local operators while collecting royalties, companies maintain market presence and brand awareness while minimizing tariff exposure.

Businesses may also form joint ventures, technology-sharing agreements, and co-investment arrangements with their suppliers and logistics providers to create plans that create stability, cut costs and drive opportunities for all participants.

Will current trends create a long-term shift in supply chain dynamics?

No matter where you are in the world, you want to know whether today’s shifts represent temporary disruptions or permanent changes to market fundamentals. The short answer, unfortunately, is that time will tell. But while the future isn’t set in stone, one thing is certain: consumer products businesses that analyze, adapt, and act swiftly will be the first to see what’s coming. Forward-thinking companies won’t just weather these changes; they’ll turn them into powerful competitive advantages, redefining the market on their terms. In today’s volatile consumer goods market, that’s an opportunity you can’t afford to miss. 

Want more information about tariffs' impacts on supply chains? Visit our tariff resource page for guides, webinars, and case studies.