How will EU tariffs affect food brands?

Posted on 22/06/2018 · Posted in Mash Direct

Are American products sold in Britain about to get more expensive? In response to President Trump’s tariffs on European steel and aluminium, the EU has stated that it will place duties on €2.8bn worth of US goods from today.

Peanut butter, orange juice and denim jeans are just some of the products hit in the opening shots of this trade battle. Details on the tariffs are scarce, and the EU has said that it won’t implement the duties if America climbs down.

However, businesses need to prepare for the possibility that trading relations will worsen and that this tit-for-tat dynamic will intensify, sucking in more industries than the handful already caught in the crossfire.

The first job of any good communications strategy should be to establish a complete understanding of the situation, and then implement a comms plan for stakeholders that informs, reassures and shows that the business has an iron grip on this complicated issue.

However, if there is a negative impact on the business, then there needs to be a communications strategy to deal with it. For example, how should comms respond if products are about to get more expensive? One option will be for the business to absorb the cost of the tariffs, which may be possible if there is strong evidence that the duties will be temporary. A brand could certainly earn a lot of brownie points from consumers if it showed that it was doing everything in its power to protect its customers’ spending power. Highlighting this could be an easy win for the public relations team.

Such a strategy would certainly hit the bottom line. However, brands may have little choice. Communication managers need to remember the company’s other main customers: retailers. Stockists will be applying a lot of pressure to ensure costs aren’t being passed on to shoppers so products with escalating price points may be at risk of being delisted. Retail relations will therefore need to be paramount, with brands clearly demonstrating how they will mitigate the impact of tariffs on their partners.

From a consumer side, brands need to focus on building equity. If price is no longer a selling point, shoppers need to be given other compelling reasons to purchase. If you represent a peanut butter product that can’t compete on cost, implement a campaign to instead show that you’re the best tasting, coolest or most versatile brand on the market. Higher price points can also be utilised to establish premium positioning if coupled with the right branding, packaging and communications strategy.

But what of British brands? Is there a homegrown advantage to be had?

Any company that finds its major competitor under pressure on price can capitalise on its rival’s disadvantage. Those businesses that are absorbing additional costs will have less money to spend on promotions and marketing, providing an opportunity for others to secure greater shelf space and share of voice.

Likewise, retailers could be persuaded to swap out one brand for another if they feel the incumbent no longer offers value for money.

Whatever side of this international development brands fall on, a thorough understanding of the situation will allow marketeers to deploy the most effective communications response possible.

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You can also read the article from our Founding Director, Liam Keogh, on PR Week: https://bit.ly/2MhvMoX