CNN
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American consumers do not have to worry about President Donald Trump’s rates about aluminum that increase the price of their can of soft drinks.
Two weeks ago, Trump announced a rate of 25% for all steel and aluminum input in the United States that would be in force on 12 March Some soft drinks drinkers who take another staple out of their wallets.
But shortly after the executive order, drinking companies started assessing what the rates could mean for their industry – and the results were not too worrying.
James Quincey, CEO of Coca-Cola, suggested that the company could disappear from the use of aluminum and the production of other packaging materials could increase to guarantee affordability and meet the consumer demand.
“If aluminum cans become more expensive, we can put more emphasis on (plastic) bottles,” Quincey said in the profit of the company on the fourth quarter on 11 February.
The rates will probably have almost no influence on consumer prices, according to Adam S. Hersh, a senior economist at the Economic Policy Institute.
“Companies have more than enough profit margins to absorb small price increases into a small input for production,” he said.
In 2023, data showed that the Coca-Cola company almost 50% of its drinks in plastic bottles, 25% in aluminum cans and the remaining 25% packed in glass bottles and other packaging. Data from Neat DRPEPPER showed that they have packed 27% of their drinks in plastic bottles, 13% in aluminum tins and 8% in glass.
Quincey has also made it clear that although rates on aluminum will probably lead to extra costs, it is unlikely that they have a significant impact on drinks companies the size of Coca-Cola.
“I think we are in danger of exaggerating the impact of the 25% increase in the aluminum price compared to the total system. It is not insignificant, but it is not going to change an American business business in millions of dollars, “he said.
“It’s a cost. It will have to be managed. It would be better not to have it compared to the company, but we will continue our way. ”
A can costs a little less than 4 cents to produce, according to Hersh. “If we set up a rate of 25% there, it would increase the costs of the can to 5 cents,” he said, adding that it would increase the production costs of a Six-Pack by 6 cents.
Investors largely agree that aluminum rates will not lead to considerable cost increases, since the stock prices of drinking companies are relatively stable since they were announced, according to Hersh.
Most alcohol companies outsource the packaging to Bottelaars, and it is the Bottelaars who buy rough aluminum and ultimately decide on prices and strategy, says Filippo Falorni, a drink analyst at Citi.
Coca-Cola sells its concentrate to Bottelaars, which mixing with water and packaging on production lines that are interchangeable.
“It is fairly easy to change production lines from cans to bottles,” Falorni said.
Increasing the use of plastic packaging instead of aluminum is primarily a strategy for cost movement, given the ease of changing production lines and not necessarily due to a priceless high aluminum prices, he said.
But switch to other species The packaging may be more complicated for smaller beverages and those who are in -house, as CNN reported earlier.
Going off aluminum cans can be ‘a colossal decision’, and the “Normally it takes a period of years to make a transition such as successful,” says William Pietersen, a professor at the Columbia Business School and former CEO of Lever Foods, Seagram USA and Tropicana.
Since Trump announced the new rates, the aluminum prices have risen more than 4%, which Hersh called ‘relatively stable’.
The coalition of American metal manufacturers and users (Cammu) said that 25% rates on steel and aluminum can harm the domestic manufacturers directly.
“Restoring 25 percent rates for steel and aluminum imports from our allies and without a workable exclusion process immediately gets American manufacturers in the way,” said a Cammu statement.
“Foreign customers shift their supply chains away from American producers. Once removed, especially for smaller, family businesses, it is difficult to get that lost company back, “is the statement.
In 2024, according to the US Geological Survey, the United States imported around 47% of the aluminum that was used in their own country.
But when combining the rates of Trump’s first term, the price of aluminum that traded on the market and has seen the domestic production of aluminum in recent years, Falorni said.
Within the beverage industry, companies adapt to price increases in various ways.
Companies such as Coca-Cola, with only 25% of their income from the United States, can compensate for increasing costs by utilizing income from other markets.
This flexibility makes the company less vulnerable to aluminum rates than companies such as Neat Dr. Pepper, which are highly dependent on the American market and is more exposed to domestic price fluctuations, Falorni said.
While about a quarter of the Coca-Cola products are in aluminum cans, consumers are also used to plastic and glass bottles.
Energy drinks such as Monster and Seltzers such as White-Claw are mainly sold in cans, with few viable alternatives. For these brands, shifting to other materials can damage the demand, which means they have little choice, but to pass on higher costs to consumers, according to Falorni.
While switching to plastic and glass packaging would I have a small financial impact on soft drink companies such as Coca-Cola, according to Judith Enck, the president of Beyond Plastics and a former regional manager of the Environmental Protection Agency, are “destroyed” for the environment.
“Every significant shift to more plastic bottles is a huge environmental problem,” Ensck told CNN.
Refillable glass containers are the most durable packaging option for drinking companies, followed by aluminum cans (because they can be recycled easily) and then glass bottles for one -time use. Plastic is one of the least durable, because according to Enk around 16,000 chemicals are used to produce plastics.
Coca-Cola bottles are the world’s number 1 source of plastic pollution. In December the company announced a drastic reduction in the sustainability goals of the packaging.
Drinking companies will probably not feel much recoil from the Trump administration if they choose less sustainable packaging.
“The Trump administration sends a very clear message that they do not give a priority to environmental protection,” said Ensck.
“I don’t think large companies feel busy to change.”
CNN’s Jordan Valinsky and Alicia Wallace contributed to this report.
