If the early days of the new presidential administration have shown us anything, it’s that major changes are going to impact U.S. supply chains. New trade policies and tariffs will have significant implications for the food and beverage industry. Procurement leaders responsible for sourcing materials and items outside of the United States will need to overcome the hurdles associated with playing by new rules by re-examining existing strategies and identifying new U.S.-based suppliers. The ability to balance and allocate demand across multiple new and existing suppliers will require that brands adopt the tools necessary to rapidly evaluate cost structures on multiple operational dimensions at the item level, whereas traditional tools focus on making selection decisions at the supplier level.
Reshoring and domestic production hurdles
Food and beverage manufacturers should take the opportunity of a new administration to reconsider their supplier relationships from the perspective of trade compliance and geography. However, the recently implemented tariffs on both Canada and Mexico mean that there is no “safe” shore when it comes to dodging steep import taxes and duties. Even domestic food and beverage suppliers will have cost inflation risks associated with their reliance on internationally grown ingredients and imports. We expect tariffs and trade restrictions in 2025 to make some food and beverage items either significantly more expensive or create temporary shortages with a lack of availability in the United States.
In addition to trade restrictions, another challenge looms over the food and beverage industry– labor shortages. This is an essential element to consider alongside the Trump administration’s actions on trade. With more than two-thirds of U.S. crop workers foreign-born, it is estimated by the USDA that 42% of U.S. farmworkers lack authorized immigration status. Heightened U.S. immigration enforcement will have a profound impact on the domestic food and beverage industry. A reduced workforce will raise the cost of key domestically farmed ingredients as there will be an increased demand for domestic produce and significantly fewer hands to harvest it. The U.S. food and beverage companies and their suppliers will need to look proactively for strategies and tools to manage costs across a range of categories. With this in mind, reshoring is not an iron-clad solution if the costs of imports, ingredients, and scarce labor all continue to rise.
These new trade policies will not fully shut the United States off from global food and beverage companies though. In fact, we expect to see foreign food and beverage companies react by establishing a presence in the United States themselves, either through mergers and acquisitions or by establishing U.S.-based manufacturing. There have already been signs of this happening from EU-based food and beverage brands, especially in fast-moving consumer goods (FMCG) categories. As a result, additional opportunities for partnerships between domestic and foreign brands and their suppliers are likely to grow, strengthening the position of U.S.-based suppliers and enabling them to command higher prices.
Meeting quality and safety standards with alternative suppliers
The food and beverage industry faces a unique set of challenges, including a rigorous quality and safety audit process required for potential new suppliers from the Food and Drug Administration (FDA). Reviewing inspection reports, compliance documentation, and conducting site visits, along with independent product testing in some cases can be a time-consuming and costly but necessary step. This extensive due diligence makes sourcing alternate suppliers a resource-intensive process regardless of domestic or international origins.
For products with allergen-sensitive ingredients like gluten, it’s also crucial to determine what other items are produced in the suppliers’ facilities. Even seemingly minor details, such as FDA certifications for conveyor belt lubricant, are significant. Beyond safety and compliance, companies must also evaluate a supplier’s performance and reliability in delivering products on time. This level of scrutiny makes the process of supplier discovery and supplier development in the food and beverage industry particularly demanding.
The task of reshoring perishable goods
With these challenges and intricacies in mind, reshoring to create shorter supply chains would still improve lead times, reduce spoilage rates, and streamline food logistics operations. Reshoring can simplify the process of storing, moving, and stocking perishable goods. However, modern cold chain operations, which rely on continuous refrigeration, and in some cases freezing, of perishable goods, have existed for decades and are designed to support the global food and beverage supply chain. Given the sensitivity to spoilage, these cold chains are among the most efficient and operationally optimized supply chains in the world.
Reshoring manufacturing may bring jobs back to the United States, but those sites may still be dependent on imported ingredients. For example, shifting guacamole production to the US will not eliminate the need to import avocados from Mexico. Therefore, the global cold chain, including bonded warehouses supervised by Customs and Border Protection (CBP) and inspection houses (I-houses) where the United States Department of Agriculture (USDA) inspects imported meat and poultry, will remain essential regardless of where the manufacturing takes place. Food and beverage firms that can fully reshore their entire supply chain stand to benefit from shorter, less complex supply chains, reduced logistics and warehousing costs, and lower risks to on-time, in-full delivery.
Reshoring is a multi-year process, and businesses do not need to tackle it all at once. Instead, they may take a targeted approach to reshoring. Companies should focus on single points of failure in their supply chain, particularly areas where they are the least diversified. This is especially critical for single sources in categories that are strategically relevant to their business, such as food ingredients and sustainable packaging. While supply bases are likely to remain global, adapting to evolving trade policies means shifting a greater share of supply to domestic options.
Looking ahead: Preparing to adapt and remaining agile amid change
The current administration’s proposal of significantly higher tariffs means that companies are now rethinking their supply chains with an adapt-or-die mindset. Whether this means actually reshoring manufacturing production, warehousing, distribution, or even farming remains to be seen. The balance is likely to shift with more demand going to domestic, U.S.-based suppliers in the short term. This is a substantial opportunity for cold chain logistics providers serving food and beverage companies to provide better, more efficient alternative routes. In the long term, it may signal a market that has a lower total demand for logistics services due to shorter, simpler supply chains that will stem from reshoring efforts made now in the wake of recent policy changes.
To prepare for even more major trade policy changes in the coming months, companies today must invest in fundamental supply chain agility capabilities, such as the ability to create secondary and tertiary alternatives for single points of failure in critical supply chains, put critical logistics lanes under robust contracts, and create a transportation planning cadence that manages rates for large portfolios of lanes proactively rather than reactively.
Taking full advantage of available data plays a crucial role in enabling fast decision-making in this rapidly evolving environment. AI and predictive models have an important role to play in helping companies locate alternative suppliers, model their costs, and see around corners to plan for potential supply disruption scenarios before they occur. By leveraging data-driven insights, businesses can not only react quickly to shifting trade policies but also adapt supply chain strategies to operate business as usual.
