Surviving tariffs: How CPG startups can prepare for whatever comes next

Large food and beverage manufacturers can often weather supply chain volatility – given their deep supply chains – but those entering the consumer packaged goods (CPG) space might be caught with the short end of the stick, Joe Colyn, business partner, procurement and co-man solutions at JPG Resources, explained.

The Trump administration’s ongoing trade war with most of the world requires CPG companies to rethink their supply chains, run scenario plans and get creative with their business partners.

As supply chains tighten, CPG startups securing raw ingredients and manufacturing capacity becomes harder, as most of these resources go to larger CPG companies given their volume advantage, Colyn explained on an episode of the Founders’ Fundamentals podcast.

In response, CPG startups must have open and constant lines of communication across their supply chain to proactively find solutions to issues.

“This is not the time to put your head down and just wait for something to come out of the woods as a solution. You have to be in dialogue with your vendors. You have got to be getting their insights to what is happening and what that might mean for the product,” Colyn emphasized.

Working around supply chain constraints

Startups must think outside the box and work directly with business partners – whether they be ingredient companies or co-manufacturers – to develop novel solutions to supply chain complications, Colyn explained.

For instance, one CPG startup Colyn worked with embraced flavor and color innovation to circumvent cocoa supply chain volatility. Flavor houses, like T. Hasegawa and others, offer flavor replacers for volatile ingredients like citrus and cocoa.

“Rather than just sit back and wait for something to happen, the product owner had dived into looking at colors and flavors, and how they could get the dark brown color that they needed to deliver with cocoa, putting a little less cocoa potentially, in their product and using flavors and colors to get the image that they wanted for their product,” Colyn elaborated.

“If the cocoa supply does come back, you can go back to the first formula that you worked with, if that is really what your benchmark is. But if it is not, then you can go to plan B,” he added.

Another CPG company that Colyn worked with ran into issues when it came to securing a co-manufacturer for its product.

In this case, the food company “made an arrangement with a co-man to run on a Saturday morning, which is not their typical schedule, and they had a payment of a premium for labor, but they got the product that they needed,” Colyn said.

“Get creative in the dialogue with your co-man about how you can do that, so you buy a bit of extra labor, you incur some other costs, but you get into the market,” he elaborated.