Kraft Heinz Requests 60-Day Notice from Coffee Suppliers Amid New U.S. Tariffs

Kraft Heinz has requested its coffee suppliers provide 60 days' notice before raising prices due to new U.S. tariffs. This request, detailed in a company document, aims to manage cost volatility and protect its supply chain. The U.S. government, under President Trump, has imposed a 10% tariff on all imports, including coffee, which hasn't faced such duties since colonial times. Kraft Heinz's coffee business, generating $835 million in sales, faces increased costs due to rising raw bean prices and competitive pressures, prompting the company to seek operational flexibility and cost control.

A Strategic Response to Trade Policy Uncertainty

In April, Kraft Heinz sent a document to its coffee suppliers asking them to delay any price increases tied to the new tariffs for at least 60 days. The company also urged suppliers to only raise prices if the tariffs are deemed permanent and to reverse any increases should the levies be lifted. This measured approach underscores the challenges U.S. companies face in navigating unpredictable trade policies and the need for operational flexibility.

The 10% tariff, implemented last month, applies broadly to all imported goods, including green coffee beans, which are primarily sourced from tropical regions. While the Trump administration paused plans for steeper tariffs on April 2—excluding Chinese imports—uncertainty remains high as trade negotiations with various countries continue.

Coffee Tariffs: A Historical Anomaly

Coffee has not been subject to U.S. tariffs since the colonial era, making the current policy shift particularly disruptive for roasters and importers. Under the Green Coffee Association contract, which governs most U.S. coffee imports, the buyer—typically the roaster—bears the cost of tariffs imposed at the destination market. This contractual structure limits the ability of large buyers like Kraft Heinz to negotiate away the financial burden, despite their purchasing power.

A Europe-based coffee trader told Reuters, “No one on the trade side has hit the panic button yet, because it’s crystal clear what the rules are.” However, the clarity of rules does not mitigate the financial strain on companies already grappling with rising input costs and competitive pressures.

Financial Pressures Mount for Kraft Heinz

Kraft Heinz’s coffee business generated $835 million in net sales in its fiscal year ended December 28, 2024, representing about 3% of the company’s total net sales of $25.8 billion. While not a core growth driver, coffee remains a critical cash flow contributor for the company, which uses proceeds from the category to invest in higher-growth brands.

The company’s broader financial performance has been under pressure. In the quarter ended March 29, Kraft Heinz reported a sharp decline in sales and volumes, prompting it to lower its sales and profit forecasts for the remainder of the year. The company also raised its estimate for overall input cost inflation to 5%, up from a previous forecast of 3%. Coffee costs, however, have surged even more dramatically, with raw bean prices nearly doubling over the past year due to adverse weather and crop shortfalls in key producing regions.

These cost pressures are particularly concerning for Kraft Heinz’s Maxwell House brand, which competes in the budget segment of the market. A 27.5-ounce canister of Maxwell House currently retails for $11.79 at Target, or about 21 cents per cup. Any significant price increase could erode its value proposition and market share, especially as private label and start-up brands gain traction.

Implications for U.S. Companies and Investors

Kraft Heinz’s request for a 60-day notice period is not just a logistical measure—it also reflects a broader concern among U.S. companies and investors about the ripple effects of trade policy on supply chains and profitability. The company’s document reportedly dashed hopes among some Trump administration officials and investors that large buyers could leverage their scale to absorb or offset tariff-related costs through supplier negotiations.

Instead, the Green Coffee Association’s standard contract terms leave little room for maneuvering, placing the onus squarely on buyers. This reality complicates financial planning and inventory management for companies like Kraft Heinz, which must now factor in both commodity price volatility and geopolitical risk.

Moreover, the company’s appeal to suppliers to “mitigate the impact” of tariffs suggests a desire for collaborative solutions, though it remains unclear how much flexibility suppliers have given their own exposure to global market dynamics.

Contractual Constraints and Market Timing

Industry sources noted that roasters such as Kraft Heinz typically lock in coffee prices months in advance through contracts with suppliers. These agreements, made before the tariffs were announced, limit the ability of either party to adjust pricing retroactively. As a result, any new cost burdens from tariffs must be addressed through future contracts or renegotiations, further complicating procurement strategies.

The timing of the tariffs also adds to the complexity. With the U.S. government still in the process of negotiating bilateral trade deals, the permanence of the 10% tariff remains uncertain. Kraft Heinz’s insistence that price hikes only occur if the tariffs are permanent reflects a cautious approach aimed at avoiding unnecessary cost increases that could later be reversed.

A Broader Struggle for Shelf Space

Beyond coffee, Kraft Heinz is facing competitive headwinds across its portfolio. Legacy brands like Lunchables, Kraft Macaroni and Cheese, and Oscar Mayer are struggling to maintain shelf space in an increasingly fragmented grocery market. The rise of private label products and nimble start-ups has intensified pricing pressure, making cost control even more critical.

In this context, the company’s proactive stance on tariff-related price hikes is part of a broader effort to stabilize margins and protect brand equity. By seeking advance notice and conditional pricing adjustments, Kraft Heinz aims to maintain predictability in its cost structure and avoid sudden disruptions that could impact both operations and investor confidence.

References

• Exclusive-Kraft Heinz asks coffee suppliers for 60 days' notice for tariff hikes
• Kraft Heinz asks coffee suppliers for 60 days' notice for tariff hikes
• Exclusive: Kraft Heinz asks coffee suppliers for 60 days' notice for tariff hikes