Georgia beverage firms fear losses from tariffs
Industry leaders worry higher consumer prices could cut market share.
Thomas O’Neal works at a beverage can filling line at Ironmonger Brewing in Marietta. Georgia beverage industry leaders warn that the new duties of 10 percent on aluminum and 25 percent on steel could raise the price of production, delay hires and slow equipment upgrades. PHOTOS BYHYOSUBSHIN/HSHIN@AJC.COM
Gary Converse stacks cans of freshly-canned beer at Ironmonger, where executives are fearful of possible higher production costs.
This is one in a series of stories from The Atlanta Journal Constitution on the Georgia impact of President Donald Trump’s trade policies. The AJC seeks to give readers the clearest possible picture of how international trade fights could affect the economy and jobs close to home.

In a humid warehouse turned-brewery in Marietta on a recent July morning, the canning of beer has stopped and workers are in a sweaty struggle with a broken machine.

Shaking his head, co-owner David Sheets says they’ll have to call the manufacturer in Minnesota and hope a replacement can be shipped quickly. With razor thin margins, a small business cannot afford delays in production or unexpected costs.

Which is why the 5-year-old Ironmonger Brewing Co. is worried about a trade war - starting with the price of aluminum used in its cans.

“If we get a tariff that drives the 11-cent can up to 15 cents a can, that’s trouble,” Sheets said. “I am not going to be able to raise my prices to cover for that. I will have to absorb the cost.”

Many in Georgia’s beverage industry, from giants such as CocaCola Co. to fledgling local breweries and craft soda makers, are fretful that new tariffs on steel and aluminum imports will raise costs and hamstring growth. Not only do most use aluminum cans, but they mix and ferment their products in equipment made with steel parts and sometimes serve them out of steel kegs.

A chorus of businesses and hade groups in recent months have warned that the new duties of 10 percent on aluminum and 25 percent on steel could raise the price of production, delay hires and slow equipment upgrades. That could ultimately result in higher prices for consumers and potentially a loss in market share to competing industries.

“This tariff, particularly if it is in effect for a long time, will have impacts up and down the supply chain,” said Jim McGreevy, the CEO of the Beer Institute, a trade group that represents brewers, beer importers and others in the industry.

‘Unfair practices’ President Donald Trump announced the steel and aluminum tariffs this spring, fulfilling a central promise of his populism-tinged campaign. He said hading partners such as China have been unfairly dumping cheap metals on the world market, harming U.S.-made steel and aluminum and ultimately threatening the country’s national security.

His administration has said that by cracldng down on international trade abuses now, the U.S. can negotiate fairer agreements with its trading partners that will pay dividends for domestic industries for years to come.

“The president will not stand idle while unfair practices erode America’s steel and aluminum industries and threaten national security,” Commerce Secretary Wilbur Ross said in a March op-ed in The Wall Sheet Journal. “Other countries understand that.”

Experts say the tariffs’ impact on the economy will be modest - and even a good thing for some domestic industries. American-made aluminum and steel companies saw their stocks jump after the tariffs were announced, and some, such as Century Aluminum and U.S. Steel, announced plans to expand.

“The president’s action today is key in stemming the tide of unfair foreign imports and putting steelworkers back to work,” American Iron and Steel Institute President Thomas J. Gibson said shortly after Trump announced the tariffs in March.

But there also will be losers. That is what prompted a deluge of criticism from free-market groups and even some of Trump’s closest Georgia allies, including Republican U.S. Sen. David Perdue, who warned the tariffs were too broad and could lead to unintended consequences.

“The president’s instincts are right that we need access in these markets,” Perdue said in March, “but (tariffs) need to be very targeted.”

Members of Congress have differed on how - or whether - to respond legislatively. Georgia U.S. Sen. Johnny Isakson backed a symbolic measure last month that would allow Congress to sign off on tariffs levied in the name of national security, while Perdue voted against it, saying it would harm Trump’s negotiating ability.

Georgia footprint The stakes for the beverage sector are significant.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said the industry “has become very global over the past 10 to 20 years,” making tariffs pinch all the more.

Companies that make nonalcoholic beverages account for nearly $14 billion in business and 18,000jobs in the state, according to the Georgia Beverage Association. And Georgia’s roughly 108 breweries - from giants such as the Anheuser-Busch, which has a plant in Cartersville, to start ups like Ironmonger account for some 56,000 jobs, according to the Beer Institute.

The new tariffs have begun to have an impact on some local companies, particularly smaller ones that are already operating with tight profit margins. Any substantial increases in input costs could be harder for such companies to weather.

“Anyone who is using metal in production is going to be worse off,” said Thomas Cunningham, the chief economist for the Metro Atlanta Chamber.

At Ironmonger, aluminum cans account for roughly 15 percent of the company’s costs.

“The margins we have now are about 8 or 9 percent, and with these tariffs, you want to take that to 2 or 3 percent,” Sheets said. “How do I save enough money to hire more people? How do I have enough to give my people raises?” Others say they have yet to feel an impact but are concerned about what could happen should the tariffs stay in place long term.

Hollis Callaway started production at Montane, his Atlanta-based sparkling water company, more than a year ago and has rapidly expanded. He uses spring water sourced from his family’s property near Hamilton, in Middle Georgia, near the Alabama line, to produce four flavors of sparking water, which he now sells through roughly 200 vendors across the state.

Callaway said the main costs for his three-person start up are cans, paper board and freight, but that he has yet to feel the impact of the aluminum tariffs because of the timing of his contract. Still, he’s worried the duties could harm his balance sheets later.

“If our costs increase, we’re going to be slower to hire and slower to expand,” he said.

“I want to keep our pricing the same,” Callaway said. “Ultimately, we would have to pass the cost on, but for now we’re not changing our pricing.” ‘Worrying’ rhetoric Meanwhile, Georgia’s largest beverage companies have kept the details of how the tariffs have affected their businesses closer to the vest. Many have spoken out only through trade organizations, fearful that any direct criticism of Trump’s policies could land them in hot water with the president.

Coca-Cola hasn’t publicly discussed what impact the tariffs could have on its operation, but it spent tens of thousands of dollars lobbying Congress and the Commerce Department on the issue in the first quarter of the year, according to federal disclosures.

The company also released a statement more broadly touting “free and fair trade.”

“While we understand the desire to ensure orderly commerce and economic growth in the United States, the current rhetoric around trade is worrying,” the company said.

“If strict tariff policies implemented in one country are mirrored in others, the world will become more insular, goods and services will be less affordable for consumers and that would have a negative impact on global economic prosperity.”

Duane Stanford, the executive editor of Beverage Digest, said the trade policy change “hasn’t been a punch in the face yet” to soft drink makers.

“But the longer it lasts, the more impact it will have,” he said.

Hufbauer, the Peterson Institute economist, said larger companies generally tend to weather trade disputes more smoothly than smaller ones.

“The big, iconic brands have margins that tend to be generous,” he said. “They can take a fair amount of added costs. Small companies will probably have no choice but to raise prices.”

Others fear the broader impact of tariffs on entire industries.

McGreevy, the Beer Institute CEO, said brewers compete not only against one another for customers but wine and spirit makers. Since those industries tend to use more glass and plastic rather than aluminum for bottling their products, they could gain an edge.

“All of these producers are fighting for the consumers’ consumption,” he said, “and frankly, wine and spirits are not exposed to the aluminum tariffs in the way that beer is.”