President Donald Trump’s unpredictable trade policy is hurting consumer sentiment and adding to cost pressures, at a time when high prices of commodities like cocoa and coffee continue to filter through to supermarkets.

Those were among the takeaways from some of the world’s biggest food companies’ results this week, with one key message in particular: Consumers should brace for more pain. Here’s what they tell us about the outlook for food inflation and consumer trends:

PepsiCo — Tariff Headwinds

From breakfast cereals and fruit juices to salty chips and sweet sodas, PepsiCo’s broad variety of products can offer a glimpse into consumers and their behavior — and it’s pointing to unease and uncertainty.

The Doritos maker cut its full-year profit outlook, with trade headwinds and worsening consumer sentiment driving up costs and denting demand for its snacks and soft drinks.

At the same time, US Health and Human Services Secretary Robert F. Kennedy Jr. is pushing on with efforts to phase out the use of petroleum-based synthetic food dyes, impacting many PepsiCo products. He’s also lobbying state governors to join his campaign to limit access to sugary sweets and drinks.

Nestle — Price Hikes

Like its rivals, the maker of Nespresso and KitKat candy bars has been hit by a surge in coffee and cocoa costs, forcing it to push up prices or face narrowing margins.

The company has hiked prices by double digits in some markets, and executives pointed to soft consumer demand.

• Read: Nestle, Unilever Signal More Pricing Pain to Come for Consumers

Unilever — Emerging Markets Pain

Unilever has also raised prices, which helped sales. The emerging markets division, which accounts for almost 60% of revenue, saw volumes dip in the first quarter.

Latin America was particularly hit, hurt by high interest rates which lowered consumer demand and led to retailers destocking in markets. Sales also dropped in China.

Danone — Age, Health and Weight Loss

Danone is benefiting from demand for high-protein yogurt in North America and infant formula in China. CEO Antoine de Saint-Affrique is seeking to tap a trend toward healthy eating, particularly in the US, with the increasing use of obesity medications like Novo Nordisk’s Wegovy.

He’s also betting that an aging population will boost demand for the company’s specialized nutrition range.

Tariff Impact

The impact on consumers will depend on how the global trade war plays out. Here’s some of the latest developments:

• French billionaire Bernard Arnault, whose group LVMH owns labels like Moët & Chandon and Hennessy Cognac, called on the EU to strike a deal with the US on tariffs to defend the region’s winegrowers.
• Japan is considering increasing imports of US rice and soybeans as a potential bargaining chip in talks over Trump’s tariffs.
• China sharply reduced imports of many US commodities last month, in some cases to zero, with wheat among the worst affected. 
• Escalating tensions between the US and China have created an opening for Brazil and Argentina to ramp up exports of everything from meat to grains.

—Agnieszka de Sousa in London

Charted Territory

Peak booze? | Without noticing it, humanity has passed a remarkable milestone: Alcohol consumption has gone into possibly permanent decline. The decline could be attributed to a generational shift or increased availability of non-alcoholic alternatives or soft drugs. The Covid-19 pandemic pushed things further, focusing attention on health and encouraging a style of socializing that’s more intentional and less focused on just getting drunk. Production of grape wine hit its maximum level of 37.5 million metric tons as far back as 1979 and has since fallen by about 27%. The world appears to have hit a shallower peak in beer, too; it’s now about 2.6% below where it was in 2016, when 190 million tons was brewed, or roughly half a trillion standard bottles. (Read David Fickling’s Bloomberg Opinion column here.) 

This Week’s Must Reads

• Bloomberg reporters drove some 2,500 kilometers (1,553 miles) last month through key cocoa-growing areas in Ivory Coast and Ghana. What they found were signs that the road to recovery in production will be a tough one.
• Indonesia is considering exporting rice, a rare phenomenon for a country that often imports itself, in a bid to bolster goodwill with nations in need of the staple grain.
• The US Department of Health and Human Services said Tuesday it plans to work with food companies to phase out use of many artificial food colorings by 2026, but industry lobbyists say there’s no agreement in place to remove the dyes, according to people familiar with the matter.
• The US egg shortage and subsequent surge in prices is pushing many Americans to try their hand at raising a chicken flock of their own. 
• The UK’s driest start to the year in four decades is threatening the country’s grain crops and increasing the risk of wildfires.
• Iraq’s government expects it will be able to buy enough wheat from local farmers for its crucial subsidy program to avoid imports for a third year in a row.
• Companies are deploying AI as a climate solution in various ways, including climate-proofing food and aiding crop breeding. 

On the Bloomberg Terminal

• President Trump’s global tariffs and freezing of federal agriculture grants have added to financial strains on American farmers, who are seeking refuge in bankruptcy at the highest rate in years, Bloomberg Law reports. 
• Brazilian chicken exporter BRF is building a new plant in Saudi Arabia to help triple its local output as the kingdom ramps up efforts to secure food supply, Bloomberg News reports.
• Run SPLC after an equity ticker on Bloomberg to show critical data about a company's suppliers, customers and peers.
• Use the AHOY function to track global commodities trade flows.
• See DSET CHOKE for a dataset to monitor shipping chokepoints. 
• For freight dashboards, see BI RAIL, BI TRCK and BI SHIP and BI 3PLS
• Click HERE for automated stories about supply chains.
• On the Bloomberg Terminal, type NH FWV for FreightWaves content.
• See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.

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