November 11, 2021
The Great Can Price Explosion. Why You’ll Pay More for Canned Foods…
And How It Should Have Never Happened
Some say canned foods aren’t sexy. That’s bad thinking that can wait for an explanation in a later post. Yet, for everything from canned cat food to canned corn you are going to be shocked at inflated prices in the coming year. Don’t blame the food manufacturers because the cost is in the can. This train wreck could have been avoided.
This story begins with the age of Food Network and cooking shows that disdained canned foods and promoted fresh foods instead. The result was a slow decline in center aisle canned food sales over the past two decades. This decline meant that steel mills that produce “tinplate” used by can manufacturers cut back or closed tinplate lines. Then, a pandemic happened.
In March 2020, there was a mad rush by consumers to load their pantries with canned foods as quickly as their closets of hoarded toilet paper. Nearly overnight canned food sales grew by 13%* as can manufacturers cranked out 27 billion steel cans last year, a 12.8% increase.
By mid-2021, restaurants began to re-open after a year of closed or limited kitchen production. Meanwhile, consumers kept buying canned foods. Today, domestic steel producers can only supply 60% of needed tinplate for food manufacturers selling into the retail and foodservice channels.
41% of the cost for a 15 oz. can of American-grown corn you will buy this week is in the can. Just 22% is in the corn itself and 14% is in the labor.
Tariffs and quotas on steel imports imposed by the Federal government several years ago were designed to protect and grow sagging domestic steel production capabilities. Yet major domestic producers cut their production by 12% and closed steel mills. Tinplate steel is now at record highs. In September 2020, the estimated price of a ton of steel was $560. By September 2021 that price had exploded to $1,940**!
Thus, 41% of the cost for a 15 oz. can of American-grown corn you will buy this week is in the can. Just 22% is in the corn itself and 14% is in the labor.
An important loophole in the foreign steel import tariffs is another tragedy. While steel for cans is subject to tariffs, foreign canned fruit and vegetable imports are not. Imports of these items from China grew by 811% in 2020 and from Thailand by 35%. Thus, that can of store brand corn might have been grown and processed in China, Thailand, or Brazil. The import threat is so significant, the Federal government in its 2020 Defense Production Act proclaimed domestic fruit and vegetable production as part of our national security interest.
Smart domestic producers of canned foods were somewhat protected by inflated prices through long-term contracts with metal can producers in 2021. New contracts for food produced in 2022 are significantly higher and those costs will be passed along to consumers and restaurant operators nationwide.
The best insight for consumers would be to stock up on essential canned foods before the end of 2021. For restaurant operators who have relied on canned fruit or vegetables, the best advice is to switch to flexible plastic pouches or other packaging to avoid significant price increases.
Creative Energy is providing significant insights into trends affecting the food business for dozens of clients within the food space. If you would like to tap into insights that can grow your food brand, let’s schedule a discussion.
*The Can Institute