Podcast Summary

In this episode, our Opinionated Marketers talk about how Trump's changing trade policies and tariffs are creating uncertainty for businesses, affecting pricing, input costs, and consumer markets. Marketers need to carefully consider how to manage these impacts, from absorption to passing costs onto customers. At the same time, there are opportunities to innovate and segment products to maintain competitiveness.

 

Key Points

  • Trump’s tariffs on China, and delayed tariffs on Mexico and Canada, create uncertainty for businesses and marketers.
  • Marketers need to consider pricing, segmentation, and whether to absorb or pass on increased costs to customers.
  • Tariffs are often used as a political tool rather than purely to protect trade interests.
  • Commoditized products like grapes and bananas offer opportunities for innovative segmentation to increase margins.
  • Consumer preferences and international market differences should inform product strategy and marketing decisions.

 

Podcast Transcript

Transcripts are auto-generated.

 

Charles N (00:07.618)
Right, thank you, after you, Kiran.

Kiran (00:10.532)
Brilliant, okay.

Hello and welcome to Opinionated Marketers with Charles Nixon and me, Kiran Kapoor. Charles, we are talking on the day after President Trump announced trade wars, tariffs and all sorts of economic blockade measures with… Let’s start that again.

Hello and welcome to Opinionated Marketers with Charles Nixon and me, Kiran Kapoor. Charles, we’re talking on the day after Donald Trump originally said he was going to impose tariffs on Canada, Mexico and China. He’s now not doing tariffs on Mexico and Canada – well, he’s delayed them – but the tariffs on China have gone ahead. So we thought we really ought to start by talking about what on earth is going on, and what marketers should be looking at.

Charles N (01:06.050)
And we also need to roll in various things, including bananas, grapes, and other commoditised products. It will all become clearer as we go on. Essentially, Trump is engaging in a game of diplomacy in which he is using the economic weapon. He is basically getting what he wants by threatening tariffs. In some instances, he’s got results quite quickly, such as with Colombia.

In other cases, such as China, he has imposed or threatened to impose tariffs, but isn’t necessarily getting what he wants because they’ve immediately countered with 10–15% tariffs against his 10%. So we’re either into a trade war there, or a large piece of negotiation. Canada and Mexico have got a pause as of today, on the basis that they’re prepared to negotiate.

So what do marketers have to think about? Well, marketers have to think about pricing, and from that also segmentation. The issue will be whether a tariff leads to an increase in your input prices, and what you do about that – do you pass them onto your customers, absorb them, or even pass them on with a margin if you need to improve profitability? In fact, it can be an opportunity to raise prices on the basis that you need to grow profitability and attract investment funds.

But generally speaking, for products going into the consumer marketplace, politicians believe there is enough competition to stop companies passing on the costs. Companies may therefore absorb them, become more efficient, or potentially pass them on and blame politicians for the impact. It’s an interesting conundrum for marketers, and one you need to have internally discussed before it becomes too late – tariffs can be imposed overnight.

Charles N (03:25.262)
You can suddenly find yourself with a conundrum you don’t know the answer to. And of course, customers don’t like uncertainty about what’s going to happen to their staple goods. So this is very much a territory for internal policy debate.

Kiran (03:42.958)
Yes, and it’s worth pointing out that this is very much a moving story. Trump announced on the 1st of February that he was going to impose tariffs. The tariffs could have come in almost immediately, and then they were put off. Tariffs have gone on against China. It’s not necessarily being used to protect America’s trading interests – it’s being used more as a political tool.

The reason tariffs have not been applied to Mexico is as much to do with Mexico sending troops to stop the fentanyl traffic as anything else. It’s not about a trade deficit that Trump is trying to address – he wants something he can claim as a political gain. So, Charles, yes, I think you’re right: it’s about being prepared, thinking through risks, considering how it might affect your business, and then not losing sleep over it.

There’s literally no point, because we don’t know what’s going to happen. And that’s something I suspect Trump’s supporters find most exciting – that it’s unpredictable.

Charles N (04:50.382)
It is unpredictable, and it may well achieve things that previous administrations or other countries couldn’t. Having a radical politician in power is useful in many instances because people don’t know what’s going to happen, and nothing is off the table. So we are in a very interesting area.

Another aspect is twofold. Firstly, most of the tariffs I’ve seen predicted are on industrial goods, so it will take time for the impact to feed through to consumer prices. But where it does come directly onto consumer goods – fruit, vegetables or finished products – it raises a very interesting question about pricing and segmentation. Here come the grapes and bananas.

The issue is: what happens if the consumer finds that the price of everyday goods suddenly rises? They may then start making considered decisions about which ones they buy and how much.

We’ve had discussion over the last few years about coffee prices going up. If you look now, coffee is significantly more expensive than it was 18 months ago. Does that mean consumption goes down, or do consumers switch to cheaper alternatives?

And you had a very interesting story about someone attempting a significant piece of segmentation in the grape marketplace.

Kiran (06:48.974)
Yes, this was actually an article on the BBC website this morning about a trial marketing grapes by texture and taste. A Peterborough-based fruit importer is working with Tesco on a small trial. In the UK, we tend to buy grapes simply as red or white.

But they suggest you could market grapes by flavour and style, in the same way we now buy apples by variety. We no longer just buy “an apple” – we buy Gala, Braeburn, Russet and so on. So with grapes, they’re looking at texture (crunchy, for example) and flavour (such as tropical or candyfloss grapes).

I thought this was an interesting way of taking a fairly commoditised marketplace and finding ways of segmenting the product. Presumably this not only helps match grapes to customer preferences but also potentially allows for a price increase.

Charles N (08:03.052)
Yes, I think it’s a very interesting approach. Apples is a good comparison because 20 years ago, an apple was just an apple. Now, as you say, there are multiple varieties and people buy their preferred ones – sometimes for specific uses.

In the grape marketplace, you’ve obviously got different uses: cooking, after-dinner, snacking, and so on. There’s even segmentation by format, such as small bunches for snacking or packed lunches, versus larger bunches. It’s similar to what we discussed last week with WHSmith, where you can charge a premium for convenience.

Bananas, by contrast, are still commoditised. You might distinguish large and small, or organic and non-organic, but that’s about it. There are still markets where segmentation by end usage hasn’t happened yet, but could yield higher margins.

So whether you’re dealing with fruit, screws or industrial goods, it’s worth thinking – especially in a tariff environment – about how you might innovate in your market, and segment by product use.

Kiran (09:57.392)
It’s interesting. When I read the BBC article, I wondered about the international angle. There was no mention of whether this is just a UK perspective – that we think of grapes only as red or white – and whether consumers in other countries see grapes differently. As you say, in the UK it’s often just “a snack pot of grapes” or “a big bunch of grapes.” I’d be intrigued to know if internationally the market is more segmented, and whether we’re just catching up.

Charles N (10:32.462)
That’s a very interesting point. Yes, a little bit of international research – some deeper digging, as it were – might reveal some answers.

Kiran (10:49.756)
Lovely to speak to you as ever, Charles. And of course, if listeners are shouting at their speakers saying, “There are plenty of grape varieties in my country!”, do let us know. We have an international audience, and you can contact the show through any of the Cambridge Marketing College’s social media platforms. Thank you for listening, and goodbye.

Charles N (11:08.984)
Goodbye.