By Evie Liu

The Trump administration's doubling of tariffs on steel and aluminum to 50%, effective June 4, is more of a problem for beverage companies than for producers of aluminum cans.

Neither group is likely to be hit as badly as the canned-food industry. Unlike food cans, which are usually made of imported tinplate steel, about 70% of beverage cans come from recycled aluminum -- much of which is sourced domestically -- that aren't subject to the Section 232 tariffs applied to primary aluminum imports.

Beverage-can producers should be able to manage through the higher tariffs, wrote Morgan Stanley analyst Stefan Diaz in a Tuesday note. He predicted they will continue to see modest growth in the North America market.

"To date, we have not seen any negative impact from tariffs on beverage can demand," wrote Diaz, "In fact, beverage can share gains have accelerated recently."

The analyst pointed out that the kind of containers beverage companies choose depend more on where the drinks are consumed than on price. Cheaper overseas aluminum costs and potential trade deals down the line could also offset any effect on demand for cans resulting from tariffs.

Cans have a host of advantages compared to other containers, wrote Diaz, including lighter weight, easier stacking, less breakage, and less light penetration. The integrated pull tab also saves costs on separate bottle caps.

Even including a 50% tariff on imported aluminum, using glass bottles is still costlier than cans because they are heavier to transport. For all these reasons, many high-growth beverage categories today, such as energy drinks and ready-to-drink cocktails, are nearly 100% packaged in cans.

"We continue to believe that U.S. beverage cans' share gains experienced over the past 10 years will largely hold despite the latest increase in aluminum tariffs," wrote Diaz.

He particularly likes Colorado-based Ball Corporation and Florida-based Crown Holdings, citing what he described as their healthy balance sheets and share buyback plans.

More expensive cans, however, could affect beverage companies to varying degrees. Soda makers that already use a lot of plastic bottles, for example, would have an easier time adjusting to the tariffs.

When tariffs on aluminum and steel were set to rise to 25% in March, Coca-Cola CEO James Quincey said on a February earnings call that the impact on the company would be manageable. Coca-Cola could rely more on plastic if cans became more expensive, he said.

This could help the company limit price increases, minimizing the effect on demand and sales volume. "I think we control enough variables that we can adapt and mitigate our way through what is happening," said Quincey.

In 2023, aluminum cans made up just a quarter of Coca-Cola's packaging globally, while plastic accounted for nearly half. Coca-Cola's heavy reliance on independent bottlers could also help it diffuse the risks related to aluminum costs.

Companies that don't typically use plastic could be affected more. On its latest earnings call in June, Monster Beverage said that if the new 50% aluminum tariff remains in place, the energy-drink company expects to see a modest impact beginning in the third quarter.

Likewise, executives at Celsius, another fast-growing energy-drink company, noted that while the aluminum tariff is "not significantly impactful" in the second quarter, they don't know how things will play out in the long term.

Beer companies are at higher risk as well. Since the mid-2000s, the industry has been steadily shifting away from glass bottles to metal cans. In 2023, 64% of beer sold was in aluminum cans, according to the Beer Institute, up from 48% in 2005. Many brewers have retooled their bottling lines to focus more on cans, which means going back to glass wouldn't be easy.

Boston Beer warned in April that tariffs could drive up its costs by $20 million to $30 million in 2025 and dent earnings by $1.25 to $1.90 per share. Without the tariff impact, management expected full-year 2025 earnings to be between $8 and $10.5 per share.

Write to Evie Liu at evie.liu@barrons.com

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June 25, 2025 12:01 ET (16:01 GMT)

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