By Yannick Verry, Brand Director, Fi Europe
Key takeaways:
- Tariff volatility is reshaping sourcing: Companies are diversifying suppliers (e.g., shifting from Malagasy to Ugandan vanilla) and building regional trading networks to reduce exposure to high or shifting tariffs.
- Resilience is becoming a strategic advantage: Firms investing in regional production, domestic manufacturing, and comprehensive reformulation are gaining long-term flexibility, faster innovation cycles, and reduced supply-chain risk.
- Procurement is evolving from cost control to competitive differentiator: Transparent communication, adaptable material choices, and proactive supply-chain investments position early movers to gain market share as global trade structures continue to shift.
Trade policy adjustments throughout 2025 have prompted food ingredient companies to reassess sourcing relationships and investment priorities. Tariff rates now vary significantly by country of origin for identical products, creating cost differentials that are reshaping procurement decisions across categories, affecting commodities from vanilla and spices to sweeteners and packaging materials.
Rather than simply managing costs, leading companies are using this moment to build more resilient supply chains and establish competitive advantages. The strategies emerging — diversified supplier networks, regional production investments, and strategic reformulations — position early movers for growth as market conditions continue to evolve. Those treating current disruptions as catalysts for transformation are discovering opportunities competitors haven’t yet recognized.
Tariff disparities shift sourcing patterns
Madagascar supplies approximately 80% of vanilla imported to the United States. Recent tariff implementation briefly imposed a 47% duty on Malagasy vanilla this spring, while Uganda and Papua New Guinea have consistently faced only 10% rates on their exports. In late 2025, the tariff rate was reduced to 15%, but is still significantly higher than that of the minor vanilla suppliers Uganda and Papua New Guinea. This change in market dynamics poses a cost challenge but also suggests an opportunity for forward-thinking procurement teams to build supplier relationships in growing markets before competitors arrive.
Let’s take a closer look at the case of alternatives to Malagasy vanilla and how pursuing them could improve supply chain resilience across multiple vectors. Uganda produces 250 to 300 metric tons annually, and the country is actively courting international buyers. Companies entering now gain access to suppliers harvesting twice yearly rather than once, reducing supply risk that has plagued Madagascar-dependent buyers during cyclone seasons. Government subsidies and technical support programs mean infrastructure is improving rapidly. An additional advantage is that Ugandan vanilla exceeds 2% vanillin content on average, meeting premium specifications without reformulation.
The shift requires investment. Product developers must validate new suppliers, potentially adjust formulas and manage marketing teams through any label changes. Yet companies making this move now are diversifying risk while competitors remain locked into single-source dependencies. When Madagascar next experiences a poor harvest, or when tariffs shift again, these early movers will have established alternatives rather than scrambling for supply.
Building regional trading networks
European companies are capitalizing on regional tariff differentials to create value. The European Union faces 15% duties on food and beverage exports to the United States, substantially below the 50% rate in countries like India. Sophisticated operators are exploring intermediary trading strategies by shipping goods to European facilities, then re-exporting to American customers as EU-origin products, effectively cutting tariff exposure while building European market presence simultaneously.
Rather than requiring entirely new infrastructure, this approach scales existing operations. Companies already conducting cross-border trade can expand intermediary activities, creating additional revenue streams while solving customer cost challenges. The model works particularly well for shelf-stable ingredients where quality isn’t tied to specific geographic origin in consumer perception.
Domestic production offers multiple advantages
Manufacturers are considering investment in American-based facilities as strategic moves to gain supply chain control and eliminate import exposure entirely. For example, Nestlé has invested in American pet food production capacity, while PepsiCo is upgrading facilities to enhance regional distribution. These moves reflect broader recognition that domestic manufacturing delivers benefits extending beyond tariff avoidance, including reduced lead times, improved responsiveness to market changes, and marketing advantages around American sourcing.
The economics particularly favor companies with existing American operations that can add capacity incrementally. Regional production allows faster innovation cycles, with product developers able to test formulations and get customer feedback in weeks rather than months. For ingredients where freshness impacts quality, proximity to customers can justify premium pricing that offsets higher production costs.
Building entirely new facilities requires multi-year timelines and substantial capital investment. Yet companies making these commitments now are securing supply chain independence that becomes increasingly valuable to long-term operational control and market responsiveness.
Reformulation provides opportunities for advancement
Ingredient substitution, approached strategically, drives innovation rather than simply cutting costs. Sweetener markets demonstrate this potential; natural high-intensity options, particularly stevia, have dominated the sweetener market as manufacturers responded to clean-label preferences.
With stevia processing concentrated in China and India — regions facing elevated tariffs — companies are reconsidering the sweetener landscape holistically. Sucralose currently benefits from tariff exemptions, creating cost advantages. Yet rather than simple substitution, leading product developers are using this moment to reformulate comprehensively, improving taste profiles and exploring newer options like allulose that deliver functional advantages, including browning in baked goods and freeze-point stability in frozen desserts, that many other alternatives lack.
This approach requires investment. Sweetener changes affect flavour and texture, demanding extensive testing. Yet companies treating reformulation as an innovation opportunity often emerge with superior products that justify price premiums and build resilience that pays dividends beyond current tariff considerations.
Procurement innovation drives competitive advantage
When steel and aluminium tariffs reached 50%, beverage producers shifted some volume from metal cans to plastic bottles, not just to manage costs but to reduce dependency on tariff-exposed materials. Flexibility becomes a competitive advantage when commodity prices or trade policies shift unexpectedly.
Communication about these changes matters as much as the changes themselves. Early in the tariff period, many companies avoided discussing cost drivers with customers. Research now shows this approach backfired — customers assumed price increases reflected corporate opportunism rather than genuine input cost pressures. Companies explaining their supply chain investments, quality maintenance efforts and strategic adaptations are building customer relationships that survive price volatility. Transparency positions tariffs as external factors affecting entire industries, not company-specific problems.
The Consumer Brands Association continues advocating for policy modifications that account for ingredient availability constraints, but the most resilient companies aren’t waiting for regulatory relief. They’re building supply chains that deliver regardless of trade policy direction, turning procurement from reactive cost function into proactive competitive advantage.
Growth through resilience
Market projections estimate vanilla demand growing from $2.7 billion in 2024 to $4.7 billion by 2034, indicating sustained consumption despite trade friction. Companies that invested in diversified sourcing, built capabilities across multiple geographies and preserved formulation flexibility aren’t just surviving current conditions — they’re gaining market share from less adaptable competitors. These capabilities enable brands to grow: each new supplier relationship creates options for future ingredients, each reformulation builds institutional knowledge, each regional investment opens new markets.
The competitive landscape is separating into those treating current disruptions as temporary inconvenience versus those recognizing fundamental market restructuring. Companies building resilience as core capability rather than exceptional response are positioning for growth regardless of how trade policies evolve.
Supply chains will continue requiring recalibration as conditions shift. Yet this ongoing change creates a persistent advantage for companies that build adaptation into organizational DNA. The winners emerging from this transition will be those that invested in capabilities while competitors focused solely on managing immediate costs.
The latest insights were explored at Fi Europe 2025’s panel discussion, “Europe’s edge: navigating trade shifts and turning challenges into opportunities.”
Yannick Verry is Brand Director for the Fi Events Portfolio at Informa Markets, leading strategic, financial, operational and customer-oriented objectives for the Fi series of exhibitions — the world’s largest network of events for food ingredients and innovation in the F&B and pet food sectors. With over 15 years of experience in international trade and B2B events strategy across Europe, Asia, and the Americas, Yannick brings extensive expertise in P&L management, brand leadership, and digital transformation within the global food industry.
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