Disruption at one end of the supply chain doesn’t stay contained — it amplifies. Across geographies, sectors, and commodities, we’re seeing a classic (reverse) bullwhip effect unfold.

The situation in Iran is a clear example. While headlines focus on crude oil, the ripple effects extend much further — into raw materials, packaging inputs, and both global and domestic transportation costs. The result: higher costs for finished goods on grocery and drug store shelves across Canada, further intensifying the affordability pressures consumers are already facing.

For consumer packaged goods (CPG) manufacturers, this is forcing a reassessment of sourcing and supply chain strategies. Much of the attention in the news focuses on shorter term offsetting tactics such as temporary surcharges, but the reality is more structural. For most players across the supply chain, the remedy will require sustained and holistic cost increases, not temporary fixes.

That creates a vicious cycle. Consumers, already facing +30% cumulative inflation since the start of the decade, continue to rationalize spending and consumption — while CPG manufacturers and grocery retailers remain volume (tonnage) starved, driving more frequent and deeper promotions to generate much needed consumer demand.  This is where the real opportunity lies — the much needed volume flywheel:

• Volume drives productivity.
• Productivity drives lower prices.
• Lower prices increase volume.

The margin vs. volume dilemma is the most top-of-mind factor today for industry. CPG manufacturers operating in Canada, on average, have a 3% (absolute) unfavourable gross margin gap compared to 2020 due to having absorbed significant cost pressures along the way — including tariffs in 2025. Layer the current geopolitical situation on top of existing cost headwinds, and one conclusion becomes hard to avoid: continued grocery inflation in 2026 is inevitable.

That said, there are practical actions that CPG manufacturers and grocery retailers can collaborate on today to help soften the impact:

• Shift to rail where feasible: Trade-off longer lead times and higher inventory carrying costs for lower transportation costs.
• Increase Full Truck Load (FTL) penetration: Revisit minimum order quantities, full/half pallet thresholds, and delivery frequencies.
• Optimize promotional strategies: Ensure depth and frequency are optimized to achieve ROI creating consumer value.
• Redeploy non-working trade spend: Redirect non-working retailer trade spend and penalty charges into consumer price reductions that stimulate demand.

In the current environment, collaboration across the supply chain isn’t optional — it’s essential. The faster we restore volume, the faster we can rebuild the productivity-cost-consumption flywheel that the industry depends on.

This op-ed was originally published on LinkedIn.