London.- (Reuters)- Even if President Donald Trump’s tariffs are not imposed, threats and uncertainty caused by intermittent taxes have already cost money to the Tequila sector and could cause a temporary slowdown in sales, they told reuters producers, investors and analysts.
The 25%tariffs, initially planned to be applied as of February and that were briefly in force on March 4 before being suspended both occasions, threatened billions of dollars of imports from large producers such as Diageo and Becle.
The barriers promoted companies and consumers to monchila tequila, which can only be developed in Mexico, freeze expansion plans and divert resources to other areas.
Some producers, restaurants and consumers accumulated important tequila reserves, sometimes up to six months, a bet that will bear fruit if tariffs are imposed.
However, the producers claim that this also has a cost, harming the sector even if the tariffs are developed.
“Whatever happens … a price has been paid,” said Mike Novy, executive director of Calabasas Bevenge Company, which operates the Tequila brand founded by Kendall Jenner, 818 Tequila.
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The company asked its distillery to work at full speed, with workers doing overtime during December vacations, to be able to send about six months of product to the US before tariffs, said Nocy, adding a cost of up to 2 million dollars, while storage rates would add approximately 10% to their costs.
The company had also suspended planned hiring and product launch, he said, which also cost him opportunities.
Brian Rosen, founder of Investbev, an investor that is associated with marks of spirits in their early stages to help them grow, said that Tequila companies in their portfolio had also accumulated a supply for six months and are paying up to $ 20,000 per shipping container for storage.
These storage costs alone could boost some brands to increase prices, another anticipated effect of tariffs that could happen now even if they do not apply, he said.
The impact on tequila – a brilliant point for the United States alcoholic beverage industry in the middle of a strong fall in the largest sales of that sector – shows the collateral damage of Trump’s effort to destroy and rebuild global commercial relations in favor of the United States.
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This comes at a time when the companies that depend on the tequila, from the important manufacturer of Diageo Liquor, whose Tequila brand Don Julio drives the performance, to the small restaurants whose sales of Margaritas help to keep them afloat, are fighting with high and prolonged interest rates and inflation.
Diageo and Becle, the world’s largest producer in Tequila, previously informed investors who had advanced the inventory before the entry into force of tariffs. Diageo declined to comment and Becle did not answer the questions.
A lot of tequila
Without a doubt, Noval and other companies with which Reuters spoke said that the disappearance of tariffs, which threaten to derail the growth of tequila, would be a blessing for the industry.
While some wholesalers have accumulated inventory, it is unlikely that this drives the fate of painful cycle of shortage seen recently with other spirits such as the Coñac, since this was driven by the low underlying demand and the tequila is still popular, said Michael Bilello, senior vice president of communications and marketing in Wine & Spirits Wholes of America, a commercial organism.
Tequila larger companies could also not have such high levels of inventory. The main distributor, Republic National Distributing Company (RNDC), operates with inventories much lower than those of six months, even with tariffs, said Sean Halligan, director of the supply chain, and added that maintaining excessive inventory entails its own risks.
But any accumulation of stocks in the supply chain could generate an initial increase in sales of large producers, which will decrease as customers normalize their levels, said Fitch Ratings.
The happy west, a Mexican restaurant in New York, ordered 120 tequila boxes and 80 mezcal boxes since January, which is equivalent to approximately six months of supply, according to the owner and chef Luis Arce Mota. Normally only buys about 20 boxes at the same time.
“I’m going to take a lot of tequila (if you don’t impose tariffs),” he said.
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Drinkers have done the same. Richard Paige, a communication professional in Indianapolis with pleasure for tequila, said he had made sure he had his team supplied for at least a few months.
That behavior could generate a second “very quiet” quarter for the great producers of Tequila, said Trevor Stirling, Bernstein analyst.
Meanwhile, in Mexico, representatives of Tequila brands and industry agencies said that companies will seek new markets, signals of investment changes that could make the American tequila sector less vibrant, said Noval of 818.
“It’s already happening,” he continued. “If tariffs are permanent, the result is simply magnified.”
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