GLOBAL – The global alcoholic beverage industry is bracing for potential disruptions after U.S. President Donald Trump announced new tariffs on imports from Mexico, Canada, and China.
Under three executive orders, the U.S. will impose 25 percent tariffs on Mexican and most Canadian imports and 10 percent on goods from China, initially effective February 1st.
Both Mexico and Canada have threatened retaliatory tariffs in response, though Mexican President Claudia Sheinbaum stated that tariffs with the U.S. are on hold for a month following a conversation with Trump.
The uncertainty surrounding these trade tensions has already impacted major beverage companies, many of which source key ingredients and finished products from the affected countries.
Diageo braces for profit hit
Diageo, the owner of brands such as Johnnie Walker, Smirnoff, and Don Julio, has significant exposure to Mexican and Canadian imports, accounting for about 46 percent of its supply chain, according to Jefferies.
The company has withdrawn its previous annual sales growth target of 5-7 percent due to market uncertainties, including the U.S. tariffs and weaker demand in key markets.
Chief Financial Officer Nik Jhangiani estimated that if the tariffs are implemented in March, they could result in a US$200 million hit to operating profit for the fiscal year ending June 2025.
Diageo shipped approximately US$1.6 billion worth of tequila to the U.S. in 2023, making it highly vulnerable to increased trade costs.
Pernod Ricard and Campari assess risks
Pernod Ricard SA, the producer of Absolut Vodka and Jameson Irish Whiskey, has production sites in Canada, Mexico, and China, with 6.3 percent of its sales tied to imports from Mexico and Canada.
Affected brands include Codigo 1530 tequila and Jefferson’s bourbon whiskey.
Similarly, Campari, which operates a facility in Canada and another in Mexico, produces spirits such as Gran Centenario and Espolon tequila.
J.P. Morgan has noted that tequila, a major growth driver in the U.S. market, accounts for 7 percent of Pernod Ricard’s group sales, posing a notable risk.
AB InBev may gain market share but faces challenges
Anheuser-Busch InBev (AB InBev), the brewer behind Budweiser and Stella Artois, could benefit from the tariffs as a major portion of its portfolio is sourced within the U.S., potentially gaining market share over competitors relying on imports.
However, analysts at J.P. Morgan caution that a substantial percentage of AB InBev’s earnings before interest and tax (EBIT) is derived from Mexico.
The tariffs could weaken demand for some of its products, offsetting potential gains in market share.
Brown-Forman faces tariffs on whiskey and tequila
Brown-Forman, the maker of Jack Daniel’s Tennessee Whiskey, will be impacted by tariffs on its tequila portfolio in Mexico, which contributes a mid-single-digit percentage of U.S. sales.
In addition, retaliatory tariffs from Canada and Mexico will likely affect its American whiskey portfolio, including Jack Daniel’s. Canada and Mexico accounted for 1% and 7% of Brown-Forman’s total sales in 2024, respectively, according to its annual report.
Constellation Brands at high risk
Constellation Brands, the owner of Corona and Modelo Especial beer, faces one of the most significant exposures to tariffs.
The company operates a total production capacity of approximately 48 million hectoliters in Mexico, expected to rise to 65 million hectoliters by fiscal 2028.
J.P. Morgan warns that roughly 85 percent of Constellation Brands’ consolidated sales come from Mexican beer, meaning the company could see a mid-20 percent impact on earnings per share if it does not implement pricing or cost-saving measures.
Molson Coors and Heineken face minimal impact
Molson Coors Beverage, which produces Miller Lite and Molson Canadian, has exposure to tariffs through Molson Canadian beer.
However, J.P. Morgan believes the impact will be minimal, as the company brews Coors Light and Miller Lite locally in Canadian breweries, reducing reliance on imports.
Dutch brewer Heineken, which imports products from Mexico, is expected to experience only a modest impact, as Mexican imports account for a low-single-digit percentage of its total sales, according to Jefferies.
With retaliatory tariffs still on the table, the industry faces uncertainty over potential cost increases, supply chain disruptions, and shifting consumer demand.
While some companies like AB InBev may benefit from a more localized supply chain, others—particularly those with heavy reliance on Mexican beer and tequila—could experience substantial profit declines if no mitigation strategies are put in place.
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