Skip to main content

Mexico’s tariffs of 25 per cent on Tennessee whisky, in retaliation for U.S. President Donald Trump’s levies on its steel and aluminum, could spell bad news for the distiller of Jack Daniel’s in one of its biggest growth markets.

Brown-Forman Corp. said it’s hard to accurately forecast future sales growth with so much uncertainty surrounding the proposed tariffs. Canada and the European Union have also threatened to add duties to U.S. whisky.

The company, based in Louisville, Ky., referred to “concerns over potential retaliatory tariffs on American spirits” in its earnings report released Wednesday. If nothing major changes, Brown-Forman said it expects underlying net sales growth globally of between 6 per cent and 7 per cent in the next fiscal year.

Story continues below advertisement

Only about 5 per cent of the company’s total sales are in Mexico currently, but that’s been growing rapidly, with the country logging a 15-per-cent bump in reported net sales last quarter. By comparison, demand in Brown-Forman’s much larger home market grew just 7 per cent.

Of course, Tennessee whisky isn’t the company’s only popular product in Mexico, with its tequila brands such as Herradura also driving growth there.

Brown-Forman’s B shares fell as much as 7 per cent – the most intraday in a year – to US$52.47 on Wednesday.

The company is seeking to blunt the impact of tariffs by building up inventories in markets outside of the United States – a strategy begun after European officials warned of retaliation earlier this year.

“While it’s premature to comment on the potential impact on our business, we are on top of the situation and have undertaken measures over the last few months to mitigate risk, such as increasing our inventory levels in non-U.S. markets where we own our own distribution,” chief financial officer Jane Morreau said in a call with analysts Wednesday.

Brown-Forman has moved more products to European countries such as France, Spain, Germany and Poland, where it owns its distribution network, spokesman Phil Lynch said. The company hasn’t yet started to build up inventory in other countries such as Mexico, he said.

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter