About $3 billion worth of tequila and mezcal imports from top producers Diageo and Jose Cuervo owner Becle could be at risk due to tariffs that U.S. President-elect Donald Trump plans to impose on Mexico, according to Mexican customs information seen by Reuters.
The tariffs would also increase the cost of importing iconic spirits that cannot be produced outside their home regions, such as tequila and mezcal. Tequila, a key ingredient in popular cocktails such as the margarita, and mezcal, both of which are world-renowned, must be made exclusively in Mexico, similar to how Champagne must be produced in France or Parmesan cheese in Italy.
Companies such as Diageo, the world’s largest spirits maker, and Mexico’s Becle, the leading producer of tequila, face an uncertain outlook because of the potential tariffs. Both companies dominate the U.S. market for agave-based drinks and rely significantly on U.S. tequila sales for growth.
According to exclusive export data provided by ImportYeti to Reuters, Diageo subsidiaries shipped more than 25 million liters of tequila from Mexico to the United States last year. This includes top brands such as Don Julio, Casamigos, DeLeon and 21 Seeds, amounting to 33.7 million 750 ml bottles. Based on prices from Total Wines & More, one of the largest retailers of alcoholic beverages in the United States, the value of these imports is estimated at nearly $1.6 billion.
A similar analysis of shipments from Becle, which includes eight brands of tequila and mezcal, revealed a comparable sales value also close to $1.6 billion. Meanwhile, Campari Group, another leading spirits producer with a presence in the tequila market, exported $122 million worth of products, according to the Reuters analysis.
Diageo said it has extensive experience in international trade and plans to work with the new administration on issues affecting its business. Becle did not comment, and Campari declined to comment.
The analysis highlights the potential impact of tariffs on major tequila and mezcal producers. According to the Distilled Spirits Council of the United States (DISCUS), imports by the industry reached $4.6 billion in 2023, a 160% increase from 2019. DISCUS warned that tariffs could lead to job losses and announced it will seek an exemption from the proposed 10% universal tariff on all foreign products.
Price increases
Diageo also faces significant risks from its imports of Canadian whisky. According to data from Circana, the company sold at least $483.4 million worth of Canadian whisky in the United States through the end of November, further exposing it to expected tariffs on products from Canada.
Sales of Crown Royal Canadian whisky, along with tequila, represent a key part of Diageo’s U.S. business. However, the decline in its results has raised concerns among investors.
Both Diageo and Becle are also facing challenges from declining demand for premium spirits, a phenomenon attributed to the end of the consumer boom driven by the Covid-19 pandemic.
In the United States, more affordable tequila brands such as Kendall Jenner’s 818 Tequila have gained market share, while premium brands such as Diageo’s Casamigos have lost ground due to increased consumer sensitivity to prices.
The Reuters analysis was based on prices for standard bottles at U.S. online liquor stores. When the brand or sub-brand of shipments could not be identified, it was assumed they contained the cheapest bottles available. However, the shipments include bottles of different sizes and prices, which are also sold in bars at significantly higher margins.
While a 25% tariff on an estimated $1.6 billion in sales would equate to $400 million, tariffs are calculated on the value of imports, not retail prices. Companies could take steps to counter the impact, such as raising prices, according to Joseph Gabelli, a portfolio manager at Gabelli Funds, a Diageo investor.
In November, analysts at Jefferies estimated that prices would have to rise by 10% to offset a 25% tariff. However, Gabelli noted that in the case of tequila and mezcal, tariffs would not create competitive disadvantages for specific brands. The real question is whether American consumers would be willing to pay more for their favorite beverages.
“Would a reduction in consumption cause tequila to become more expensive? Presumably there would be some negative effect,” he said.
