Whiskey producers feeling effects of possible trade war
\n\u2018It\u2019s definitely going to be painful\u2019
\nBY GREG TROTTER – CHICAGO TRIBUNE<\/p>\n
Makers of American whiskey worry the increasing likelihood of retaliatory tariffs, particularly from the European Union and China, could hurt business after years of booming growth abroad.<\/p>\n
The Trump administration announced Friday that it was moving forward with 25 percent tariffs on $50 billion worth of Chinese goods, most of which will go into effect July 6. China responded later in the day by announcing its retaliation of similar value. Whiskey is one of the American goods that would be subject to the Chinese tariffs, according to the Distilled Spirits Council of the United States.<\/p>\n
The European Union, meanwhile, is preparing to implement more than $3 billion in tariffs on American goods in response to Trump\u2019s tariffs on steel and aluminum exports to the U.S. Mexico has already imposed 25 percent tariffs on American goods, including bourbon; Canada and Turkey could soon follow suit.<\/p>\n
None of this is good news for the American spirits industry. From 2008 to last year, exports of American whiskey grew almost 43 percent \u2014 from about $791 million to about $1.1 billion, according to data provided by the Distilled Spirits Council. Whiskey exports year to date are up more than 20 percent from last year.<\/p>\n
\u201cWhiskey is a great American export story and we don\u2019t want to see that disrupted,\u201d said Clarkson Hine, interim president and CEO for the Distilled Spirits Council.<\/p>\n
The European Union, in particular, has been a strong export market for American whiskey, in part because it\u2019s been mutually duty-free since 1997. U.S. bourbon that\u2019s sold in France is taxed the same as spirits that are distilled locally there. Chicago-area companies large and small, from Beam Suntory to smaller craft distilleries like Few Spirits and Koval Distillery, have invested in Europe because of that open trade relationship and the growing demand for bourbon.<\/p>\n
Total U.S. spirits exports to the EU last year were valued at $789 million; 85 percent of that was American whiskey, according to the Distilled Spirits Council. By comparison, American spirit exports to China have grown from less than $1 million in 2001 \u2014 when that nation joined the World Trade Organization \u2014 to $12.8 million last year.<\/p>\n
Hine, who is also senior vice president of corporate communications and public affairs at Beam Suntory, declined to give any specifics on how the tariffs will affect the privately held company, a division of the Japanese firm Suntory Holdings, saying only that contingency plans were in place.<\/p>\n
Executives at rival Brown-Forman, maker of Jack Daniel\u2019s and Woodford Reserve, among other brands, are also keeping close tabs on the potential tariffs. About one quarter of Kentucky-based Brown-Forman\u2019s sales are generated in Europe and another quarter is from other global markets; the rest comes from sales within the U.S.<\/p>\n
\u201c(While) it\u2019s 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,\u201d Brown-Forman Chief Financial Officer Jane Morreau said on an earnings call earlier this month, according to a transcript of the call.<\/p>\n
That\u2019s not an option for smaller spirits companies that don\u2019t own their own distribution in non-U.S. markets. Paul Hletko, founder of Evanston-based Few Spirits, said he\u2019s lost sales \u201cin the six figures\u201d in just the past two months from distributors in Europe and China cutting back on orders out of concern that tariffs could lead to higher prices for consumers, and therefore less demand.<\/p>\n
\u201cThat\u2019s just the market responding to all the verbal jabs, not even actual tariffs,\u201d Hletko said.<\/p>\n
Exports make up about 10 to 15 percent of total revenue for Few Spirits, said Hletko, who declined to disclose sales for the privately held company. Few\u2019s top export markets are the U.K., France, Finland and China, he said. It has taken years of work to build demand in those markets.<\/p>\n
Likewise, Koval Distillery, based in the Ravenswood neighborhood on Chicago\u2019s North Side, has grown its business in recent years in both Asia and Europe. Exports make up about 25 percent of the company\u2019s approximately $6 million in annual revenue, said Sonat Birnecker Hart, Koval president. Its largest export markets are Austria, Germany and Italy.<\/p>\n
\u201cWe don\u2019t know the extent of the damage this is going to cause, but it\u2019s definitely going to be painful,\u201d Hart said.<\/p>\n
Earlier this month, the Distilled Spirits Council sent a letter to Commerce Secretary Wilbur Ross, outlining the industry\u2019s concerns about the tariffs and calling on the administration to \u201cfind effective solutions to address U.S. trade policy concerns, without harming the U.S. distilled spirits sector in the process.\u201d<\/p>\n
On Friday, the Commerce Department responded and the two sides expect to meet soon. Despite the looming threat of tariffs, the spirits trade group says it is optimistic that the situation can still be deescalated in a way that\u2019s not bad for the booze business.<\/p>\n
\u201cWe\u2019re the unfortunate collateral damage of someone else\u2019s dispute,\u201d said Frank Coleman, spokesman for the spirits group. \u201cWe want to get everyone back at the table and talking again.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Whiskey producers feeling effects of possible trade war \u2018It\u2019s definitely going to be painful\u2019 BY GREG TROTTER – CHICAGO TRIBUNE Makers of American whiskey worry the increasing likelihood of retaliatory tariffs, particularly from the European Union and China, could hurt business after years of booming growth abroad. The Trump administration announced Friday that it was […]<\/p>\n","protected":false},"author":19,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"_links":{"self":[{"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=\/wp\/v2\/posts\/1549"}],"collection":[{"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1549"}],"version-history":[{"count":1,"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=\/wp\/v2\/posts\/1549\/revisions"}],"predecessor-version":[{"id":1550,"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=\/wp\/v2\/posts\/1549\/revisions\/1550"}],"wp:attachment":[{"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/keepersofthequaich.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}