Suntory Holdings Braces for Whiskey Tariff Impact with Stockpiling Efforts
Amid looming Trump tariffs, Suntory Holdings is doubling down on whiskey stockpiling to mitigate potential cost increases. CEO Tak Niinami revealed these measures at the World Economic Forum in Davos, Switzerland.
Impact of Trump Tariffs on Liquor Industry
In 2018, the European Union imposed a retaliatory 25% tariff on American whiskey, prompting a 20% decline in exports. The Trump administration retaliated with a 25% tariff on single malt scotch whiskey.
After initially maintaining the tariffs, the Biden administration suspended them in December 2023 through an agreement with the EU. However, the suspension expires in March, and a new agreement is crucial to avoid a 50% tariff on whiskey exports to the EU.
Suntory's Response
Suntory has been proactively preparing for the potential re-imposition of tariffs. By stockpiling its whiskey products in Europe, the company aims to lock in costs before they potentially spike.
Market Impact
Suntory Holdings' stock has declined 13% in the past six months, reflecting investor concerns about the impact of tariffs. Other liquor companies, such as Diageo (DEO) and Pernod Ricard (RI.PA), have also experienced stock declines of 10% and 22%, respectively.
Inflationary Pressures
Niinami warns that tariffs could lead to higher prices for consumers. He believes the US's reliance on Chinese goods and the upcoming midterm elections will force President Biden to address inflation as a priority.
Conclusion
Suntory Holdings' stockpiling efforts demonstrate the industry's concerns about the looming threat of whiskey tariffs. The re-imposition of tariffs would have significant implications for liquor companies and could lead to inflationary pressures on consumers.