Bottles of Jim Beam Bourbon on display at Rossi's Deli in San Francisco. (AP Photo/Jeff Chiu, File)
Suntory Holdings, the Japanese spirits firm behind Jim Beam, Knob Creek and El Tesoro tequila, plans to raise liquor prices worldwide in the face of tariffs and changing consumers habits.
On Sunday, Suntory Holdings CEO Takeshi Niinami sat down with Time Magazine for a candid conversation in which he laid bare the current state of the alcohol industry. Topics including the rising popularity of pre-mixed cocktails and a youth-led shift toward drinking in moderation. Above all else, Niinami emphasized that higher prices will prove instrumental to the survival of top-shelf brands.
"First, we have to increase gross margins by efficient operation in our factories. And we have to brush up so that local consumers think that our brands are more premium than before, so that we can ask for higher prices. Second, we produce locally [...] we have to make use of innovation to overcome the situation of the higher tariff world." Niinami remarked.
Niinami is not alone. Much has been said about the threat of tariffs on the liquor industry over the past few months, especially in relation to the American market.
A 50% tariff on American whiskey exports to the E.U. is slated to take effect in March unless officials reach a new deal. Some fear that Trump's proposed universal tariff plan — which intends to place a 10% to 20% tax on all imported goods — might spoil negotiations. In the worst-case scenario, a domino effect of retaliatory tariffs could raise the cost of entry for all spirits, even those produced and consumed in their home country.
For a company like Suntory, the situation would present a dual dilemma. On the one hand, it would hinder the export potential of American favorites like Jim Beam, Maker's Mark and Basil Hayden. Conversely, Japanese brands like Yamazaki and Irish brands like Laphroaig would face a steep barrier to entry for consumers in the U.S.
In the event of a "higher tariff world," prices would rise whether or not Niinami and Suntory decide to follow suit.
[caption id="attachment_88179" align="aligncenter" width="600"] Takeshi Niinami, chairman of the Japan Association of Cooperate Executives, speaks during a regular press conference in Tokyo on March 12, 2024. (Photo: Kyodo via AP Images)[/caption]
The threat of tariffs has already escalated into an outright trade war between some of the world's biggest economies.
In Sept. 2023, the E.U. announced an anti-dumping investigation into Chinese electric vehicles being imported to the region. In retaliation, China proposed tariffs on European brandy; as of last week, those tariffs have been formalized. The move has already taken a toll on cognac brands like Hennessy and Rémy Martin, which regularly gross over a billion dollars annually in the Chinese market.
Other difficulties lie in the aftershocks of COVID-19. Premium brands, vaguely defined as any bottle that costs over $50, experienced a surge in popularity during lockdown thanks to a boom in at-home spending. The trend has since cooled off, leading to a period of readjustment as spirits companies change pace.
"Because at the time of COVID drinking at home was a frequent habit very much embedded in people's lives. People ended up with a lot of cash because they didn't spend so much in restaurants, and a lot of people got subsidies from their government, so their pockets were full [...] But now the party is over," Niinami remarked.
Takeshi Niinami, chairman of the Japan Association of Cooperate Executives, speaks during a regular press conference in Tokyo on March 12, 2024. (Photo: Kyodo via AP Images)[/caption]
The threat of tariffs has already escalated into an outright trade war between some of the world's biggest economies.
In Sept. 2023, the E.U. announced an anti-dumping investigation into Chinese electric vehicles being imported to the region. In retaliation, China proposed tariffs on European brandy; as of last week, those tariffs have been formalized. The move has already taken a toll on cognac brands like Hennessy and Rémy Martin, which regularly gross over a billion dollars annually in the Chinese market.
Other difficulties lie in the aftershocks of COVID-19. Premium brands, vaguely defined as any bottle that costs over $50, experienced a surge in popularity during lockdown thanks to a boom in at-home spending. The trend has since cooled off, leading to a period of readjustment as spirits companies change pace.