How will an increasingly insular world impact the beverage alcohol industry?

Protectionist trade policies and a new climate of insularity are poised to hamper beverage alcohol brand owners as they start to bounce back from the impact of the Covid-19 pandemic

Trade wars – between the US and China, and between the US and the European Union – have brought increased import tariffs, with the threat of more to come this summer. These have already led to reduced imports of American whisky into the EU, and of single malt Scotch into the US, as well as narrower margins for companies forced to absorb the extra cost.

Furthermore, isolationist policies, such as the recent US move to restrict employment visas, and the reluctance of some governments to share Covid19 vaccines, could engender a new atmosphere of insularity, reinforcing a move by consumers to favour local products over imports.

“This could be one of the biggest impacts of the pandemic and an increasingly insular world: a return to locally-produced spirits and other beverage alcohol products,” says Emily Neill, COO Research at IWSR. “If you follow this idea of ‘support local’ through, it is likely to create larger premium segments of these categories.”

According to the Distilled Spirits Council of the US (DISCUS), American whiskey exports to the EU fell by 33%, at a cost of US$300m, between the imposition of a 25% tariff in June 2018 and the end of April 2020.

Jack Daniel’s owner Brown-Forman said during the company’s fiscal 2020 Q3 results announcement in March 2020 that margins had been squeezed by the move. Meanwhile, Albert Baladi, CEO of Beam Suntory, admitted that the company had been “hurt” by the EU tariffs, which had led to price increases in markets including the UK and Poland, in commentary on the company’s full-year results announcement for 2019.