Whiskey Industry Rocked By Trade War, European Union Tariff

July 03, 2018 - 5:52 pm

NEW YORK (WCBS 880) -- Markets have been jittery in recent weeks, with U.S. tariffs on China scheduled to kick in on Friday, but a separate set of tariffs and retaliatory moves are shaking up trade with Europe.

The whiskey market specifically is preparing for the worst, after the European Union slapped 25 percent tariffs on American whiskey.

“Whiskey is such an American staple, so this definitely does have some sort of effect on the industry, and there’s a lot of disappointment coming from the industry right now,” Bloomberg reporter Janine Wolf told WCBS 880’s John Metaxas.

The tariffs are affecting large manufacturers and family-owned businesses alike, Wolf explained. But smaller distilleries are being hit the hardest.

“So for bigger companies like Brown-Forman, with their Jack Daniel’s whiskey – for them, they actually told me that they’re going to be increasing the price on the consumer level by about 10 percent. But for them, because they have such a strong brand recognition, they’re able to withstand sort of those price increases,” Wolf said. “But for a smaller company like, let’s say, Buffalo Trace Distillery, they’re not going to be able to do the same thing. So for them, in order to sort of keep the price for the consumer the same, they’re actually going to be cutting the price of spirits that they sell to overseas distributors, and they’re going to be absorbing that price themselves.

Thus, the smaller distilleries will see a loss in profits – and will scale back in other ways.

“A lot of these smaller, family-owned whiskey distillers are, I mean, there’s a great amount of uncertainty within this space right now, so a lot of them are telling me that they’re just going to sort of wait it out and see if things clear up or not,” Wolf said. “But I mean, in the long run, they are wanting to sort of invest more into global growth, so those plans are sort of being put on the backburner for now.”

Jobs in the whiskey industry will also be affected.

“For example, one of the companies that I talked to – Catoctin Creek over in Virginia – they were actually sort of wanting to grow their employee count as well, so now, since they’re having to sort of make additional plans as a result of the tariffs, they’re actually not going to be employing any new people for the moment. So on the job level, we’re also seeing those effects being taken,” she said.

Overall, distillers are optimistic that the trade war will come to an end – but they remain uncertain and disappointed about the current state of affairs, according to Wolf.

“A lot of these people don’t know, it’s so fresh,” she said.