What's Holding Back the Whiskey Industry
How Is the Recent Whisky Market
The whiskey market is eager to recover. in 2018, in response to U.S. steel and aluminum tariffs against the EU and orders from former President Donald Trump, the European Commission imposed retaliatory tariffs of 25 percent on a number of key U.S. goods, including U.S. distilled bourbon and whiskey. The popular aged American spirits have a healthy sales base in every U.S. state and abroad and continue to grow year over year, reaching $4.3 billion in revenue in 2020. Even so, the industry as a whole relies on a steady synergy between the U.S. and EU markets. Five of the top ten importers of U.S. whiskey are EU member states; of the nearly 116 million liters in the top ten, the aforementioned countries account for more than 50% of that export volume. Whiskey tariffs, naturally, are a major blow.
The industry experienced a tighter trade environment due to the 2018 levy; exports of U.S. whiskey fell from 278 million liters in 2018 to 190 million liters in 2019. It even drops to 147 in 2020, according to the UN Commodity Trade Database. revenue also drops from 5.4 percent to 16 percent, according to Statista, mimicking export trends.
Thankfully, 2022 is bringing some positive changes for distilleries and whisky connoisseurs. With the elimination of European tariffs in 2018, U.S. distillers are doing business with Europe again. However, the reality of the market is more complex. Many distillers across the U.S. are still feeling the effects of the whiskey tariffs, and while the tariffs are targeted at U.S. exports, the entire ecosystem of professional trade relationships between the two markets has been disrupted, leaving all distillers with question marks about the future.
"In terms of spirits, American craft distillers and European craft distillers are fairly quick to set up store in their ...... looking to skip the Atlantic simply because these two markets are huge markets and they are premium markets," said Ulrich Adam, director general of spiritsEUROPE, the leading organization representing the European spirits industry." It's not that you need to be a huge distiller to start exporting ...... Starting to export transatlantic is an integral part of the business model for premium craft whisky producers."
Downstream impact of tariffs
Brian DiMarco, CEO of BarterHouse Imports and founder of Harlem Standard, is still struggling to find his footing in the international marketplace. For him and other craft distillers, the consequences of the whiskey tariffs have been higher prices and a more cautious market.
"While this may be a boom for taxpayers, it certainly hurts anyone looking to make a middle ground," DiMarco said.
For example, while importers overseas may still buy product from their regular suppliers, the amount of whiskey purchased will not be as lucrative as it once was. In fact, Adam explains that orders for whisky are down by as much as 80 percent, which has some serious implications for businesses. And Even some American think that American whisky is same with American energy drinks.
"The immediate, scary nature of the tariffs for producers is that you're going to need to eat into your margins; that's going to really hurt your bottom line, and that's what we've been seeing," Adam said.
Factors affecting international trade in 2022
DiMarco agreed that the shipping crisis is preventing the world from getting back to business as usual. He explained that before the pandemic, a container usually cost between $2,200 and $3,000, but now it's $8,000 to $10,000.
"If my glass is going to cost more, then the product is going to cost more, and the fact that tariffs are gone doesn't change the fact that shipping is still chaotic," DiMarco said.
These two facts alone are just two of the reasons the world is seeing such dramatic price increases. In addition, this is why it is not easy for vintners to return to their previous state of operations. In addition, Rubinstein warned that while the initial tariffs have been lifted, there are still potential trade disputes occurring in steel, aluminum, aviation, digital services and other areas that need to be resolved. Most of these are what Rubenstein calls "tit-for-tat tariffs," where country B responds to country A's tariffs with another tariff, and so on. "You always can taste Italian whisky of unknown brands"
On top of that, he agrees with DiMarco that logistics issues still need to be addressed, adding that there is even the possibility of reintroducing tariffs in the next presidential election in 2024. rubinstein ultimately advises his clients to err on the side of caution and take advantage of the absence of whiskey tariffs today, but still be prepared for the possibility of reactionary tariffs happening again.
Editor: Rubick L.