Donald Trump has introduced trade tariffs on steel and aluminium coming into the US in order to protect domestic production. In retaliation, many of the trade partners have introduced tariffs on US goods coming into their countries. That means that Bourbon tariffs are here making American whiskey (not just bourbon) 25% more expensive at wholesale in many places. What does this mean for your bar?
The price of American Whiskey is going up.
This is a given. This means all the big names, Jack Daniels, Jim Beam, Makers Mark, Wild Turkey and more will have price hikes coming very soon if you’re in one of the countries imposing tariffs on their import. In some areas, especially where one of the brands owns their own route to market and wholesalers, they may be able to offset some of the cost increases by simply selling to their own subsidiary at a lower cost. That way the duty would be absorbed (at least partially) which would give those companies a large competitive advantage over smaller Whiskey makers.
As a result, many smaller Whiskey producers in the US may suffer from lower distribution overseas, and we may see a number of these acquired by the larger player. Expect to see Bacardi Brown Forman, Diageo and Edrington Beam-Suntory buying up more small distilleries and brands in the coming couple of years.
Keep an eye on the cost prices coming into your bar and make sure you update your price files, as these price increases may well break your margins if your drinks don’t get a recipe adjustment or a price increase.
Non-American Whisk(e)y could benefit, for now.
Whisk(e)y produced outside of the USA will probably get at least a short term sales bump, especially those who produce an Bourbon style Whiskey. Liquids like Monkey Shoulder will likely do well given its branding and mixable flavour. Because of the sheer number of barrels that the Bourbon industry makes and exports, there are a number of whiskies that can work as a direct replacement in a number of drinks.
However, there may be more tariffs introduced by the US government to penalise these spirits coming into America too. Because exports of US Whiskey would likely fall due to the increased cost in other markets, a tariff on those other whiskies coming into America would push Americans to drink domestic spirits more, helping the local producers.
Essentially what I’m saying here, is that American whiskey is getting pricier for non-Americans, and non-American whiskey will probably get more expensive for Americans.
Basically, we all lose.
Rum might do well from Bourbon Tariffs
A little different, but many aged rums also use bourbon casks and have the sweetness of a Bourbon Whiskey. Also, because of the climate in most Rum producing nations, the aging process happens more quickly and so it wouldn’t be too hard for the producers to quickly ramp production to make rum specifically to fill the Bourbon gap. Check out The Real McCoy Rums which have a real Whiskey edge to them with no sugars added, produced at the Foursquare distillery in Barbados.
Rums work great in whiskey cocktails like the Old Fashioned, Manhattan and more.
Action Plan for Bourbon Tariffs
- Double check any pricing changes with your supplier.
- Check your margins based on any cost price changes.
- Check for alternative products if your pricing is broken.
- Look at spec changes to offset costs or increase pricing.
- Make sure your team are aware of the situation and can explain it to their guests.
- Be open to bigger changes like rums in the mid term
Hopefully this will help to keep your bar’s program on track, and fingers crossed the whole situation will be resolved soon so we can all go back to drinking what we like, anywhere in the world without silly added costs.