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Constellation Brands: 'It's too early to know' how Trump policies will affect Mexican beer portfolio

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Mary Ellen Shoup

By Mary Ellen Shoup+

02-Feb-2017
Last updated on 02-Feb-2017 at 15:02 GMT2017-02-02T15:02:30Z

Trump floated a 20% import tax on goods coming from Mexico and the revenue would be used to pay for construction of the border wall between US and Mexico. ©iStock/monticello
Trump floated a 20% import tax on goods coming from Mexico and the revenue would be used to pay for construction of the border wall between US and Mexico. ©iStock/monticello

Constellation Brands says it is “too early to know” how US President Donald Trump’s policies – and in particular a 20% tax on imports from Mexico - will affect its business.

Constellation Brands imports a number of beer brands from Mexico (such as Corona, Modelo, and Pacifico), and last year credited 70% of its earnings to sales of its imported Mexican-made products. Since Trump was elected to office, Constellations Brands stock price has fallen to $148.34 per share since its October high of $171.24 in October 2016.

Constellation Brands corporate communications manager, Alicia Nestle, told BeverageDaily: "Until there are more specifics, it is too early to know how any new White House and/or congressional policies will affect our business.

"Over the years, we’ve worked very effectively with representatives from all levels of the US government and from both political parties, and we fully expect that to continue.” 

Trump said that the 20% proposed tax on Mexican imports would be a way to pay for building a border wall between the US and Mexico, but he is still considering other options to finance the construction.

The discussion of raising the import tax follows President Enrique Peña Nieto of Mexico cancelling his planned meeting with the US President after Trump signed an executive order to begin the process of building the wall and stating that he would make Mexico pay for it.

Constellation Brands: 'ahead of the game'

Constellation Brands has expressed mixed sentiments in the past regarding Trump’s stance on immigration and border controls.

In its third quarter earnings call, Constellation Brands CEO, Robert Sands, noted how the company’s beer business contributed to 60% of the total US beer industry IRI dollar growth in 2016.

However, at the time of the call in early January, Sands did not express concerns over what would happen with beer and alcohol production in Mexico in regards to increased border taxes.

“It's possible that Mexican beer could be exempt because it's an inherently Mexican product and it's not the kind of thing that perhaps is being targeted, i.e., the movement of production from the US to Mexico.

"In fact, in our particular case it's the complete opposite in which you have a US company that bought an inherently Mexican company and actually resulted in the creation of jobs in the US as opposed to the opposite,” Sands said.

"We have been so far ahead of the game that we sort of know what we are going to do," he added.

Politicians urge Trump to mend relations with Mexico

Republican politicians have expressed concern over how Trump’s trade decisions could negatively impact the trade relationship the US has built with Mexico.

Sen. Lindsey Graham, R-South Carolina tweeted: "Border security yes, tariffs no. Mexico is 3rd largest trading partner. Any tariff we can levy they can levy. Huge barrier to econ growth. Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad."

Trump also made threats that he will pull the US out of North American Free Trade Agreement, a move that may further jeopardize US and Mexico trade relations. 

Mexican multibillionaire Carlos Slim, who purchased PepsiCo Americas Beverages’ headquarters in April 2015, also expressed disapproval over Trump’s efforts to build a wall between the two bordering countries and tax imports from Mexico.

“The best wall is investment, which generates employment in Mexico,” Slim said during a press conference held last Friday.

“Mexico is the best partner the US has and also the most complementary.”

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