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North America Headwinds Impact Jose Cuervo Distiller’s Profit

The world’s largest tequila maker, Mexican distiller Becle, reported a 5% decline in second-quarter net profit on Thursday as a result of lower volumes and sales in its two biggest markets, the United States and Canada.

Compared to the 1.40 billion pesos recorded in the same quarter last year, net profit decreased to 1.33 billion pesos ($77.5 million).

Becle’s shares closed up 1.6% before the report was released on Thursday afternoon, but according to Citi analysts, they “should underperform” on Friday because core earnings fell short of expectations by 12%.

The Mexico City-based company, which also distributes mezcal, whiskey, and other alcoholic beverages, recorded a 2.4% decline in revenue from April to June, totaling 11.06 billion pesos.

Volumes fell 5.6% in the North American region as a result of price hikes, which, when coupled with the strengthening of the peso against the dollar in Mexico, led to an almost 13% decline in sales, according to Becle.

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Becle’s Strategy Amidst Peso Surge and Market Shifts

north-america-headwinds-impact-jose-cuervo-distiller-profit
The world’s largest tequila maker, Mexican distiller Becle, reported a 5% decline in second-quarter net profit on Thursday as a result of lower volumes and sales in its two biggest markets, the United States and Canada.

From the start of the year, the peso has gained about 13% against the dollar. According to the distiller, sales in the United States and Canada would have only decreased 1.4% on a currency-neutral basis.

According to Citi analysts, the strong peso will probably have an impact on Becle’s profitability up to the end of the year. Nonetheless, they noted that agave prices are starting to decline, which will benefit outcomes through 2024.

According to the analysts, management will need to keep building up its brands in order to capitalize on the “premiumization” trend in the United States and Canada.

According to Citi, premium tequila has gained market share and American consumers now view the liquor as “a luxury sipping drink, rather than a party drink.”

Becle’s volumes in Mexico also decreased marginally, which the business attributed to changes in the energy drink market, even though price increases increased sales.

Becle was able to sell almost 8% more drinks globally while moving about 18% more volume.

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Source: MSN

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