Beer Marketer's Insights - 25% Tariffs on Imported Beer Cans Likely Apply Only to Aluminum, Not Value of Liquid Inside

The tariffs on imported cans may be far less impactful than initially feared. Those 25% tariffs apply only to the aluminum content within a package - not the liquid inside, INSIGHTS understands. That would of course be far less expensive than a surcharge on the total value of the product and a big sigh of relief for many beer importers, particularly those that are USMCA compliant. The 25% aluminum levies were slated to go into effect today and seemingly supersede the existing trade agreement. But USMCA compliant goods are otherwise considered exempt from current tariffs, which presumably includes most Mexican imports (see last issue). As things stand, European importers are still subject to 20% tariffs. The 25% tariff on imported aluminum cans would likely be in addition, tho quite minor in comparison. Forecasting the impact of tariffs "just on the aluminum," Evercore ISI's Robert Ottenstein estimates that Constellation's "cost for an aluminum can ranges between $0.06-0.08/can, suggesting a $0.015-0.02 tariff impact/can." And if that's the case, "we believe that STZ would probably absorb the impact of the tariff given current general beer demand weakness and that the tariff impact is relatively manageable in size." The "most likely outcome is a $0.25-0.40 hit to STZ's earnings," per Evercore ISI's first blush forecast. "We continue to assume that STZ will evade the latest US tariffs," added HSBC's Carlos Laboy in a separate report. "A tariff that seems more likely to hit STZ relates to aluminium used in cans," he acknowledged. Tho "the 20% peso devaluation's impact on brewing costs over the past year may offset it." Constellation has remained silent on the subject, currently in its quiet period leading up to its earnings report next Wed. But while many analysts forecast far bigger impacts, "we continue to assume that no announcement from management means no material change to its tariff condition," Carlos added, believing such a big change "would be pressing enough for the firm to promptly disclose." He takes management's silence as "good news." At the very least, we should know much more come Wed.

25% Tariffs on Imported Beer Cans Likely Apply Only to Aluminum, Not Value of Liquid Inside

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