American beer drinkers could see some of their favorite beverages cost more in the coming years if President-elect Donald Trump's plan to place a 25% tariff on Mexican imports goes through.
What Happened: Trump has promised to put tariffs on countries like China, Mexico and Canada when he is inaugurated as president in January, a move that has several sectors on high alert as they brace for the impact and likely pass the higher costs onto consumers.
One of the companies that could feel the brunt of the 25% tariff on Mexican imports is Constellation Brands (NYSE:STZ), an alcohol company that holds the exclusive U.S license for several of the top imported beer brands in America.
Constellation imports brands like Modelo, Corona and Pacifico from Mexico where they are brewed by Grupo Modelo, which is a unit of Anheuser-Busch InBev SA (NYSE:BUD).
Data from Statista lists Modelo as the top imported beer in the United States for 2024, with Corona ranking second on the list. Heineken and Dos Equis XX, which are imported by Heineken USA, a unit of Heineken NV (OTC:HEINY), rank third and fourth on the list respectively. Dos Equis is manufactured in Mexico and imported to the U.S.
Modelo is the top-selling beer in America, as reported by USA Today. The beer passed Bud Light for the crown in May 2023 and has maintained the market share lead. Corona Extra is the fifth bestselling beer in the U.S. according to the report, giving Constellation two of the top five bestselling beers in the U.S.
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Why It's Important: Constellation shares fell earlier this week on news of the tariff, which could have a big impact on the company's beer division.
The beer company manufactures all of its beer in Mexico, as reported by CNBC. Beer made up 86% of the company's revenue for the first half of 2024.
A 25% tariff on Mexican imports could raise Constellation's cost of goods sold by around 16%, according to Wells Fargo analyst Chris Carey.
Analysts expect Constellation to raise prices to offset the impact from the tariffs.
While other companies could opt to move manufacturing to the U.S. to offset the impact of the tariffs, Constellation might be stuck. The company has to produce beer brands like Modelo and Corona where AB InBev makes them, as part of an antitrust settlement between the U.S. Department of Justice, AB InBev and Grupo Modelo.
Trump previously proposed a 5% tariff on Mexican imports with plans to raise the amount to 25%, but those tariffs were not put in place previously according to the report.
Mexican President Claudia Sheinbaum suggested tariffs on American goods imported to Mexico in response to Trump's plan.
"One tariff will be followed by another in response, and so on until we put common companies at risk," Sheinbaum said.
Sheinbaum highlighted American automakers in her comments.
The comments from Trump and Sheinbaum could see tensions escalate between the U.S. and Mexico and a potential trade war taking place.
Consumers would likely be the losers in such a battle and drinking beers that come from Mexico will likely cost Americans more in the coming months.
STZ Price Action: Constellation Brands stock is up 1.17% to $236.57 on Wednesday versus a 52-week trading range of $224.76 to $274.87. Constellation stock is down 3% year-to-date in 2024.
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