Tequila Industry Will Take A Hit If Trump Imposes Tariffs On Mexico
ARI SHAPIRO, HOST:
It's happy hour on a Friday, and we have some sad news for tequila drinkers. This is a product that by definition can only be made in Mexico. So if President Trump imposes tariffs on goods from Mexico this Monday as promised, tequila will take a hit. Jacob Gluck co-owns Goza Tequila based in Atlanta, and he joins us now. Welcome.
JACOB GLUCK: Hi, good to be here. Thanks for having me.
SHAPIRO: So the U.S. imported $1.4 billion worth of tequila last year. And most of these companies are owned by Americans and operated out of the U.S. like yours. Tell us about Goza, your company. How much do you import every month, for example?
GLUCK: So Goza Tequila - we came to market in the spring of 2015. We've been able to more than double business every year since then. And today we're importing about 10,000 bottles a month.
SHAPIRO: And tequila can only be made in Mexico, right? It's like champagne that can only be produced in the Champagne region of France.
GLUCK: That's exactly right, Ari - and not just Mexico but specifically a region in Mexico that's mostly in the state of Jalisco.
SHAPIRO: So is there a term like sparkling wine that is used for things that we would otherwise call tequila that are not produced in that specific region of Mexico?
GLUCK: There really isn't, not that you would go to the store and buy. We have a couple guesses as to why that is. The first reason is that so much about tequila is about heritage and the tradition and the story. And a lot of that, if not all of that's, tied to Mexico. And the second reason is it's probably a lot more expensive to make it in America, too.
SHAPIRO: So what was your immediate reaction when you heard this announcement from the White House that there was going to be a 5% and possibly higher tariff on everything that comes over the border, including all the tequila that you import?
GLUCK: Well, I would say surprise followed by concern to be honest with you. Five percent's a lot, and especially as it increases to 10, 15 and all the way upwards to 25, it could be pretty devastating.
SHAPIRO: Were you trying to get as many bottles over the border as possible before these take effect?
GLUCK: Honestly, that wasn't really possible. There was such a short amount of time from the time that it was announced to Monday when the 5% is supposed to go into effect. We didn't have time to do that. Now what we are doing is we're trying to make contingency plans all the way from 5% percent to 25%. And one thing we realized is, well, we're not importing on Monday. We don't import every day. So we're hoping these talks in D.C. - they'll come to a deal and that we can essentially delay importing until a deal is made but before it increases from 5 to 10%. So it is an intricate little dance we're trying to do.
SHAPIRO: So you kind of have to gamble. Is there going to be a deal so you won't have to pay the 5% tariff? Or if you don't import right away and there is no deal, are you going to have to pay 10, 15, 20, even 25%?
GLUCK: Yeah, that's exactly right. We're trying to play that game, so to speak.
GLUCK: It - yeah, it - you know, it's the uncertainty that makes it a particularly intense situation for us right now.
SHAPIRO: How long do you think it will be until margarita drinkers at a bar start to feel the price increase?
GLUCK: It's not going to be that long, to be honest with you. I could say probably within a month. Producers like Goza - we have tough decisions to make. We're going to have to decide whether it's us, the distributors, the restaurant, the liquor store or even the consumer that's going to have to bear the brunt of these tariffs.
SHAPIRO: I could be wrong about this, but my impression is that high-end alcohol has a really steep profit margin. Like, if I'm paying $10 or more for a cocktail, the cost of the tequila is actually very small. Is it possible that you can just absorb this price increase?
GLUCK: We can to a certain point. You know, 5% and 25% is drastically different. Just to mention, we already are paying a federal excise tax on everything we import, which for us equates to about 25% of our cost of goods. In terms of a high profit margin, we have a healthy margin. But again, at a certain point, we will have to make some tough decisions.
SHAPIRO: OK, so if people want to enjoy some tequila this weekend before prices go up, what's your recommendation of how they should drink it?
GLUCK: Well, first of all, they should drink Goza...
GLUCK: ...If you're in one of the states where we're available.
SHAPIRO: With a slice of lime or just as is?
GLUCK: I like a slice of lime, but you don't need it. And by the way, you better also get that lime before the price goes up.
SHAPIRO: Jacob Gluck, cheers.
GLUCK: Thank you.
SHAPIRO: He's co-owner of Goza Tequila based in Atlanta, Ga.
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