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Currency Woes, Price Hikes Cut Into Cuervo’s First-Quarter Sales And Profits

April 27, 2018

Grupo Cuervo saw its first-quarter sales decrease 12.7% to $229 million, due to currency fluctuations and what it called a “short-term decline” in the U.S. and Canada following price increases. Operating profit was down 36% to $51 million. In the U.S. and Canada, Grupo Cuervo’s volume slipped 17% to 1.8 million cases in the first quarter, and net sales fell 23% to $138 million.

The company said the North American struggles were caused by “an unanticipated year-over-year decline in depletions as a result of last year’s price increase that led to higher retailer purchasing activity in (2017’s) first quarter.” Currency fluctuations—particularly the strength of the Mexican peso against the U.S. dollar—also played a role, with foreign currency impact leading to an 8.1% reduction in reported U.S. sales value, Cuervo added.

Cuervo’s namesake Tequila brand was down 10% to 1 million cases globally during the three months through March, weighed down by the difficulties in the U.S. and Canada. The brand’s value sales slumped 21% to $72 million.

The tough first quarter comes after Cuervo posted a 2.6% sales increase to $900 million in North America in its full fiscal year ended in December. According to Impact Databank, Jose Cuervo Tequila was down 1.5% to 3.65 million cases in the U.S. in calendar 2017, while the higher-priced 1800 Tequila increased 6% to 1.1 million cases, continuing a trend that has seen it expand by more than 60% since 2010.—Daniel Marsteller

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