Cuervo’s Full-Year Sales Jump 9%, But Agave Costs Weigh Down Earnings

Grupo Cuervo enjoyed strong net sales and volume growth in its fiscal year through December, but its profits continue to be slowed by increasing agave costs. Globally, Cuervo posted net sales up 9.2% on an underlying basis to MX$29 billion ($1.5b) on a 7.5% volume increase to 22.1 million 9-liter cases. The company saw EBITDA inch upward 0.4% to MX$6 billion ($303m).

Cuervo says it continues to see “strong depletion trends in the U.S. and Canada,” with growth led by premiumization in its core Tequila category. On an underlying basis, net sales rose 8.1% to MX$18.2 billion ($921m) in Cuervo’s North America region in 2019, as volume climbed 8% to 12.3 million cases. According to Impact Databank, the Jose Cuervo brand was up 7% to 3.8 million cases in the U.S. last year, driven by double-digit gains for its Especial Silver and Tradicional offerings. 1800 Ultimate Margarita and Pendleton whisky were also growth drivers for the company in the U.S.

While premiumization is boosting sales, Cuervo continues to wrangle with high agave costs amid the Tequila market’s expansion. The company cited “increases in third-party agave supply costs and lower production efficiencies,” and, to a lesser degree, Mexican peso appreciation against the U.S. dollar, as impacting the business.—Daniel Marsteller

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