Pernod Ricard and Diageo are lobbying the United States government for a border tax exemption on alcohol products that can only be produced in their designated namesake regions.
Champagne, cognac and tequila are subject to provenance rules and restrictions.
Pernod CEO Alexandre Ricard says its unfair for US consumers to be forced to pay higher prices for its Absolut vodka, Martell cognac and Mumm champagne if the Republicans impose a 20% tax on imports.
“If your cost of imports increases via taxes, the only way to cope with it is to pass it on to consumers, which is not nice to consumers, but we don’t have much of a choice,” he said in an interview with Anna Edwards on Bloomberg TV.
Ricard added to reporters in London: “Retailers are saying, and we’re fully in line with them, that the border adjustment tax is a consumer tax, a consumption tax.”
He did note that some products, such as blended Scotch, were more flexible. It could be blended in Scotland and shipped to the US in bulk to be bottled locally, which would be more efficient as it would be lighter to transport.
“Maybe, it’s something one could consider despite all of that,” Ricard told Reuters. “I would say it’s something we should do anyway for environmental reasons.”
Pernod Ricard and Diageo North America have joined the “Americans for Affordable Products” lobby group, which includes more than 100 businesses opposed to the tax.
North America accounts for about one-third of Diageo’s net sales, and one-half of its operating profit. It’s Don Julio tequila is “absolutely on the path to expanding our manufacturing capacity down in Mexico – that work is starting and under way,” Chief Financial Officer Kathy Mikells said in January.
