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Tequila Slump Hits Jose Cuervo Maker
27 Feb
Summary
- Becle shares have dropped nearly 14% this year.
- Consumer drinking habits have shifted post-pandemic.
- A softer US dollar impacts Becle's key market earnings.
Becle, the company behind Jose Cuervo, has seen its shares decline by nearly 14% this year, marking the worst performance in the Mexbol benchmark index. This downturn is attributed to a reduction in tequila consumption among North Americans, a trend that began during the pandemic.
Despite a significant collapse in the price of agave, tequila's primary ingredient, Becle is struggling to offset the impact of softer consumer spending. A weaker US dollar further diminishes earnings from its vital US market. Analysts also point to recent changes in US distributors as a potential factor limiting product availability.
The company recently reported fourth-quarter net income that missed analyst expectations, accompanied by volume declines in Mexico, the US, and Canada. Weakness in the US Hispanic consumer market, typically a major sales driver, is a significant concern, with this demographic reportedly cutting back on spending due to inflation and fewer social gatherings.
Looking ahead, Becle's fortunes might improve with the upcoming World Cup, which is anticipated to boost consumer companies, particularly in Mexico, through increased tourism and social events. Analysts suggest Becle is currently trading at a discount, presenting a potential long-term investment opportunity as profitability is expected to recover.
