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Constellation Brands able to shrug off Trump border tax - analyst

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Constellation Brands' Mexican beer portfolio in the US will likely be resilient to a Donald Trump-backed border tax proposal, an analyst has said.

A Republican party tax proposal could be "highly disruptive" Cowen & Co said

A Republican party tax proposal could be "highly disruptive" Cowen & Co said

Fast-growing brands such as Corona Extra and Modelo Especial, which Constellation owns the US rights to, would be directly affected by the 15%-to-20% border tax hike outlined as part of the Republican party's "Better Way" plan, Cowen & Co said yesterday. If the tax is implemented, Constellation may have to pass it on to consumers. However, the brands should be unaffected at retail, Cowen said, as imports mirror US craft beer in their strong resistance to price rises.

"Constellation should be better insulated to take pricing," the analyst said in a note to clients. "We believe its premium products are popular among higher-income consumers who would ultimately be able to better withstand a pass through on price increases, if necessary."

Cowen said that the border tax implementation is not certain and would probably take time to pass. However, it added that it could be "highly disruptive, in particular for the lower-income consumer in the US".

According to US media, the "Better Way" tax reform proposal was first announced by the Republican party in June, and stands a bigger chance of being passed with Trump in the White House and a Republican-controlled Congress. It would also affect other alcohol categories, including Tequila, Scotch, rum and Cognac, and all imported wines, Cowen said.

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