Booze, Trump and the Economy

Trump on the US Alcohol Industry

My beautiful discovery of podcasts that has absorbed my morning drives to work led me to an interesting conversation on the impact of the strengthening US dollar on the alcohol industry in the US. We often discuss about other aspects of consumer consumption but we forget that alcohol was once a luxury but now is an almost daily ‘necessity’ that drives consumer budgets.

According to statista.com, the sales in US alcoholic beverages stood at $219.52Bn in 2015. Which is pretty significant as this has been a slow but gradual increase over the last 5 years.

When the US dollar strengthens, this means that alcohol importers’ purchasing power rises as most foreign goods are priced in foreign currency. So the principle of “buy more for less” applies. This has enabled alcohol importers to buy, thereafter, sell more alcohol volumes due to cheaper imports and thus benefit them through cost savings.

Even with the favorable import prices, this does not entirely translate to gains for the consumer. Suppliers and retailers alike have showed previous hesitance to adjust US domestic prices on the back of currency volatility and more recently risks to policy direction. However, they have offered incentives to consumers through promotions and sales and also in providing consumers with better quality products.

However, Trumps’ border tax of close to 20% and his indirect sentiment towards a much favorable US dollar to enhance US goods and services competitiveness in the global trade market could reverse the gains realized in the alcohol industry. It may be too soon to understand the full impact of these policies but the added cost is expected to be passed on to the consumer. We shall be following this VERY closely.