Some clarity for alcohol producers in the U.S. and Europe today following news of an EU trade deal. CNBC’s Brandon Gomez unpacks why investors are still approaching the group with caution as they await more details for a possible exemption.

A recent EU-US trade deal has imposed a 15% tariff on European alcohol imports to the US, which is less severe than the previously feared 30% rate. However, the deal did not include a specific exemption for wine and spirits, leaving producers in a state of uncertainty. Major European spirits companies, including Pernod Ricard, Diageo, and Campari, initially saw their stock prices rise but later declined as investor concerns grew over the ongoing impact of tariffs and softening demand.

Industry leaders warn that the 15% tariff remains a significant challenge, with previous lower tariffs already causing notable declines in wine exports. Additionally, broader trends such as reduced alcohol consumption among younger generations and competition from non-alcoholic alternatives continue to pressure the sector. Calls for a tariff exemption persist as companies face the prospect of raising prices or reducing their presence in the US market.

Low spirits for alcohol stocks despite better-than-feared trade deal

Welcome back getting some clarity perhaps for alcohol producers in the US and Europe today following the news of the EU trade deal But the group overall moving lower Brandon Gomez has been tracking the impact on that industry for us Brandon. What do we know? Hey, yeah, good morning, David a breath of relief, but no cheers yet European wine and spirits makers treading carefully finding themselves left out of the EU trade deal now that 15% tariff on EU Imports to the u.s Better than the 30% feared but no decision regarding a wine and spirits carve-out EU officials saying an agreement for the sector Would be examined in the coming weeks now spirits stocks per no record Let me quantra Diageo and Campari tick slightly higher at first now lower as investor uncertainty starts to settle in Remy Campari and Pernault with the largest revenue exposure to the u.s And you would think isn't a deal net positive, you know, why aren't shares higher? Well two reasons first 15% tariffs are still a big hit wine trade group CEV said the previous 10% blanket tariff on EU imports led to a 12% decline for wine producers and Second leading winemakers may have to increase prices or eject from the US market overall the EU Exporting 10.5 billion of alcohol to the US in 2024 with 1.2 billion coming back in return Distilled spirits Council of the US CEO Chris Wanger saying he remains optimistic the US and EU will return to zero for zero Tariffs David also weighing on the sector beer maker Heineken reporting a earnings beat this morning But warning of softening demand in the US and EU a real cocktail for disaster here, David Well, yeah I mean you've been reporting on the overall trends for the business apart from Tariffs have not been particularly good for any number of different providers as well I guess that hasn't changed either hasn't no and of course you obviously have the steel and aluminum tariffs as well weighing in on this In addition to the tariffs on the products themselves, right? You had President Trump this morning saying we're gonna bring all of that production here domestically Luckily for the brewers a lot of that supply chain already is domestic whether it be Beers produced in Canada made in Canada same with the u.s. So with beer, it's less of a conversation But as we're talking about spirits and alcohol, the story is a little bit different here Yeah, I was gonna say Brandon the the overall demand backdrop and to be one thing if they were dealing with these tariffs if the industry or Consumption was up, but we talk over and over about the impact of cannabis the impact of GLP ones Maybe something just generational that has people drinking less year-on-year. Absolutely I mean you have the the legal drinking age Gen Z consumers who are drinking less turning to those non-alcoholic options as well But we have to really factor in here is that they're really calling for this exemption, right? You have to sort of see that while there is this consumer demand that's been depleting over the years, you know in 2018 These companies were a lot more there were better insulated to absorb costs Maybe they didn't have to pass it on to consumers now. It's a different story There's that we can in consumer demand and and you're gonna see prices rise at least that's what I'm hearing from a lot of the producers that I'm speaking with Brand appreciate that important element of this deal. We'll see if we get more clarity in the weeks and months to come That's our Brandon Gomez

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