Tequila giant Becle’s profit jumps despite slowing demand

By Sarah Morland and Marion Giraldo

MEXICO CITY (Reuters) -Mexican distiller Becle, the world’s largest tequila producer, on Thursday posted a 41% rise in its net profit for the last three months of 2023 compared to a year earlier, above market forecasts even as sales slipped in key markets.

The Mexico City-based firm, which sells Jose Cuervo family tequilas as well as mezcal, whiskey and other liquors, posted a net profit of 1.96 billion pesos ($115 million) for the fourth quarter, even as revenues fell 5% to 13.16 billion pesos.

This landed above estimates from analysts polled by LSEG, who had forecast a quarterly profit of 1.28 billion pesos from revenues of 13.05 billion.

Earnings before interest, tax, depreciation and amortization (EBITDA) edged down 2% to 2.44 billion pesos, just above a forecast of 2.22 billion pesos. “Slowing consumer demand for spirits in several markets indicates trends are normalizing after two years of exponential growth,” Becle’s management said in a filing to Mexico’s main stock exchange, adding that lower costs expected this year should allow it to improve margins.

The company said it planned to continue its strategy of selling more premium products, which had allowed it gain territory in key markets and better face up to “current challenges.”

Becle’s stock is down nearly a quarter compared to this time last year, largely due to a 19% nosedive after its third-quarter earnings, when it suffered from a stronger Mexican peso battering foreign earnings as well as slower U.S. volumes.

Volumes in Becle’s home market, which represents around just over a quarter of sales, were up 10% year on year, while in the U.S. and Canada, which brings in the lion’s share, they fell 12% – although the firm noted they would have fallen just 3% when stripping out currency effects.The distiller saw volumes of its trademark label Jose Cuervo fall 2% from the same quarter of 2022, while other tequilas and non-alcoholic drinks each shot up 6%.

Over all of 2023, sales were down 3%. Becle had in April forecast that annual sales would grow in the “high single digits.”

(Reporting by Sarah Morland and Marion Giraldo; Editing by Brendan O’Boyle and Sonali Paul)