The Impact of Tariffs on Brough Brothers Bourbon: A Story of Disrupted Expansion
Disrupted Expansion Plans: The Struggle of Brough Brothers Bourbon
Brough Brothers Distillery, a Black-owned bourbon maker in Louisville, Kentucky, find themselves at the crossroads of ambition and uncertainty as tariffs threaten their expansion plans. Victor Yarbrough, CEO, along with his brothers Bryson and Chris, had envisioned their company entering lucrative markets in Canada and Europe. However, the looming tariffs have placed these goals on hold, labeling them as "collateral damage" in a broader trade conflict instigated by President Donald Trump. The frustration is palpable as they witness their hard-earned opportunities slipping away due to forces beyond their control.
The significance of the new distillery cannot be overstated. It represents not just an increase in production capacity but a strategic move to elevate the company’s profile in the competitive bourbon world. However, the uncertainty surrounding tariffs has halted their progress, leaving them in a state of limbo. The Yarbroughs are not alone in their plight; larger corporations may weather the storm, but for small businesses like theirs, the impact is devastating. The tariffs not only affect their expansion but also threaten their very survival in an increasingly hostile trade environment.
Diplomacy and Public Relations: Navigating a Sensitive Landscape
The world of spirits is not just about production; it’s about diplomacy and public relations. Brough Brothers and other U.S. distillers face a unique challenge as they navigate the sensitive terrain of international relations. The "America First" approach has left a bitter taste, leading to public backlash in Canada. From hockey fans booing the U.S. national anthem to liquor stores removing American spirits, the distillers are grappling with a multifaceted crisis.
In such a climate, silence can be golden. Distillers often shy away from political discourse, fearing alienation of their diverse customer base. However, the current situation demands a proactive approach. Victor Yarbrough suggests a "media blitz" or "PR blitz" to mend fences. This strategy, while necessary, is fraught with challenges. Rebuilding trust requires more than just publicity; it demands consistent and positive engagement to alter public perception.
The historical context of trade relations adds another layer of complexity. Past conflicts and resolutions can offer valuable insights, but the current tariff disputes present a new challenge. The uncertainty is compounded by the unpredictable nature of tariff policies, leaving businesses without a clear path forward. As Brough Brothers considers their next move, they must balance their business goals with the delicate art of international diplomacy.
Uncertainty Reigns: The Immediate Threat of Trade Wars
The expanding global market for bourbon and other American spirits is being hampered by the immediate threat of ongoing trade wars. Governor Andy Beshear of Kentucky highlights the instability caused by fluctuating tariff policies, emphasizing the month-to-month unpredictability that disrupts business planning. The challenge is not just the tariffs themselves but the constant uncertainty they create, leaving businesses in a state of flux.
Brough Brothers’ situation remains unresolved despite temporary reprieves. Victor Yarbrough notes that the delay in tariffs does not alleviate their planning challenges; it merely prolongs the uncertainty. The impact is felt across the industry, with distillers struggling to maintain long-term planning. Judy Hollis Jones of Buzzard’s Roost Spirits echoes these sentiments, stressing the need for certainty in an industry that requires meticulous forward planning, especially considering the aging process of whiskey.
The broader implications of these tariffs extend beyond Kentucky, affecting the national economy and consumer prices. The dispute has created a ripple effect, with businesses forced to reconsider their strategies and seek alternative markets. However, every option comes with its own set of challenges, leaving distillers in a precarious position as they navigate the turbulent trade landscape.
A Threat to Distillers: The Potential for Irreparable Harm
The threat of a 50% tariff on American whiskey looms large, posing a significant challenge to the industry. Chris Swonger of the Distilled Spirits Councilwarns of "irreparable harm" to distillers of all sizes. The tariffs act as a tax, forcing companies to either absorb reduced profits or pass the cost to consumers, risking market share in competitive markets. The EU, the largest export market for U.S. distilled spirits, is set to reinstate tariffs, reviving a dispute from Trump’s first term.
The historical precedent of a 20% drop in EU exports due to prior tariffs underscores the severity of the situation. While larger distilleries may have the resources to navigate these challenges, smaller distilleries are particularly vulnerable. The financial impact is compounded by the unpredictability of tariff policies, leaving distillers in a constant state of uncertainty. The threat is not just financial; it jeopardizes the hard-won market share and the reputation of American spirits internationally.
Small Distilleries: Vulnerable to Trade War Fallout
Small distilleries like Brough Brothers and The Bard Distillery are among the most vulnerable to the fallout from the trade wars. Their limited resources and reliance on international markets make them acutely sensitive to changes in trade policies. Tom Bard of The Bard Distillery in Muhlenberg County, Kentucky, highlights the personal and financial investment in capturing the Canadian market, only to see their efforts derailed by the trade disputes.
The emotional and financial toll is evident as Bard expresses his frustration over the uncertainty. Despite their resilience, small distilleries face significant challenges in diversifying their markets and managing inventory without a clear direction. The Bard Distillery’s experience is a testament to the broader struggles of small businesses caught in the crossfire of international trade disputes.
Conclusion: The Need for Stable Trade Policies
The ongoing trade disputes underscore the urgent need for stable and predictable trade policies. Distillers, both large and small, are calling for a resolution to the tariff disputes that are threatening their businesses. The impact extends beyond the industry, affecting the broader economy and consumer prices. As Brough Brothers and other distilleries continue to navigate this uncertain landscape, they emphasize the importance of resilience and adaptability.
In the words of Tom Bard, "We’re small-business Americans, so we’re going to make it work. But it would be nice to not have these roadblocks." The coming months will be crucial as distillers await clarity on tariffs and work to rebuild relationships with international markets. The hope is that through diplomacy and advocacy, the industry can overcome the current challenges and continue to thrive in an increasingly complex global market.
