Jose Cuervo owner Becle enjoys 41% net profit rise

Mexican distiller Becle, owner of the Jose Cuervo brand and the world’s largest Tequila producer, enjoyed a 41% rise in its net profit for the final three months of 2023 compared to the same period a year earlier.

The results were better than predicted by analysts despite disappointing sales in key markets.

The company, controlled by the Beckmann family, made a net profit of 1.96 billion pesos ($115 million) for October to December quarter despite earnings falling by 5% to 13.16 billion pesos.

Analysts had produced a consensus profit forecast of 1.28 billion pesos from sales of 13.05 billion.

The group was badly hit last autumn by a slump in US sales as consumers retrenched in the face of inflationary pressures and price rises. It was also hit by the rising value of the peso.

Sales in the U.S. and Canada, the group’s biggest market, fell by 12% in the quarter, but, Becle said, would have fallen by only 3% if the effect of the strengthening peso was discounted.

In Becle’s Mexican home market, which accounts for about a quarter of its annual revenues, sales rose by 10% in the quarter compared with 2022.

By comparison Diageo replaced its chief officer Mexico after a buildup of unsold inventories in Latin America’s second largest economy forced it to issue a profit warning in November that sent its shares tumbling.

Global volumes of the Jose Cuervo Tequila range fell by 2% from the same quarter of 2022, while other Tequilas and non-alcoholic drinks each gained 6%.

Annual sales in 2023 were down 3% despite Becle forecasting last April that they would grow in the “high single digits”.

“Slowing consumer demand for spirits in several markets indicates trends are normalising after two years of exponential growth,” Becle said in a report accompanying the figures.

It also said that adding that it expected margins to improve in 2024 as inflation settles and costs are reduced.

It plans to continue the strategy of selling more premium products, which had allowed it to make gains in key markets and better face up to “current challenges”.

The majority of Becle’s sales remain at the commodity end of the spirits market, especially Tequila.