How Trump's Ban on Canadian Alcohol May Help Big Producers, Drive Small Ones from U.S. Market

"All animals are equal, but some are more equal than others." – George Orwell, "Animal Farm."

Half of Canada's spirits production is exported, and 93% of those exports go directly to the U.S. The upshot: It's highly likely major bev/al companies – such as Diageo, Pernod Ricard, and others – that own Canadian spirits brands will gain share, and many smaller ones will no longer be in the U.S. market.

Here's why:

Trump's proclamation covers specific tariff classifications, and for many of them, the ban only applies when the alcohol is packaged in bottles, cans, boxes, kegs or similar containers intended for direct consumption.

Bulk or unbottled shipments? No worries. Pay the usual 50% duty and welcome to the U.S. market.

That's great for global brands that already have U.S. bottling operations or the capability to find co-packers, make the necessary shipping arrangements and get regulatory approvals, such as Certificates of Label Approval.

But it's not so great for smaller Canadian producers than don't ship in bulk to the U.S. or have the capability to develop the supply chain to do so.

Canadian Prime Minister Mark Carney's government is actively working to develop new markets in a bid to uncouple Canada's economy from the U.S. But for a small supplier seeking to expand sales in Europe, Asia, Australia/New Zealand, etc., that's easier said than done. They would have to find new distributors, develop new supply chains in the various countries, and fight to obtain share.

But what about simply replacing sales lost in the U.S. with new sales in Canada? The first problem, obviously, is getting Canadians to even consider a new brand. The second, and bigger challenge, is getting product on retail shelves outside one's own province.