The maker of Jack Daniel’s may be in need of a drink.

Brown-Forman Corp. (BFb.N) will have to raise prices for American whiskey sold in the European Union following the implementation of a 25 per cent tariff, according to spokesman Phil Lynch. The higher prices, which he said will primarily impact Jack Daniel’s, will translate to about a 10 percent increase at the customer level.

“A 25 per cent tariff does not translate into a 25 per cent increase on the price of a bottle of Jack Daniel’s,” Lynch said. Due to advanced shipment in Europe, price increases will roll out over the next couple of months and market-by-market, he said.

Brown-Forman, which also makes bourbons including Woodford Reserve, fell to the lowest level in nearly seven months Monday.

Goldman Forecast

Lynch did not say what kind of impact the expected price hikes will have on European sales, noting that “we continue to invest behind the growth of American whiskey in the EU.”

Goldman Sachs Group Inc. analyst Judy Hong trimmed her projections for the company’s earnings per share by 4 per cent to 5 per cent for both the current and next fiscal year due to the tariffs. Her revised estimates take into account the levies imposed by the EU as well as Mexico, she said Monday in a note to clients. Hong said the company is likely to cut its own profit and sales-growth guidance when it reports in August.

The EU last week triggered the first phase of retaliation against the U.S. over its metal-import tariffs, making good on more than three months of threats to hit iconic American goods with tit-for-tat levies. The European Commission in Brussels gave final approval for a 25 percent duty on 2.8 billion euros (US$3.2 billion) of EU imports of a range of U.S. products including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and whiskey.

While President Donald Trump has repeatedly claimed that the U.S. can easily win trade wars, victims are starting to pile up at home and abroad. Daimler AG, the maker of Mercedes-Benz luxury vehicles, warned last week that escalating tension between the U.S. and China will impair earnings from its Alabama sport utility vehicle plant and lower profit this year. Harley-Davidson said it plans to shift some production of its motorcycles out of the U.S. in response to retaliatory EU levies.

On-Ground Inventory

Louisville, Kentucky-based Brown-Forman said earlier this month it was too soon to accurately forecast future sales growth with so much uncertainty surrounding the tariffs, but said at the time it was trying to mute the impact by building up inventories in markets outside of the U.S. Brown-Forman has moved more product to France, Spain, Germany and Poland, where it has its own distribution network, it said earlier this month.

“In markets where we don’t own our own distribution, it’s the local distributor whom we sell our own product to -- they will make the decision on whether or not to increase the price on the product that they purchased from Brown-Forman and then sell into the retail level,” Lynch said Monday.

Shares were down 2.9 per cent to US$48.36 as of 3:45 p.m. in New York after earlier slipping as much as 3.9 per cent to US$47.89, the lowest intraday level since Dec. 1.

--With assistance from Austin Weinstein.