Tremblay and Tremblay briefly discuss challenges that import brands face when competing with domestic brands–such as higher transportation/shipping costs. I’m a fan of Mexican import brands Corona and Dos Equis and I find it surprising that they can be so competitively priced in comparison to domestic craft brews despite higher transportation costs and import taxes. I looked into alcohol import taxes and found a very informative paper (written in 2010 with 2008 data, so it’s a bit dated but still interesting) that does an international comparison of import taxes on the three most important types of alcohol–beer, spirits and wine.
(it’s fairly easy to read and pretty interesting in my opinion)
For the purpose of international comparison, the author (Kym Anderson) expressed import tax as a percentage of wholesale pre-tax prices for a given volume. There is dramatic variation among countries (see Table 1) in the beer-only category. The US has quite a low import tax (reporting import/excise taxes as 1% of wholesale pre-tax price) in comparison to many other first world countries. Australia reports an incredible 76% while European countries range between 0-24%, averaging 10%.
2 Comments
Interesting. I would think transport costs from Mexico (and Canada — Labatt’s, anyone) are much lower than anything that must move by ship. There are delays at border crossing, but in general the same truck and driver can continue on their merry way. Anything coming by boat has to be trans-shipped. Now it might be (much) less costly if the beer could be shipped bulk and bottled here — in fact, if beer has to age, that could occur in transit. I have a vague recollection of seeing an article many years ago that Heineken was shipped that way.
Note Kym Anderson is a very prolific ag econ researcher, especially for things with a trade component; I’ve read many of (his? her?) articles over the years.
Part of the low transportation costs may be due to NAFTA. But as the professor mentions, the trucking routes from Canada or Mexico to the US prove to be much cheaper than the overseas shipping and trucking of other importers. I also wonder if part of the cheaper cost is due to a lower quality of beer imported from Mexico or Canada. It could be that the European beers are higher quality and subsequently higher priced.
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