Diageo: Lobbying to lower liquor tax

Diageo, the world’s largest liquor producer, is lobbying the government in Mexico aggressively to stop taxing liquor products by price and switch to an alcohol tax regime based on a rate levied by alcohol content.

Pursuing profit interests

The background for Diageo’s advocacy campaign is that luxury tequila, frequently sold at retail prices of hundred dollars a bottle or more, is a fast-growing product with potential of generating massive profits for the alcohol industry. However, Mexico’s current alcohol tax regime effects the price to increase and thus hampers sales.

Mexico’s ad valorem system puts a 53% tax on luxury liquor products, such as luxury tequila. At the same time, the tax put on beer, which is Mexico’s most widely used alcohol type, is 26%. Beer accounts for $24.6bn of the $35.7bn total Mexican alcohol products market, according to Euromonitor International,

Most recently, Diageo acquired a new luxury liquor brand called Don Julio. It is Mexico’s top super-premium tequila brand. Don Julio Real retails for $375 a bottle.

Ivan Menezes, Diageo’s chief executive, pushed his case for an overhaul of the alcohol tax regime at meetings with President Enrique Peña Nieto and Luis Videgaray, the finance minister. Sales of tequila reached $1.14bn in 2014.

Alcohol tax a public health measure

Alcohol taxation is a win-win measure – both in promoting public health and in generating additional governments funds for health and social welfare spending.

Reviewed scientific studies provide consistent evidence that higher alcohol prices and alcohol taxes are associated with reductions in both alcohol consumption and related, subsequent harms. Results were robust across different countries, time periods, study designs and analytic approaches, and outcomes.