Premium Trends And Rising Middle Class Will Transform Tequila Demand

Key Takeaways

• Global demand, premiumization, and heritage give Becle strong pricing power and margin potential beyond consensus expectations.
  
• Vertical integration, disciplined costs, and digital investments may drive sustained margin expansion, rapid revenue growth, and international diversification.
  
• Heavy dependence on tequila and weak innovation in craft or low-alcohol segments leaves Becle exposed to shifting consumer preferences and regulatory or competitive risks.

Catalysts

Manufactures and distributes spirits and other distilled beverages in Mexico, the United States, Canada, and internationally.

• Analyst consensus expects steady premiumization benefits and margin expansion, but this narrative likely understates Becle's advantage: outsized global demand for authentic Tequila and craft spirits, combined with Becle's unmatched portfolio and heritage, positions the company for market share gains and pricing power that could drive both revenue growth and structurally higher net margins above industry averages.
  
• While analysts broadly expect stable to modestly improving gross and EBITDA margins from favorable agave prices and operational efficiency, this may underestimate the impact of Becle's continued vertical integration and aggressive cost discipline, which may unlock sustained, multi-year margin expansion and higher free cash flow conversion even as the competitive environment stabilizes.
  
• The growth of the global middle class and rising disposable incomes in key emerging markets creates a powerful tailwind for Becle's international expansion, enabling the company to boost sales volumes and diversify revenue streams, mitigating regional volatility and driving top-line growth well above current consensus.
  
• The accelerating digitization of the spirits industry, combined with Becle's investment in e-commerce and direct-to-consumer channels, could facilitate high incremental margins and rapid global brand penetration, significantly improving both revenue growth and operational leverage in the coming years.
  
• Becle's capital allocation discipline and strengthening balance sheet position it to pursue high-return strategic M&A or bolt-on acquisitions in the premium spirits category, which could rapidly enhance earnings growth, further accelerate its premiumization strategy, and unlock additional shareholder value.

Becle. de Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Becle. de compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Becle. de's revenue will grow by 11.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.5% today to 15.1% in 3 years time.
• The bullish analysts expect earnings to reach MX$9.5 billion (and earnings per share of MX$2.21) by about August 2028, up from MX$5.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 22.8x on those 2028 earnings, up from 15.0x today. This future PE is greater than the current PE for the MX Beverage industry at 16.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.12%, as per the Simply Wall St company report.

Becle. de Future Earnings Per Share Growth

Risks

• Sustained global anti-alcohol sentiment and rising health consciousness could drive regulatory headwinds, volume declines, and revenue pressure for Becle in its core markets if spirits consumption weakens long term.
  
• Becle's heavy reliance on Jose Cuervo tequila for growth represents a significant brand concentration risk; any category shift away from tequila or toward low
• and no-alcohol options could materially erode future revenues and threaten market share.
  
• Competitive pressure and lower pricing in key markets like the U.S., as evidenced by declining net sales and aggressive promotional activity, may compress margins and reduce overall profitability over time.
  
• Becle's focus on premiumization is challenged by slower innovation compared to global peers and limited presence in high-growth craft and low-alcohol segments, which could lead to stagnating revenues and weaker net margins as consumer preferences evolve.
  
• Persistent foreign exchange volatility, particularly with exposure to the Mexican peso and U.S. dollar, increases earnings uncertainty and could mask underlying operational weaknesses, negatively impacting reported financial performance over the long term.

Valuation

• The assumed bullish price target for Becle. de is MX$40.53, which represents two standard deviations above the consensus price target of MX$29.68. This valuation is based on what can be assumed as the expectations of Becle. de's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$40.71, and the most bearish reporting a price target of just MX$23.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be MX$62.9 billion, earnings will come to MX$9.5 billion, and it would be trading on a PE ratio of 22.8x, assuming you use a discount rate of 14.1%.
  
• Given the current share price of MX$23.5, the bullish analyst price target of MX$40.53 is 42.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.