Category:Wine news

25 percent European wine tariff went into effect today

by Wine Curmudgeon Posted On

European wine tariffLook for higher prices and less selection as the European wine tariff takes hold

Get ready to pay as much as one-third more for some of your favorite cheap wines – assuming you can still find them. That’s because the U.S.’ 25 percent European wine tariffs went into effect today.

I wish there was good news to report. But since the World Trade Organization approved the U.S. tariff this week, nothing good has happened. The Trump Administration, often reticent to actually impose tariffs, has not backed off this one save for vague hints. The European Union says it will retaliate, escalating the trade war between the U.S. and its best friends in the world.

One of the clearest analyses of what’s going on is here – the tariff covers French, Spanish, German, and British non-sparkling wine that is less than 14 percent alcohol. Italian and Portuguese wine isn’t included, nor is wine from South America, South Africa, Australia and New Zealand.

What can we expect to happen with the 25 percent European wine tariff?

• Higher prices almost immediately. Some retailers in Dallas have already hiked prices; the rest should go into effect over the next six months as the new vintages work their way into local retailers.

• Well-known and popular brands disappearing from store shelves. A French wine producer and an English wine business consultant both named La Vieille Ferme, the value-priced French wine, as one of the first to go. That’s because a price hike would take the 1.5-liter bottle from $12 to $16, “and what consumer is going to pay $16 for a $12 wine?” asked the producer. So stores will stop carrying the wine – and others like it, no doubt including many in the $10 Hall of Fame – once current stocks run out.

• Serious financial problems for some of the best and most interesting small- and medium-sized importers, the kind who bring in the wine that I write about on the blog. These problems could even lead to business failures. That’s because the 25 percent tariff is their profit margin. They can’t raise prices to recoup the margin, said the consultant, since the market won’t support those price increases. Plus, they’ll be squeezed by the biggest importers, who will absorb some of the price increase because they can afford to take less margin.

I’ll update this post if anything changes, but I don’t expect it to. That would require a miracle, and to paraphrase Sidney Greenstreet in “Casablanca,” “The Trump Administration has outlawed miracles.”

More about the 25 percent European wine tariff:
• Preparing for the 25 percent wine tariff
• Do new U.S. wine tariffs mean the end of most $10 European wine?

Image from akaratphasura via 123RF

Winebits 615: I Love Lucy Day, wine and health, wine lawsuits

by Wine Curmudgeon Posted On

This week’s wine news: It’s national “I Love Lucy” Day; celebrate by stomping grapes. Plus, medieval doctors relied on wine and yet another wine lawsuit

• “Lucy, you got some ‘splaining to do….“: How could the Wine Curmudgeon let national “I Love Lucy” Day pass without posting the epic grape-stomping scene from the series’ fifth season in 1956? It’s not so much that the scene is so funny; rather, that 63 years later, it remains a part of U.S. culture. Wineries still schedule grape stomps for publicity, and every news release seems to mention this episode. Even I have been invited to stomp grapes.

• The prescription is wine: Doctors in the middle ages prescribed wine for almost all diseases, reports The Scientist. This included using wine as an antiseptic, for high cholesterol, herpes, depression (always white wine, never red), digestion, and even preventing gray hair. Hospitals had their own wine cellars, and many accepted vineyard land for payment. Says one expert: “If you drank the water you were going to die, and if you drank the wine you wouldn’t.”

• One more lawsuit: Regular visitors here know how much the Wine Curmudgeon appreciates a good wine lawsuit, and this one is nifty. Sutter Home says a New York wholesaler has ripped off its Napa Cellars brand with a wine called Clos de Napa Cellars. Even the technical sheets, says the lawsuit, say it’s made to resemble Napa Cellars. Wine lawsuits don’t get much better than that, do they?

Video courtesy of Edvin via YouTube, using a Creative Commons license

Preparing for the 25 percent wine tariff

by Wine Curmudgeon Posted On

wine tariffFive ways to save money if and when the 25 percent wine tariff for France and Spain takes effect

So far, there’s been no sign that the 25 percent tariff on French and Spanish wine won’t go into effect at the end of the week. So those of us who are rightfully worried about all that quality $10 wine going away should act now:

• Stock up before prices increase. Last week, I bought what might have been the last seven bottles of Chateau Bonnet Blanc in Dallas, and also bought most of what was on the shelf of the Azul y Garanza tempranillo. The Bonnet, of course, is one of the all-time great cheap wines, but it almost certainly won’t be $10 after Oct. 18. The Azul, $11 for a 1-liter bottle, is not just a terrific value, but a quality wine as well – Spanish tempranillo that tastes like Spanish tempranillo.

• Look for closeouts and sales before Oct. 18. Central Market, the Texas version of Whole Foods, did a 20 percent French wine sale last week. So I bought a case of assorted $10 French rose for $8 a bottle; hopefully I can hold out for the first six weeks or so of the tariff.

• There is always Italy. The good news is that Italian wine was excluded from the tariff (though not its olive oil and some of its cheeses). The bad news is that this means that very ordinary $9 pinot grigio will become an even bigger attraction as retailers drop similarly-priced French and Spanish wine. But $10 Sicilian wines will still offer value, while regions in the middle part of the country like Umbria and Montepulciano d’Abruzzo have long been famous for price and quality.

• Sparkling is safe. One would have thought that if the U.S. really wanted to punish France, it would have taxed Champagne. Hence there should still be value in $12 to $15 cava, the Spanish sparkling wine.

• Think South Africa. South African wines haven’t been popular in the U.S. for almost 20 years, but this could be their time to shine, says James McFadyen, a long-time retailer and distributor on both sides of the Atlantic. Producers like Ken Forrester and Mulderbosch offer quality and fair prices for both red and white; the catch has been availability.

Wine prices 2019 update: Are prices coming down despite premiumization?

by Wine Curmudgeon Posted On

wine prices 2019Way too many grapes and continuing flat demand may lead to lower wine prices 2019

At the end of the summer, I was talking to an official for one of the big grape grower trade groups. I asked what he thought wine prices would do through the end of the year, as well as into 2020.

“Wine prices are coming down,” he said. How can that be, I asked. Because, of course, premiumization — its reason for being that wine prices are never going down again.

He laughed. “That may be,” he said. “But when you have too many grapes, which we do, and flat demand, which we do, wine prices come down. There’s nothing premiumization can do about it.”

The trade group official was not alone in his take on wine prices 2019. Whenever I interview a retailer or producer, I always ask about business. And their responses over the past nine months have not been nearly as optimistic as the last couple of years – and certainly not as optimistic as the official wine business position: “Ever more wine sold at ever high prices!”

The consensus: Business may not be bad yet, but it’s certainly slowing. And, no, this isn’t a highly scientific survey process, and yes, it’s overwhelmingly anecdotal. But, like the Wine Curmudgeon Wine Sample Index, it rarely steers me wrong. Because other signs point to the same thing:

• Reports one trade website: California “supply levels remain higher than ideal and therefore the market remains favourable to buyers, with wineries quoting the lowest bulk wine prices in 5 years.” In other words, lots of grapes in the supply chain, and not too many buyers, so lower grape prices.

• And that’s because the 2018 harvest was record-breaking, and the 2019 harvest may be equally as gigantic.

• And we all know about flat demand. In 2018, about one-fifth of regular U.S. wine drinkers were older than 65, compared to 16 percent in 2015. But the youngest regular wine consumers, ages 21-24, are decreasing, dropping 13 percent from 2015.

• Canceled grape contracts. Large producers are refusing to buy grapes they agreed to buy, ostensibly because of smoke damage from the 2018 wine country wildfires. But there’s a suspicion that the wildfires had nothing to do with the cancellations; rather, it’s because the producers already have too many grapes and don’t need any more.

• Wholesale alcohol inventories, measured in dollars, are at an all-time high, according to the U.S. Census Bureau. This could be nothing more than a side effect of premiumization – the same amount of wine in warehouses, but since it costs more, its value is setting records. Or it could mean there is a lot of wine stacking up because no one wants to buy it.

• Last week’s tariff news should only make things worse, since it will raise prices for many European wines, while most cheaper French and Spanish wines could disappear from U.S. shelves. Which will further cut demand and increase the overall supply.

If, in fact, wine prices are coming down, will it happen in time for the holidays? Probably not, though I’m willing to bet we could find terrific deals as producers, distributors, and wholesalers try to get rid of select wines they have too much of.

The real selloff may come at the beginning of next year, and especially if the holiday season is as slow as it looks like it will be. And then, finally, we could be able to see the beginning of the end of premiumization.

More abut wine prices 2019:
• Wine prices 2019
• 2019 SVB wine report
• The biggest factor in California wine prices

Photo: “Wine section of a supermarket” by piropiro3 is licensed under CC BY 2.0 

Higher wine prices, retailer margins, and premiumization

by Wine Curmudgeon Posted On

wine pricesWine price data may show that retailers are absorbing some of the higher prices that come with premiumization

The theory behind premiumization is that wine has become more expensive – not necessarily because wine prices have increased, but because we’re buying more expensive wine. Yes, it’s a fine distinction, but it’s one that the experts insist on.

And there may be some evidence to back that up.

What I’ve found, with expert guidance from Tarek Abdallah, PhD, an assistant professor of operations management at Northwestern University’s Kellogg School of Management in Evanston, Ill., is that retailers haven’t been raising prices as much as wholesalers have. In fact, says Abdallah, the numbers show that retailers have been getting squeezed since the end of the recession.

Since 2009, wholesalers have raised the prices they charge retailers by an average of 2.25 percent a year. But retailers have only increased the prices they charge consumers by three-quarters of that amount, about 1.84 percent annually. In other words, retailers are absorbing some of the price increases.

Abdallah points to two sets of data compiled by the federal government to demonstrate this: First, the consumer price index for alcoholic beverages, a derivative of the better known overall consumer price index, the standard measure of U.S. inflation. Second, the wholesaler producer price index for alcoholic beverages, which measures what the second tier charges for its products.

What’s the catch?

The caveat here: Neither index breaks out wine; rather, each tracks combined sales of beer, spirits, and wine. So we can’t be certain that wine prices by themselves are acting this way. But, says Abdallah, the data is broad enough and consistent enough so that we can be reasonably certain.

Which brings us back to the idea that wine price increases aren’t the most important part of premiumization. How can they be if retailers are working to minimize those increases?

This plays into the sense that producers, rather than raising prices for existing products, are bringing new, more expensive products to market. They want us to buy their new $15 wine instead of the old $10 wine, marketing the new wine as better than the old wine because it costs more – even if it isn’t necessarily better.

And retailers seem to be hedging their bets and not charging the full $15 for the new wine — and maybe for just that reason.

More about premiumization:
• Premiumization be damned: $139.36 for 14 ½ bottles of cheap wine
• Wine prices, razor blades, and premiumization
• “Reasonably priced at $40:” Wine premiumization is out of control

Winebits 614: Alcohol consumption, “bargain” Bordeaux, overpriced beer

by Wine Curmudgeon Posted On

alcohol consumptionThis week’s wine news: The Russians cut alcohol consumption by 40 percent, while we find that affordable red Bordeaux costs $20 and a stadium beer vendor got caught overcharging even more than restaurants do

• Impressive decline: The neo-Prohibitionists must be rejoicing at the news: “Russian alcohol consumption decreased by 43 percent from 2003 to 2016, a World Health Organization report says.” The BBC report says the decline is credited to advertising restrictions, increased taxes on alcohol, and a ban on alcohol sales between certain hours – all of which have been proposed in one form or another by groups like the Centers for Disease Control to cut U.S. wine, beer, and spirits consumption. The catch? Russia has traditionally been one of the heaviest drinking countries in the world, and the drop in consumption more or less caught Russia up to the rest of the world. For example, the average life expectancy for Russian men rose to all-time high at 68. But it’s 70 for men in the U.S, despite a recent decline, and 79 for men in western Europe, where drinking is common.

• Such a deal: Charles Passy, writing in Market Watch, says we can still find affordable red Bordeaux, and he defines affordable as almost $20 a bottle. This is where the Wine Curmudgeon reminds the Winestream Media that $20 a bottle is more than twice the average price of wine sold in the U.S. and that most of us will never spend $20 for a bottle of wine. Or that much French wine that isn’t rose has been overpriced for years. But, given the current climate, if I do that, I’ll probably be criticized as a so-called consumer wine champion full of faux outrage.

• Expensive beer: Overpriced booze is nothing new on the blog, as the last item attests. But a Miami beer vendor did us one better. Says the New York Post: “A beer vendor … was arrested after charging a fan $724 for two beers on a personal credit card reader.” How did the vendor get caught? The fan’s credit card company alerted him to the attempted theft on his phone – saved by the same technology that made the overcharge possible. And no, the Wine Curmudgeon won’t make a joke about the winless Dolphins.

Do new U.S. wine tariffs mean the end of most $10 European wine?

by Wine Curmudgeon Posted On

wine tariff

The European Union gave plane manufacturer Airbus illegal subsidies, so we may not be able to buy $10 French or Spanish wine.

It’s a question no one can answer yet, but some retailers and importers think the wine tariff will do just that

The U.S. slapped a 25 percent tariff on wine from four European countries this week, and some fear it may be well be the end of most $10 European wine in the U.S.

That’s the impression I got after spending yesterday on the phone, talking to retailers and importers in the wake of the U.S. announcement that it would tax wine imported from France, Germany, Spain, and Great Britain an additional one-quarter of its value. It’s part of a laundry list of goods and services, including olive oil and airplane parts, that are being taxed in retaliation for illegal European aid to the Airbus plane manufacturer.

That means every bottle of wine from those four countries, save sparkling and those with more than 14 percent alcohol, will cost at least 25 percent more. And France and Spain account for about one-quarter of U.S. imports.

I asked James Galtieri, whose Seaview Imports brings in 85,000 cases a year, 40 percent from France and Spain, if we’ll see any $10 French or Spanish wine left in the U.S. if the tariff takes effect. “Probably not,” he said. A Dallas-area retailer told me the same thing: “There’s no way anyone can afford to sell those wines for $10 if they cost 25 percent more because of the tariff.”

In fact, Galtieri said the tariff could even take down $15 to $18 wine. “Those are the kinds that could fall out of bed completely. Yes, a $1 or $2 prince increase on a $15 wine doesn’t sound like much. But $15 is the sweet spot, and people don’t want to pay more than that. So they’ll likely buy something else, and those wines will disappear from the shelf.”

A Spanish importer, one of the best in the world, was even more blunt. “I might as well close my doors,” he said.

One bright spot?

Italian wine avoided the new tariff. But Italian producers could take advantage of the situation to raise prices and still remain competitive. Will that happen?

“It’s going to be the consumer who decides about price increases, not the Italian producers,” says Giulio Galli, an Italian wine importer in San Antonio. “If you look at something like $8.99 pinot grigio, the consumer is just not going to pay $15 for it.”

The other bright spot? There’s still some confusion about how the tariffs will be applied. A spokesman for the U.S. Trade Representative, which announced the new duties, said: “For questions on how the increased tariff rate is applied to specific products, we recommend contacting U.S. Customs and Border Protection, which will be implementing the tariffs.”

And a spokeswoman for a custom broker in Houston, which guides companies through the import maze, said Thursday that it had not been officially notified of the tariffs, including how they would be calculated. So there is a chance, however slim, that 25 percent may not mean 25 percent.

Finally, several people told me there is a chance, also however slim, that the U.S. and the EU could negotiate a settlement to the Airbus dispute that doesn’t include the wine tariffs. That may be our best bet to save $10 European wine.