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

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.

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

  • Pingback: Liquor Industry News 10-14-19 | Franklin Liquors

  • By Dale Wallace Bronstein - Reply

    For over four decades, I have made my living in this business and I think that we have not seen the end of the $10.00 European wines.

    Here are a few reasons for this opinion:

    1. Italy and Portugal are both part of Europe and there is plenty of good value product from those countries.
    Perhaps, it is finally the moment for people to discover the great values from Portugal–if they can get past
    names like Cabernet and Merlot and think instead about how the product actually tastes.

    2. There is still wine from France that comes in over 14% abv.. It will not be hit by the 25% tariff, and since the tariff
    has hit at harvest time, producers have some control over the new harvest and can push some wines over the line
    without having compromising quality. We do quite a lot of business in Bordeaux wines and know where to look for
    wines that are over 14%. It is also easy to find good quality 14% in Languedoc-Roussilon and other regions.

    We have known for some time that many wines that are labeled 14% are actually a bit higher in alcohol. As an
    example were able to label a container of Cotes du Rhone Villages that was on order as 14.5%, instead of 14% and
    avoid the tariff. We are not asking suppliers to label something that is 13.8% as 14.5%. This wine in question
    was actually 14.1% and under French law, which goes in half per-cent graduations, we had to use 14.5%. The excise
    tax is a bit higher, but not enough to cause a big difference at retail.

    3. American wineries like Gallo import quite a lot of bottled wine from Europe already and can easily bring those wines in bulk and bottle them efficiency on their existing lines in California. Other California wineries have been doing this for some time now and if the tariff runs or some time, this is liable to become the norm.

    Of course, it could drastically change the nature of the business with a lot more bulk product coming and a larger
    share of the market being controlled by American wineries or contract bottled in American plants.

    4. In the short term, if I were giving orders for the bottling of my Bordeaux futures, i would put everything up in large
    format and avoid a lot of tariff or store them in Europe for a few years until the tariff expires. (This doesn’t have to do with
    $10.00 bottles, but illustrates that people need new strategies to get past this.

    5. Since the tariff has come into effect most of our French suppliers and our German one have chosen to make the
    investment of giving us discounts from their normal prices. These do not make up all of the difference, but with the cooperation of our wholesalers, it is mitigating a lot of the increase.

    6. Along with this, there are a lot of well-made low-priced in France and Spain that can take the 25% tariff and still
    make it to our retailer’s shelves at $9.99 or less. This assumes that our wholesalers and retailers are creative in their
    margins in an effort to deliver value to their customers.

    This doesn’t mean that there will be no casualties in the business. We see dire prospects in our German category
    and in white and rose wines in general, although we remain optimistic that we can offer value in those areas–although
    with a lot less selection in the $10.00 range.

    The biggest hits will be in Burgundy, where there are no $10.00 bottles to begin with and wines from the UK, for which
    there is little market, will be eclipsed for awhile longer.

    I think that French, German, and American ingenuity and what’s left of the free market will continue to provide value.
    Perhaps after the 2020 elections, there will be a new administration that is not in love with tariffs.

    I think that the main impediment to continuing to have $10.00 bottles will be that the major wholesalers are not built
    for opportunistic buys and will fail to adapt to the market.

    As brokers, we see a great opportunity, because European-owned wineries and importers will see the benefits of using
    us us than to maintain their own salespeople as their market contracts. Brokers only get paid when they produce, while
    staff gets paid even if no one is buying. We are also free to pick and choose for our customers, so that we can always
    offer value from different sources.

    Surviving in this market, while never simple, is possible if one knows what they are doing and can convince their wholesalers
    to go along with them.

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