US importers stick to the old French wine prices

US wine retailers have maintained their optimism in the face of the tariffs on wine, finds Jeff Siegel. Surprisingly, demand has not yet shifted to other wine categories.

Photo by Jean-Luc Benazet on Unsplash
Photo by Jean-Luc Benazet on Unsplash

Six weeks into the 25 percent European wine tariffs, there's a sense in the US that importers will take only the most necessary price hikes, and that those hikes will take place between now and the end of January. Otherwise, they will wait and hope for the best.

"We are optimistic that the tariffs are not here to stay, and expect them to end, or at least be lowered, at some point in 2020," says Jordan Sager, the co-president of importer and negociant Winesellers in suburban Chicago. He points to a mandatory 15 February 2020 review by US trade officials of the current levies, as well as the World Trade Organization's expected ruling this spring on unfair Boeing subsidies. It was unfair European subsidies to Boeing competitor Airbus that made the tariffs possible, so a ruling against Boeing might offer a reason to rescind the October duties.

In fact, the number of optimists who think the tariffs will be rescinded for one reason or another – and as early as the second quarter of next year – increases as you go west across the country. East Coast importers and retailers seem more gloomy, expecting the tariffs to last longer and to even become permanent.

In this, several importers who bring in South African and Italian wine said during a November private label trade show in Chicago that they have yet to see increased demand – or even queries – from wholesalers and retailers who might want to replace their tariff-laden French, Spanish, and German products. Bob Marx of Minneapolis' Amara Wines says he is even a little surprised no one is asking about his South African wines.

Two other key trends:  First, there was some extra buying before the October deadline for mass-market wines and even those costing less than $20. Prices, say several retailers, have remained remarkably stable from the affected countries.

"Most of our distributors stocked up big time hoping to get through the last quarter on old cost basis," says Nick Vorpagel, who runs the wine shop at Lake Geneva Country Meats, a small grocer in a tourist region in southern Wisconsin. "Otherwise, I expect prices to go up once they run through those stocks. If prices start going up on French and Spanish wine, we will just concentrate more heavily on Italian and Portuguese. I’ve planned for that already. We sell a bunch of German Riesling, so that’s a bit concerning."

Second, there has been surprising cooperation between wholesalers, importers, and producers to hold the line on prices as much as possible.

"I'm really surprised to see the importers absorbing so much of the price hike," says Dan Fredman, who oversees upscale Biagio Wine & Spirits in Dallas' Victory Park neighborhood. "We'll see how long it lasts, but I can see they're especially making an effort to keep price increases down for the holiday season."

As part of this, several retailers said they are seeing more end-of-the year discounting than normal. Fredman says this may be related to the tariffs, with wholesalers trying to get rid of wine before they have to take a price hike. Or it may be nothing more complicated than the slowdown in US wine sales.

Finally, because so much of the tariff is about politics and the Trump Administration's trade vendettas, Vorpagel says he has to be careful when he brings up the tariff with some customers.

"'I’ve warned customers that I know are not Trump supporters that prices are going up," he says. "But many of our customers that like French wine in particular are of the demo(grahic) to support Trump, I don’t want to make them think I’m making a political statement. So I haven’t warned them about the price hikes."   

Jeff Siegel

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