A grinning anchorman* on a local news station stood in a Twin Cities wine shop in early October holding a bottle of French wine up to the camera and exclaimed, “come October 18th, this $15 bottle could cost you closer to $20.”
Some wine consumers might have brushed it off with thoughts like, “I don’t drink French wine anyway, so why do I care?”
*Names have been omitted to protect the ignorant.
It’s not as simple as the anchorman proclaimed
You should be concerned because the tax on French wine will ultimately be a jab at your own pocket book, whether or not you drink French wine.
On October 2 the Trump Administration announced a 25% tariff set to go into effect on October 18 on a number of imports including the majority of wines from France, Germany and Spain. A tariff is a tax that becomes due once the product hits U.S. soil.
The 16-day notice is shorter than the time it takes for a wine shipment to get across the Atlantic. A lot shorter.
A wine purchase is negotiated, then the wine purchase is transported from the winery, often across much of Europe, to a shipping port location. The purchase often waits for other orders to join it in order to fill a shipping container. This can take months to pull together.
Wine was already ON the Atlantic AND the price to receive it just jumped by 25%. This hit the panic button for everyone in the wine industry from importers to distributors and retailers — and yes, wine consumers should panic too.
A 25% tax increase is too big to ingest into just a few categories like French and Spanish wine and is more likely that the increase will be blended out across the board to blanket the blow.
One way for a consumer to avoid being hit by price increases as they stock their cellar would be on direct shipments of wine from domestic producers. So now might be the time to join a domestic wine club if you haven’t already, and also take advantage of the fact that direct to consumer shipments of wine into the state of Minnesota also avoid paying any liquor tax. And that, is a loophole that should be closed but that’s a discussion for another time. Back to Trump tariffs…
The good news
What might come as good news though is that many importers and distributors have already imported the majority of their inventory for the holiday season, and as Bill Ward recently reported in the Star Tribune, retail prices are likely to remain steady through the end of 2019.
As Jeff Burrows of FoodWineClick pointed out on Instagram, “the 25% is on the import price”, not directly the retail price. So, the importer is paying 25% more on their cost of the wine, but that would fan out a bit by the time it hits the shelf.
One California based importer and retailer has proposed an industry-wide solution that lessens the consumer impact to as little as about 8%.
That’s all good news for consumers, but there are a bunch of people in the middle feeling the biggest blow right now – namely, importers, distributors, and also some of the small family wineries that they support.
The bad, and the ugly
As previously mentioned, the Trump Administration gave notice on October 2 for a hefty increase to occur on October 18. That’s only just over two week’s notice for a significant tab on something that’s arriving by sea.
With ships already en-route westward from Europe it didn’t give importers an opportunity to negotiate a better price, or to decide not to place the order — the deal was already done.
Can you imagine if you were notified that a non-refundable $80,000 purchase you made was going to be held hostage at the postal carrier’s headquarters, for an additional 25% ($20,000) before you could have it? That’s just nuts to think about.
It’s the little guys that loose
I’m ok with paying a few bucks more for a bottle of wine here and there, particularly considering the fact that wine is a luxury and not a necessity. What’s scary to think about is the number of livelihoods at stake as a result of the price increase.
Companies will go out of business
Here’s a fictional example of a small company that imports and distributes wine solely from France — we’ll call them VenteVin. Since VenteVin only imports wine from France, they don’t have a larger portfolio of products to blend an increase out over.
As a small company, VenteVin also wouldn’t have a lot of negotiating power with their suppliers, or wineries in France.
A competitor of VenteVin, let’s call them MegaGlobal Wine, imports mega amounts of wine from every corner of the world. They’re able to negotiate some great deals on the huge quantities of wine they purchase.
MegaGlobal Wine’s products increase by a few percent here and there. Maybe MegaGlobal Wine also has to lay off a person or two out of their 99 person sales staff to help keep their prices low.
VenteVin is owner-operated. Since there’s no one to lay off, their one employee keeps trucking along, and all of the products in their portfolio increase significantly to cover the 25% tax.
That’s if paying the tariff in the first place didn’t put them out of business. After all, who’s planning to be able to cover an increase nearly 15 times the annual inflation rate, over a matter of days?
Slowly, all VenteVin’s clients, who are retailers such as wine shops, realize they can get Bordeaux wine that’s “just fine” from MegaGlobal Wine, and stop placing orders with VenteVin. Between the tariff and loss of sales, VenteVin shuts its doors.
Meanwhile, in France…
VenteVin might have been a small company, but they were a major importer for a few very small, family owned wineries. Those wineries were just barely making ends meet to begin with, and just lost their sales channel into the US.
With tariffs looming, other US importers aren’t taking on new clients. The winery’s inventory is piling up, bills are coming in, and sales aren’t going out.
This tariff will put small wineries out of business as well. Don’t believe me? Here are 202 companies affected by a round of tariffs imposed last fall.
What you can do
- Support the local guys. As Jason Kallsen with Twin Cities Wine Education points out, there are tons of great, local retailers. These retailers in turn support great, local importers and distributors that truly make a difference in the lives of the wineries they carry. Vote with your dollar, because that dollar will go the furthest in your local community.
- Vote, literally — Local elections are coming up on November 5. No, your City Council can’t overturn the Trump Administration’s tariffs, but enabling people that share your position does go upstream in Government, so the best place to start is on your block.
- Want to know who imported that bottle of French, Spanish, or Italian wine? Flip it over. The importer is named on the label (usually the back). There are literally dozens of importers in Minnesota that could use your support now more than ever. Some of these wines might even be on the shelf in big box stores — be a keen consumer and it will pay off!
- Buy local, drink local? Of course, we love local here at Minnesota Uncorked and drinking local is a way to keep your dollar in your own community. But buying a local LaCrescent isn’t going to do much to help companies like VenteVin during this time of crisis.