Tag Archives: wine tariff

Winebits 696: Wine tariff, Walmart, wine tourism

wine tariff
Could the end be in sight for the EU wine tariff?

This week’s wine news: More good news on ending the EU wine tariff, plus Walmart will sue Texas to open liquor stores and mixed news for wine tourism

• More good tariff news: The new U.S. trade representative says she’s “hopeful and motivated” in resolving the airplane parts dispute that led to the Trump wine tariffs. Bloomberg reports that U.S. Trade Representative Katherine Tai told a Senate committee last week that she is “very committed” to ending the tariffs by July, which would put an end to the two-decade long dispute over the subsidies. “I am at this point very motivated and hopeful that we will get the traction that we need with our trading partners,” Tai told the Senate panel. Which is the best news we’ve heard about the wine tariffs since the U.S., the EU, and Britain announced the four-month tariff suspension in March.

• Suing in state court? Walmart, whose several federal appeals failed, will change direction and sue Texas in state court to overturn a law that says it can’t open liquor stores in the state. The Alcohol Law Review Blog reports that the retailer “will pursue its litigation strategy in the Texas state court system under Texas state constitutional claims.” This comes after the Supreme Court declined to decide the case and Walmart was rebuffed twice by a federal appeals court. The company wants to overturn a state law that says only privately-held companies can sell spirits in Texas, on the theory that public companies can’t guarantee the public health and safety as well as private companies when it comes to selling gin, bourbon, and the like. Ah, now to be in Texas that three-tier is here.

• Return of wine tourism? Wine Business News reports mixed news for a revival of wine tourism, based on a recent Wine Market Council webinar. Dale Stratton, the group’s president, said the wine industry must continue to monitor consumer sentiment about health and safety. “First and foremost, it’s the consumer in the end who decides what recovery looks like,” he said. In this, expect wine tourism growth to come from people who live in the same regions as the wineries, and wine country destinations in rural areas will likely benefit the most.

U.S. and EU agree to suspend wine tariff

wine tariffsThe 25 percent European wine tariff is suspended for four months while the two sides negotiate an agreement

The United States and European Union have agreed to temporarily suspend the 25 percent European, the two sides announced Friday afternoon.

The wine tariff reduction is part of a larger suspension of all the tariffs, including those on food and spirits, reports The New York Times. As noted here way too many times, the tariffs were part of a long-running dispute over subsidies to aircraft behomeths Boeing and Aiirbus.

President Biden and Ursula von der Leyen, the president of the European Commission, agreed in a phone call to suspend all tariffs imposed in the dispute over subsidies given to Boeing and Airbus for at least four months.

I’ll update this as more news becomes available.

March 4 post: The BBC is reporting this morning that the U.S. has agreed to suspend tariffs on some U.K. goods, including single malt whiskies, that were imposed in retaliation for European Union aircraft subsidies dating to October 2019. This seems to be is the first substantial movement by the Biden administration to end the foolishness — and 25 percent wine tariff — over the Airbus-Boeing dispute.

That’s the good news. The bad news is that, since Brexit, the UK is no longer part of the European Union. So suspending the whisky tariff doesn’t necessarily mean the U.S. will do the same thing for taxed French, Spanish, and German wine. It’s also worth noting that the BBC story doesn’t say the U.S. suspended the tariff on British wine, also part of the original aircraft parts dispute.

Update: The statement from the U.S. doesn’t mention wine, though Shanken News Daily says the British wine tariff was also suspended.

In addition, says the BBC, the U.K. had dropped its tariffs on some US goods on Jan. 1. So this may be nothing more than a goodwill gesture in response to that.

So should we get excited that there’s hope for an end to the wine tariff? Perhaps not excited, but a reason for optimism after not having any for more than a year. I’ll update this story as more becomes available.

The tariff’s damage to the U.S. wine business

BoeigtnPeople are losing jobs and taking salary cuts to protect a company whose stock price has soared almost two-thirds in five years

We can quantify the tariff’s damage to the wine business with one sentence: U.S. companies are paying the tariff – how much sense does that make if the tariff is supposed to be punishing European companies?

I was reminded of this during a recent chat with Patrick Mata of Ole & Obrigado, one of the best Spanish wine importers in the world. You can hear the entire conversation as a podcast next week; what’s worth noting here is Mata’s analysis of the tariff: His company’s sales were down 20 percent in 2020 because of the tariff (and, of course, the pandemic). How is that punishing Europe for subsidizing airline manufacturing?

It’s not, and it’s one reason why we’re still talking about this foolishness almost 18 months after it started. Because, as one trade group executive noted, “The only link between aircraft and beverage alcohol is the fact you can purchase a drink on your flight.”

In this, take one look at any of the numbers, and you’ll be able to see the wreckage – not in phony, sound-bite geopolitical terms, but in human terms – and in the middle of the worst world health crisis in decades:

• One family-owned New York City importer has had to pay more than $2 million in tariffs, so it’s in a hiring freeze. Another had to cut salaries by 20 percent for family members.

• The Commerce Department reported that bottled table wine imports fell almost nine percent in 2020 by volume, and a whopping 21 percent in value. Those numbers, and especially the latter, are almost unprecedented.

• France has been especially hard hit. Bottled table wine shipments to the U.S. had recorded 10 consecutive years of volume growth prior to 2020, when they fell by volume and dollars – almost one-quarter of the latter.

So this is where I mention Boeing’s stock price, the company that the tariffs are protecting: It’s about two-thirds higher than it was five years ago. If that’s failing, the blog should fail so badly.

Wine prices 2021

wine prices 2021Wine prices 2021 will defy the law of supply and demand, and we’ll suffer with more overpriced, mass-market wines

This is the first of two parts looking at wine prices and wine trends in 2021. Today, Part I: Wine prices 2021. Monday, Part II: Wine trends 2021.

Anyone who says they know what wine prices 2021 will do is guessing, at best – the Wine Curmudgeon included. How else to explain a wine world which continues to deny the existence of the law of supply and demand?

That’s because we saw demand continue to decline in 2020, supply continue to increase, and prices refuse to follow along. In fact, some prices increased, and that had nothing to do with the tariff, but producers and importers trying to take advantage of the last gasps of premiumization.

Or is this premiumization’s last gasp? I’ve been writing about the end of premiumization for a couple of years (and I’m not the only one), but it’s still with us in all its irritation and aggravation. I’m beginning to think that the oligopoly structure of the post-modern wine business, with a handful of companies controlling production, wholesaling, and retailing means that prices will do what the oligopoly wants, and not what they should do. If the oligopoly wants premiumization, then we’re going to have premiumization, and that means more overpriced, mass-produced, flabby, and boring supermarket-style wines.

And it looks like the oligopoly does. How else do you explain paying $15 for Italian wine, which isn’t included in the tariff, that costs one-third that much in Italy? Or $15 and $20 California labels, where the bulk grapes used to make the wine may have cost as little as $1 per bottle? Or $20 Washington wines when the state is awash in bulk grapes? Or all those French roses that cost two and three times as much as something like this – even though the former have much the same grape cost?

So if I had to make one prediction for wine prices 2021, it’s not to expect any price relief. For one thing, the tariff isn’t going away any time soon. That not only raises the price of most French, Spanish, and German wines, but gives producers elsewhere an excuse to raise their prices. Ironically, I asked several experts about this possibility when the tariff took effect in 2019, and was told no producer would be stupid enough to raise prices to take advantage of the tariff. Once more, the experts were wrong, and the wine business demonstrated yet again why I worry about its future.

So not much good news here – save for the caveat that if I have been as wrong this time as I have been before, then we will have some good news. Just don’t count on it.

More about wine prices:
• Wine prices 2020
• Wine prices 2019
• Wine prices 2018

Winebits 676: Prosecco, tariff, e-commerce

proseccoThis week’s wine news: Top Italian producer says cheap Prosecco is undermining the market, plus chefs oppose wine tariff and Kroger becomes top e-commerce company

• Cheap Prosecco: A leading Italian producer says too many wineries are selling Prosecco at slashed prices, which is hurting the bubbly. “Prosecco is being sold at below the production cost at some retailers, which is such a big mistake,” Sandro Bottega told a virtual tasting in early December. “I don’t know how or why they do it, but it’s conveying a bad message for consumers about the product.” This is not the first time we’ve seen this complaint; it seems to happen every couple of years. In this, Bottega says producers need to produce less wine, but of higher quality at higher prices.

• Chefs vs. tariff: A new chefs group has called for the Biden Administration to end all tariffs on European food, wine, and spirits via executive action on its first day in office. The group, Coalition to Stop Restaurant Tariffs, says tariffs make the pandemic that much worse for restaurants, increasing costs that they can’t already afford. The group is a who’s who of the restaurant business, including Alice Waters of Chez Panisse and New York City’s Daniel Bouloud. This is a big deal, not just because of the names, but also because chefs usually don’t get involved in politics like this.

• Kroger e-commerce: Kroger has become the country’s ninth biggest e-tailer, the only grocer to make the list, reports Supermarket News. Why does this matter to wine drinkers? Because more than half of the wine sold in the U.S. is sold in supermarkets, and Kroger is one of the biggest. As such, it has a stake in continuing the growth of on-line wine sales that has taken place during the pandemic – and it will likely want to. I saw Kroger’s political muscle when it bankrolled a wet-dry election in Dallas after the recession; anyone who thinks it will go meekly back to the old days when the pandemic ends is mistaken.

Photo: “Birthday Prosecco” by Mel Sharlene is licensed under CC BY-SA 2.0

Wine tariff update: It looks like things are going to get worse before they get better

tariff warNew 25 percent EU spirits tariff threatens to ratchet trade war up another notch

The good news about repealing the 25 percent Trump European wine tariff? The administration that levied it will be gone in a couple of months. The bad news? A couple of commentators don’t see the Biden Administration as being necessarily more friendly toward trade and the European Union.

Alan Beattie, writing in The Financial Times, says the new administration won’t be as loopy on trade as Trump’s was, but that the days of free-traders Bill Clinton and Barack Obama won’t soon return. A Biden Administration won’t rush into anything, and while saying it believes in free trade, may not do what we want or hope it will do.

The other bad news? This week’s 25 percent European Union duty on U.S. rum, brandy, vodka and vermouth – one more tax as part of the Airbus-Boeing aircraft parts dispute, whose sad, pathetic history has turned into something only Dickens would recognize. This is in addition to a 25 percent tariff on U.S. bourbon and other whiskeys that took effect in June 2018, while Trump retaliated with the wine and Scotch tariff last fall.

In other words, all of us who were cautiously optimistic about being cautiously optimistic were probably too optimistic. Whatever signs there were that the EU was willing to compromise with the Biden Administration disappeared with the most recent tariff. Spirits producers on both sides of the Atlantic were already reeling – one trade group puts the sales losses at more than 30 percent for Scotch labels in the EU and more than 40 percent for U.S. brown goods companies. Hence, it’s difficult to see one more tariff as a sign of good faith.

Having said that, the Financial Times’ coverage of the U.S.-EU tariff war has been universally gloomy, so that’s one thing. More importantly, we’re all adults here, and rational people on both sides must realize that throwing tariffs at each other to settle a dispute that has already been mostly settled (both aircraft companies have renounced the illegal subsidies) seems pointless – as well as economically dangerous. And isn’t the economy in enough trouble as it is?

Winebits 670: It’s all about prices

pricesThis week’s wine news: It’s all about prices — supermarket shoppers cast a wary eye, Illinois weed prices stay high, and European Union sets tariff hikes

• Not in my supermarket: Shoppers, who’ve seen shortages and price hikes during the pandemic, are focusing on value at the supermarket, says a new study. The dunnhumby Consumer Pulse Survey, reports Supermarket News, found a significant lack of consumer confidence that stores are doing a good job dealing the with COVID-19 crisis, and “remain concerned about rising food prices and are adhering to a value-focused shopping strategy.” The study doesn’t specifically mention wine, but since a majority of U.S. wine purchases are made in supermarkets, it stands we’re also watching those prices. In September, only half of U.S. survey respondents thought stores were doing a good job, down from 52 percent in July and 60 percent in May.

• Pricey legal weed: Illinois’ legal weed shortage appears to be over, says the Chicago Sun-Times, but prices have not come down. “According to industry analysts, Illinois has the most expensive weed in the country. Budzu, a crowdsourcing site that tracks the price of cannabis, says the average cost for an eighth of an ounce is roughly $62. In Colorado, the same amount costs around $33.” Reasons for the high prices vary, says the story, but one analyst blamed them on weed growers and a lack of competition. The illegal price, according to one website, is about half the legal price.

• Tariff hikes coming? Bloomberg reports that the European Union has set a Nov. 10 target date for triggering tariffs on as much as $4 billion of U.S. goods in retaliation over illegal aid to Boeing Co. This would come in retaliation for the Trump Administration’s tariffs last year, including the 25 percent wine levy. Goods targeted for a tariff include aircraft-related products, spirits and nuts, and  handbags and chemicals. U.S. wine is not apparently on the list, but the U.S. exports relatively little wine to the EU, and especially compared to bourbon and similar whiskeys.