Tariffs on European Wine Could Have a Major Impact on American Wallets

Adam Arlen

, Happy Hour

There is an ongoing trade war with the EU focused on Airbus. As a result, there is already a 25% tariff on a select segment of European wines. The next round of tariffs, in February, could go up to 100%. If the 100% tariff goes into effect, the world of wine WILL be devastated.  And not for the reasons you think.  The problem goes back to the repeal of the 18th amendment, ending Prohibition. While it was a joyous day, it installed the 3-tier system of alcohol sales.  This system mandated that all alcohol sales must go from producer to a distributor, then to a retail outlet (think wine shop or restaurant) then to the final consumer.

 

Why is this bad?

Image by Photo Mix from Pixabay

Most distributors get anywhere between 20-45% of their sales from European wine.  When the bottles they normally sell from Europe double in price as soon as it hits our shores, this will create a whole host of problems.

 

That $7 glass of Pinot Grigio just became $14.

Since wine reps are on commission, their paycheck will drop. A lot.

With sales of European wine dropping, distributors will be forced to find replacements in other new world countries, spending time and energy training the sales team.

Small, specialty importers will go out of business.

Restaurants and small retailers will see declines in wine sales, further compressing an already tight margin industry.

 

 

But I don’t drink European wine, so it won’t affect me.

Wrong.  Because of the loss of ~30% of a distributor’s sales, they will most likely have to cut their payrolls to survive.  That means more accounts per sales rep and less time to focus on introducing new or little-known products to buyers.  For the US wineries, having a healthy distributor is a matter of survival.  They are an extension of the winery sales team and are vital to getting the product into the hands of the final consumer.  Due to franchise laws, a winery has no recourse to fire an underperforming distributor without a major financial hit to their bottom line.

 

What can I do?

The best gift you can give to a wine drinker is to publicly comment to your congressional representative and also to the USTR to prevent this travesty.  Wine is not a commodity that can easily be replaced by growing it in another region.

 

Further reading from a few of my friends:

https://twitter.com/JasonLett/status/1207772973169438720?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1207772973169438720&ref_url=https%3A%2F%2Fspitbucket.net%2F2019%2F12%2F20%2Fthe-tariff-trap%2F

 

https://tablascreek.typepad.com/tablas/2019/12/no-100-tariffs-on-european-wines-wont-be-good-for-california-wineries.html

 

Adam Arlen, Sommelier

 

Adam Arlen: “I am passionate about wine because it is history in a bottle.” He is the sommelier for The Peninsula Club in Cornelius, NC. Originally from Allentown, PA, he believes you should always branch out and find new things. His goal is to never stop learning and continuing to grow both personally and professionally. A fun fact about him: “I was a nuclear engineer on a submarine in a previous life.”

 

 

 

 

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