There's a new 25% tariff on products coming to the USA from Europe. Let's call it the Trump Tax. For importers of European wine they will have to now pay more for each bottle they import, and of course those costs will be passed onto the distributors, retailers and ultimately the consumer. For European winemakers, wines already sold to importers will either sit in European warehouses as the importers await the end of the Trump Tax, or those bottles will be more expensive on the shelves of merchants in the USA. For restaurants who mark up wine they buy 3-4 times the wholesale price, it means this is an ideal opportunity to be looking for alternatives.
And, alternatives are where the money is.
Older European vintages-The past four years have seen really solid wines coming out of Europe pretty much across the continent. For importers and distributors who have older vintages in stock, with some basic marketing, they can push them to retail and on-premise sales. In reality a few years of bottle age on barrel aged reds and white usually means a much better drinking experience. Given most wine sold in restaurants are from the current release vintage, wine drinkers will actually be drinking a wine that is at a better point of its life.
Australia, New Zealand, Argentina and Chile-The better made wines from these four countries are mind numbing and not impacted by the Trump Tax.
Cabernet and Malbec, Chardonnay from Argentina are very competitively priced already. Wines from Chile, made from Cabernet Sauvignon, Merlot, Carménère, Zinfandel, Petite Sirah, Cabernet franc, Pinot noir, Syrah, Sangiovese, Barbera, Malbec, and Carignan have long found their way into the USA. Of late, the Pais grape, actually one of the first grapes to be planted in Chile has been seeing a resurgence as better vinification has enabled production to take some indiginous varietals and turn out wines that defy traditional descriptions. As South America offers closer transportation of products to the USA, costs are lower. Prices are lower too.
Australia and New Zealand have been producing wines that are on a world class level. The exchange rate is very strong, but the price of wines from Oz and NZ are expensive when they reach retail in the States. Part of the cost is tied to markups along the distribution channel. If the channel all works together then value pricing comes into play, market share is gained and the public begins to appreciate wines that rival what Europe is producing.
The USA-For wineries here at home, the time to be smart and takes steps to grab market share is right before them. The holiday season is what will be impacted the most. This is the time to be smart and change the way wine is sold domestically. Here are some easy to implement programs:
- Reduce prices on direct to consumer sales by 25% on library wines. By offering deals on wines in inventory, and not in the channel, the wineries get direct customers who may come back to buy current releases for cellaring.
- Encourage the wholesalers and distributors to reduce margins in order to drive sell through.
- Promote at retail.
- Taste Comparisons-if someone likes red burgundy, align Pinot Noirs against them and show the price disparity. If someone is a Bordeaux lover show them west coast Bordeaux style blends.
- Retailers should work deals with the wholesalers and secure wines at prices that allow them to help convert wine buyers of European imports into domestic wine buyers.
There are amazing wines being produced in New York, Washington, Oregon and California, with some delights found in other states too, as sparkling wine Gruet from New Mexico is one example. If Trump really wanted to help the wine industry, the three tier system would be abolished, and interstate shipment of wine and spirits would be as easy as buying a TV set online.
For those in wine friendly states, where shipping laws don’t prevent the acquisition of wines from anywhere in the USA, the Trump Tax provides wineries a golden opportunity to expand their customer base, stimulate trial of their wines by in the know wine lovers who will want to not pay the extra 25 percent, promote brand switching and drive repeat purchase.
The time is now…..the opportunity is there. Let's see who figures out how to win.
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