Tariffs last chance

[VLM]

originally posted by Jeff Grossman:
I agree with Jayson: if an allocation moves away from the US we will never get it back. Why should the maker (then) fix something that isn't broke?

As to offshore holding pens, it's a little tricky: schnooks will have to ask for enough money to keep themselves afloat and buy the wine and pay for warehousing -- but not shipping -- until such time as the tariffs go down again. This is reminiscent of selling short in the stock market, or dealing with options: lots of moving parts and requires some expertise to navigate. I suppose the average label-fondler is not so motivated.

Offhoreing is not a viable thing.

FWIW, I've spent the past month in the company of several importers who bring in wines that are popular here as well as a well known NY retailer we all know. There are no answers. Individuals may be able to survive if they have enough savings or can pivot to another line of work but this will absolutely end many things in wine if enacted for any period of time.

Individuals like Keith may be able to buy some wines in England or France and have them held there while they wait out the tariffs and people of the character of Pete will crow about getting "pre-tariff deals" but I don't care about them. At all. I care about my friends, many of whom have done yeoman's work bringing previously unknown wines to the US getting run over by this stupid bus. I guess they're probably all liberals, and that's the point I guess.

 

[VLM]

originally posted by Christian Miller (CMM):

originally posted by Jayson Cohen:

originally posted by Rahsaan:

originally posted by VLM:
This could also have terrible repercussions for small producers in Europe that rely on the US market.

I know that for any given producer it doesn't happen overnight, but on a macro scale does this also accelerate the shift towards focusing on markets in Asia instead of the US?

(I never know how big that Asia focus actually is, and I imagine it varies, but I certainly hear about it).

That seems likely. And it could happen quickly. Say you are a grower and your US importer can’t follow through on taking its allocation of 2019s this spring/summer but your actual or prospective Chinese agent can take it. The grower may have no choice. The US importer may never get the allocation back.

And the producers rethinking allocations are the lucky ones. Many don't "allocate", just try to sell what they can, where they can.

This is the true situation for most producers. Maybe 90%+.

 

[Tristan Welles]

originally posted by VLM:

originally posted by Jayson Cohen:

originally posted by Rahsaan:

originally posted by VLM:
This could also have terrible repercussions for small producers in Europe that rely on the US market.

I know that for any given producer it doesn't happen overnight, but on a macro scale does this also accelerate the shift towards focusing on markets in Asia instead of the US?

(I never know how big that Asia focus actually is, and I imagine it varies, but I certainly hear about it).

That seems likely. And it could happen quickly. Say you are a grower and your US importer can’t follow through on taking its allocation of 2019s this spring/summer but your actual or prospective Chinese agent can take it. The grower may have no choice. The US importer may never get the allocation back.

It's not just that. Many small producers can't just shift to other markets if they are heavily dependent on the US market, they may just cease to exist. Wines that are sought after and have representation in many markets will be able to shift their wines there and they may not trust the US market again, as you indicate. However, if 50% of your wine goes to the US and that just stops it is unlikely that other markets can absorb that and if you don't have the cushion to take that shock, well, that's that.

Yes. If your label says Chambertin or Lafite, no problem. I'm thinking of many wines I like which can't possibly have worldwide connections. Even if they can rebuild a distribution channel it might take years, and we know what that means for growers.

 

[Peter Creasey]

Nathan, your despair is understandable and fully worthy of sympathy for all concerned; however, your apparent implication with the words "character" and "crow" is unfair and definitely not applicable.

. . . . . Pete

 

[Tristan Welles]

originally posted by VLM:

originally posted by Jeff Grossman:
I agree with Jayson: if an allocation moves away from the US we will never get it back. Why should the maker (then) fix something that isn't broke?

As to offshore holding pens, it's a little tricky: schnooks will have to ask for enough money to keep themselves afloat and buy the wine and pay for warehousing -- but not shipping -- until such time as the tariffs go down again. This is reminiscent of selling short in the stock market, or dealing with options: lots of moving parts and requires some expertise to navigate. I suppose the average label-fondler is not so motivated.

Offhoreing is not a viable thing.

I care about my friends, many of whom have done yeoman's work bringing previously unknown wines to the US getting run over by this stupid bus. I guess they're probably all liberals, and that's the point I guess.

First, love the typo.

Second, I really wouldn't say that was the point. Sure, somebody may have pointed it out after the fact, but this really just another facet of trade wars. Some tariffs take their toll on midwest farmers, some on coastal importers.

If there are truly nefarious malefactors at work, we can all assume they are the SWS / large distributors of the world. They have tried to use government to get rid of the little guys for years, and now this was tossed to them. I am sure the big boys jumped on the lobbying efforts as best the could.

Downstream of small distributors surely this will hurt small retailers who will have a very limited way of distinguishing themselves. I did see that Moore Bros announced they are buying as much stock as possible, but that'll last them ... a year?

Friends are getting together in Philadelphia in a few weeks, the planned drinking of Clos Ste Hune and Rougeard seems almost ... bizarre?

 

[Tristan Welles]

originally posted by Peter Creasey:

Nathan, your despair is understandable and fully worthy of sympathy for all concerned; however, your apparent implication with the words "character" and "crow" is unfair and definitely not applicable.

. . . . . Pete

Is it accurate? Sure seems to be.

 

[Keith Levenberg]

originally posted by VLM:
I care about my friends

...just not enough to engage in a productive discussion about how to help them deal with this.

I'm aware of at least one US retailer already offering the option you're denigrating as non-viable.

Minimum order 6 bottles. No cancellations or refunds. ETA approx. 90-120 days. PLEASE NOTE: This wine may be affected by the U.S. Trade Representative tariff action. Any currently applicable tariff will be calculated at checkout. Any future tariff levied between purchase date and delivery date in the U.S. is the responsibility of the customer. We offer one year’s free storage in London with no tariffs.

 

[Peter Creasey]

Tristan, no.

. . . . Pete

 

[Jonathan Loesberg]

Pete,

It may not have been your conscious intention. And certainly, Nathan's anger is leading to some unfocused lashing. out. But if you read your comment, you will surely see that what it is doing is crowing about a purchase you made before the tariff came into effect. Unconscious perhaps, but also, at best, off point.

 

[Peter Creasey]

Jonathan, not intended that way and sorry it was taken that way.

Thanks for your moderate tone.

. . . . . Pete

 

[VLM]

originally posted by Keith Levenberg:

originally posted by VLM:
I care about my friends

...just not enough to engage in a productive discussion about how to help them deal with this.

I'm aware of at least one US retailer already offering the option you're denigrating as non-viable.

Minimum order 6 bottles. No cancellations or refunds. ETA approx. 90-120 days. PLEASE NOTE: This wine may be affected by the U.S. Trade Representative tariff action. Any currently applicable tariff will be calculated at checkout. Any future tariff levied between purchase date and delivery date in the U.S. is the responsibility of the customer. We offer one year’s free storage in London with no tariffs.

I've had conversations with real people who do this for a living. What isn't productive is this dialogue since you don't understand how the wine business works.

And you make my point for me. That retailer (who I have no issue with) has nothing to do with the wine business. It's a specialty operation for collectors. It's not going to help inter alia, LDM, Pastor, Zev Rovine, Selection Massale, De Maison, Weygandt-Metzler...

But yeah, cool, you do you.

 

[VLM]

originally posted by Tristan Welles:

originally posted by VLM:

originally posted by Jeff Grossman:
I agree with Jayson: if an allocation moves away from the US we will never get it back. Why should the maker (then) fix something that isn't broke?

As to offshore holding pens, it's a little tricky: schnooks will have to ask for enough money to keep themselves afloat and buy the wine and pay for warehousing -- but not shipping -- until such time as the tariffs go down again. This is reminiscent of selling short in the stock market, or dealing with options: lots of moving parts and requires some expertise to navigate. I suppose the average label-fondler is not so motivated.

Offhoreing is not a viable thing.

I care about my friends, many of whom have done yeoman's work bringing previously unknown wines to the US getting run over by this stupid bus. I guess they're probably all liberals, and that's the point I guess.

First, love the typo.

Second, I really wouldn't say that was the point. Sure, somebody may have pointed it out after the fact, but this really just another facet of trade wars. Some tariffs take their toll on midwest farmers, some on coastal importers.

If there are truly nefarious malefactors at work, we can all assume they are the SWS / large distributors of the world. They have tried to use government to get rid of the little guys for years, and now this was tossed to them. I am sure the big boys jumped on the lobbying efforts as best the could.

Downstream of small distributors surely this will hurt small retailers who will have a very limited way of distinguishing themselves. I did see that Moore Bros announced they are buying as much stock as possible, but that'll last them ... a year?

Friends are getting together in Philadelphia in a few weeks, the planned drinking of Clos Ste Hune and Rougeard seems almost ... bizarre?

Ooops. Quite the typo.

This effects people that are very close to me, that have been there for me at many of the most important times of my life. They are getting totally fragged by the shrapnel of all this stupidity.

The worst part is that there is nothing I can do but the little I've already done.

BTW, it will negatively impact my restaurant as well.

 

[Robert Dentice]

originally posted by VLM:

This is the true situation for most producers. Maybe 90%+.

I would not say 90%. Jon Bonne's letter does a great job of showing that the tariffs will hurt the U.S. side of the equation far more than the producer side in France due to global non-U.S. demand.

I know Germany the best and many of the producers I love could easily sell all of their production in Germany let alone other countries. I think we would be surprised at how little many producers need the U.S.

The devastating impact will be hardest on U.S. importers / distributors / retailers / restaurants etc.

This will certainly hurt some growers.

 

[Jeff Grossman]

Galloni also wrote a letter (and published it to his site):

January 2, 2020
The President
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500

Dear Mr. President:

I am writing to express my strong opposition to the second round of tariffs on French and EU goods that the Office of the United States Trade Representative (USTR) is considering in connection with France's Digital Services Tax and the WTO’s recent ruling on the Airbus/Boeing dispute.

As the Founder, CEO and Lead Critic at Vinous, one of the world’s most highly respected wine publications, I engage every day with hardworking Americans whose livelihoods are now seriously at risk by potential USTR actions. If enacted, these tariffs will result in catastrophic and permanent financial harm to the thousands of working-class families in our country that depend on the economic viability of EU goods.

The US wine industry employs 1.74 million people[1] and generates $68.1B in sales[2] through both retail and hospitality channels. Approximately a third of these sales are from imports[3], 75% for wines produced in EU countries[4]. Those wines are sold by every mom-and-pop corner liquor store struggling to pay the rent, every salesperson trying to meet her sales target, every young person waiting tables to put themselves through school, every truck driver working around the clock to deliver packages to consumers and businesses, and many thousands of other middle-class Americans around the country who work in the wine industry. The proposed tariffs, which range from 25-100%, will have a devastating effect on these people and their families.

Wines are not easily interchangeable products. Consumption of EU wines will not shift to US wines in a trade war. Moreover, the highest value EU wines are not like smartphones or widgets, where manufacturing can easily be increased or decreased according to demand, but are instead inherently limited in production. The companies that make those wines will simply find other markets for their products. Once those wines are sucked out of the US economic sphere, they will never come back.

In addition, these tariffs pose a significant and very real threat to the long-term viability of wineries in the United States. In 2018, the EU was the largest export market for California wines[5]. The EU could very well choose to retaliate by levying tariffs on US wines, which would be devastating to American wineries precisely at a time they need growth from those markets to survive and are broadly beginning to establish themselves as qualitative peers to the very best European wines. Moreover, lower-priced wines from EU countries are often the first wines American consumers try before moving into higher-end segments of the market where the US has traditionally been so strong. If those affordable wines are no longer available, younger consumers will shift to other beverages such as beer and spirits, dealing another crushing blow to our US wine industry.

A new round of tariffs will ultimately create a domino effect where the entirety of the US wine industry shrinks (both distribution and production), leading to a decrease of sales tax revenues, lower corporate tax revenues, layoffs and loss of personal tax revenue.

As a citizen, I am deeply appreciative for everything you do to protect our country’s economic interests. I respectfully believe there are more direct and targeted measures that can efficiently address our current trade disputes. I urge you not to put the livelihood of so many American families at risk with these proposed tariffs.

Sincerely yours,

Antonio M. Galloni

CEO & Founder

[1] Study for WineAmerica, the National Association of American Wineries, conducted by John Dunham & Associates of New York, September 2017

[2] Total retail value of wine sales in the U.S. 2000-2018, Jan Conway, Statista, August 2019

[3] Anatomy of the Rising Import Threat to U.S. Wine, Mike Veseth, The Wine Economist, April 2019

[4] Top Wine Importing Countries, Daniel Workman, World’s Top Exports, April 2019

[5] U.S. Wine Exports Total $1.46 Billion in 2018, Wine Institute, April 2019

 

[Jayson Cohen]

originally posted by VLM:

originally posted by Jayson Cohen:

originally posted by Rahsaan:

originally posted by VLM:
This could also have terrible repercussions for small producers in Europe that rely on the US market.

I know that for any given producer it doesn't happen overnight, but on a macro scale does this also accelerate the shift towards focusing on markets in Asia instead of the US?

(I never know how big that Asia focus actually is, and I imagine it varies, but I certainly hear about it).

That seems likely. And it could happen quickly. Say you are a grower and your US importer can’t follow through on taking its allocation of 2019s this spring/summer but your actual or prospective Chinese agent can take it. The grower may have no choice. The US importer may never get the allocation back.

It's not just that. Many small producers can't just shift to other markets if they are heavily dependent on the US market, they may just cease to exist. Wines that are sought after and have representation in many markets will be able to shift their wines there and they may not trust the US market again, as you indicate. However, if 50% of your wine goes to the US and that just stops it is unlikely that other markets can absorb that and if you don't have the cushion to take that shock, well, that's that.

I agree 100%. I was just pointing out one possibility as follow up to Rahsaan.

 

[Lee Short]

originally posted by Keith Levenberg

I'm aware of at least one US retailer already offering the option you're denigrating as non-viable.

Minimum order 6 bottles. No cancellations or refunds. ETA approx. 90-120 days. PLEASE NOTE: This wine may be affected by the U.S. Trade Representative tariff action. Any currently applicable tariff will be calculated at checkout. Any future tariff levied between purchase date and delivery date in the U.S. is the responsibility of the customer. We offer one year’s free storage in London with no tariffs.

Yeah, maybe Fass Selections can outwait the tariffs by increasing their prices to cover storage. But very few retailers are going to be able to move to a model where they are selling the majority of their EU imports on prearrival. And prearrival with a Schrödinger tax to (maybe) be levied at the time the wine arrives, at that.

I really don't see how you think this is a viable solution to the problems this tariff will introduce to the import chain.

 

[MarkS]

originally posted by VLM:
I guess they're probably all liberals, and that's the point I guess.

Not to mention that tariffs on alcohol play well to the (evangelical) base, as many do not drink or care what happens to 'demon rum'.

 

[Kevin Roberts]

originally posted by VLM:

originally posted by Keith Levenberg:

originally posted by VLM:
I care about my friends

...just not enough to engage in a productive discussion about how to help them deal with this.

I'm aware of at least one US retailer already offering the option you're denigrating as non-viable.

Minimum order 6 bottles. No cancellations or refunds. ETA approx. 90-120 days. PLEASE NOTE: This wine may be affected by the U.S. Trade Representative tariff action. Any currently applicable tariff will be calculated at checkout. Any future tariff levied between purchase date and delivery date in the U.S. is the responsibility of the customer. We offer one year’s free storage in London with no tariffs.

I've had conversations with real people who do this for a living. What isn't productive is this dialogue since you don't understand how the wine business works.

And you make my point for me. That retailer (who I have no issue with) has nothing to do with the wine business. It's a specialty operation for collectors. It's not going to help inter alia, LDM, Pastor, Zev Rovine, Selection Massale, De Maison, Weygandt-Metzler...

But yeah, cool, you do you.

With the exception of Weygandt, that is exactly the portfolio of wines we work with in Iowa. We've got a solid beer base, but well over 90% of our wine sales are from the EU. It's a kick in the pants and then some.

Kevin

 

[Keith Levenberg]

originally posted by VLM:
I've had conversations with real people who do this for a living. What isn't productive is this dialogue since you don't understand how the wine business works.

And you make my point for me. That retailer (who I have no issue with) has nothing to do with the wine business. It's a specialty operation for collectors. It's not going to help inter alia, LDM, Pastor, Zev Rovine, Selection Massale, De Maison, Weygandt-Metzler...

But yeah, cool, you do you.

Amazingly, you're not the only person here who talks to real people in the wine business. I have no interest in telling LDM, Pastor, Zev Rovine, Selection Massale, De Maison, or Weygandt how to run their businesses. I assume they know what they're doing. I also assume their business plan consists of more than "shout profanities at people who are trying to think about how to make things better." But, whatever, you do you.

 

[Christian Miller (CMM)]

originally posted by VLM:
totally fragged by the shrapnel of all this stupidity.

The essence of this administration's foreign relations.