If you plan to toast the arrival of spring with a glass of French rosé, don’t be surprised if it’s a little more expensive than usual. The combination of tariffs and the global coronavirus pandemic have impacted retail supplies of 2019 French rosés.
“I’m having problems finding them,” says Jan Wilson, director of wine and spirits at The Hills Market, a locally owned grocery store in a suburb of Columbus, Ohio.
“I just can’t get any,” agrees Molly Ringe, who runs a small wine store in Seattle.
Last October, the United State Trade Representative (USTR) levied a series of tariffs on certain European Union (E.U.) products. The tariffs were retaliation for E.U. subsidies to Airbus, a France-based aerospace and defense company. The U.S. believes these subsidies put its Boeing Company at a competitive disadvantage. A World Trade Organization (WTO) ruling in October agreed, allowing the U.S. to impose up to $7.5B in tariffs on E.U. goods.
Among a long list of items, a 25% tariff was levied on all still wines below 14% alcohol from France, Germany and Spain. Last December, the USTR also threatened a 100% tariff on these items. The USTR decided not to impose 100% tariffs in mid-February, but by then damage was done.
In the meantime, the coronavirus pandemic has upended exports from France and impacted the distribution chain in the U.S.
Michael Corso, a Chicago-based importer, said the potential 100% tariff froze his business in January and February. “We kind of suspected and hoped that they wouldn’t do it, but you also couldn’t take the chance that they might.”
French rosé is often sold via pre-sale starting in January, with the wine subsequently delivered once it has arrived in the U.S. Due to uncertainty about the tariffs and therefore the final cost, many delayed pre-sale offers.
“I think I’ve seen zero,” Daniel Posner, who owns Grapes The Wine Company, a retail store in White Plains, New York, said in early March. He would have typically seen at least 20 rosé pre-sales by then.
Mark Macdonald, owner of The Italian Vine Wine Distributors in Omaha, Nebraska says the uncertainty stalled everybody.
“Last year [by March], we would have had a pretty strong majority of our pre-sales done. We’re probably a month behind because of the uncertainty of the tariffs.”
“It’s like, what next? Are there locusts?” —Lyle Railsback, national sales manager, Kermit Lynch
Veronica Lipinski Touzot owns Fine Terroir Selections, a Greenwich, Connecticut-based importer and distributor that specializes in French rosé. She says the seasonality of these wines made the delay devastating.
“In the U.S., it’s very important to get the rosé of that year and to get it as early as possible,” says Touzot.
Like many, she delayed bringing in wines until after the USTR’s decision in February, when it was announced the 25% tariffs would remain in place, but the uncertainty and delay had an impact, particularly given the subsequent outbreak of Covid-19.
“When my wines arrived in the states, no one wanted them anymore,” says Touzot. “One restaurant pre-ordered 200 cases and then said they would take 14. What do I do with the rest?”
Touzot pivoted by cancelling orders not already in transit.
“Everything that I could cancel, I cancelled,” she says. “But some wine was already on the water.”
As a result of the tariffs and the outbreak, Touzot’s business is down 50%. She had already laid off one employee due to the tariffs and has subsequently laid off more, while reducing salary for others. She has a warehouse full of rosé she is unable to sell, due to closed restaurants and retailers dealing with a changed landscape.
“I am sitting on so much inventory,” says Touzot. “I will probably have enough rosé for two years, and then no one wants the rosé from the year before. Most of my wines are hand sold, and no one goes to the store right now.”
In addition to the uncertainty about the tariffs, a dock workers strike in France earlier this year also contributed to delays on orders. Then coronavirus led to a shortage of shipping containers.
“It’s like, what next? Are there locusts?” asks Lyle Railsback, national sales manager for importer Kermit Lynch.
Thus far, importers, distributors and retailers have taken a variety of approaches to mitigating the tariffs for rosés and other affected wines. Many have reduced margins and have asked their producers to do the same to minimize costs passed on to consumers.
“We determined that consumers are really price loyal, probably even more so than brand loyal [for rosé],” says Ricardo Castiblanco, a partner in Skin Contact Wines, a New York City-based importer that focuses on organic wines. He worked with his suppliers to reduce margins to lessen the impact of the tariff.
“Instead of 25%, we can go up 10%,” says Castiblanco. “The consumer might reach for that bottle of wine if it only costs them a dollar more.” Castiblanco is also bringing in less stock to avoid paying a large sum in tariffs up front.
Importer and distributor Vintus, the exclusive U.S. importer of Château Minuty, one of the leading producers of Provencal rosé, took a different approach. Due to concerns about a potential tariff increase, Vintus rushed to bring wines in before the February announcement, paying close to $1 million in tariffs for the privilege.
“That’s all up front, all before we even sell a bottle,” says Alexander Michas, chief operating officer for Vintus, who notes it’s something small or mid-sized companies could not afford.
The outbreak has only added to the impact on the wine industry. Posner’s store has remained open, but only for curbside pickup and delivery. While sales volume is up, dollars are down 30–35% from the previous year.
“We’re sending out full trucks every day. It’s just the amount of dollars in the truck is significantly less than it normally is,” says Posner. “But I’m not complaining.”
Overall, due to the tariffs and the outbreak, consumers should expect that less product will be available, that French rosés will arrive later than usual, and that, in many cases, they will be more expensive.
However, they can also expect a surfeit of closeout, 2018 French rosés.
“There’s still a ton of ‘18 rose in the pipeline,” says Posner. “A surprising amount.”
The tariffs are on a rotating carousel, where they could be increased or decreased every 180 days. The next review period is in August, putting it directly in front of the October-November-December sales cycle. This means another period of uncertainty for the wine industry awaits.
“How do we plan for next year?” asks Michas. “These sacrifices are so enormous. Are they ones that we can continue to make? I don’t know.”
Touzot says the one-two punch of the tariffs and the outbreak have created an existential crisis for her business. After the outbreak, the government gave importers 90 days to pay the tariffs. But they still must be paid.
“Basically, what I can pay today is my employees, the ones I kept. I can pay my rent. Then what I have to pay is the duties. How about they at least take these 25% duties off? If the situation doesn’t get better soon, it’s going to be very, very tough to survive.”
Credit: Source link