South African wines get a Trump tariff bump

As the 25% tariff on French and other European wines bites the US market, South African wines are shining. Jeff Siegel asks if the trend can last.

Photo by Ashley Jurius on Unsplash
Photo by Ashley Jurius on Unsplash

The good news for South African wine is that it's had a bump from the Trump Administration's 25% tariff on French, Spanish, German, and British wine. What's not as clear is how long that will continue.

"The tariffs have been the talk of the industry and there was a great deal of apprehension around the 100% tariff that was subsequently put off," says Bob Guinn, the vice president of sales for Third Leaf Wines, which owns South Africa's Mulderbosch Vineyards and is the brand's US importer "It seemed that most people were waiting to see where that hammer fell before committing to any real category strategy. What I have seen though is a general openness, especially by distributors, to ensure portfolio diversification."

The early numbers back that up: Figures compiled by the American Association of Wine Economists from US government data show South African imports increased 16.4% in the 12-month period ending November-December 2019, which includes the first 10 weeks of the tariff. That was the biggest jump (albeit from a small base) for any country, including New Zealand's 15.7% increase. In fact, total wine imports to the US fell almost 14% during that period, and also fell more than 4% for countries not affected by the tariff.

In this, says Guinn, "Since Mulderbosch is heavily dominated with white wines, I expect we will definitely see an increased lift come in the spring and summer months as the weather gets a bit more forgiving and more of the tariff price increases hit the market."

Point in fact: US natural foods grocer Whole Foods will feature the brand's well-known Cabernet Sauvignon rosŽ, which retails for between $10 and $13, in May and June. "That's outside of what they have done with Mulderbosch in some time," says Guinn.

Jim Clarke, the marketing manager for Wines of South Africa USA, says one reason for the boost is increased awareness of the country's wines in the US, and especially in quality. "I think, maybe five years ago, you might be right and there was a perception that the wines weren't necessarily well made," he says. "But that has changed well before the tariff took effect."

Another reason for optimism, says Clarke, is that "European-focused importers" like Winebow, Skurnik Wines, and The Sorting Table have added South African labels to their portfolios. These importers, says Clarke, can reach a retail and wholesale audience that might not have considered South African wines in the past. But, if they're looking to replace tariff-spiked French and Spanish wines, there are South African wines that can slide in, and especially for Rhone- and Bordeaux-style blends.

He also says many importers are working with more expensive wines than in the past, focusing on the $15 to $20 range. This is to take advantage of premiumisation, as well as the realisation that South Africa can't compete in a price war with the largest US, brands.

That lack of pricing flexibility, though, could be a serious hurdle for South Africa to overcome. So far, says Gerald Weisl of WeiMax Wine & Spirits in suburban San Francisco, many French and Spanish producers have worked with their importers and distributors to limit price increases. That means $15 and $20 South African wines are still competing with similarly-priced European wines for shelf space, instead of undercutting them on price.

"As long as the European price increases remain modest," says Weisl, "there's just not that much room for South African wines to replace them."

Jeff Siegel

 

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