Wine industry hit by double whammy

First came the US tariffs, then came coronavirus. Jason Sych talks to industry professionals to get a sense of how the wine industry is faring.

Photo by Arslan Ahmed on Unsplash
Photo by Arslan Ahmed on Unsplash

While the novel coronavirus has taken the spotlight, the US wine tariffs are still in place and affecting swathes of the European wine industry. Two months after the tariffs were imposed in 2019, wine exports from Europe to the US dropped by 33%. Combined with COVID-19, the situation has become even more grim. 

“Right now we can’t really do much of anything at all except work in the vineyards,” said John Bojanowski, owner of Clos du Gravillas, in Languedoc, France.

The US introduced the 25% wine tariffs last October, aimed at France, Spain, Germany, and the UK. Sales to the US fell sharply soon after the tariffs – a retaliatory measure against European subsidies to Airbus – were imposed. Although aimed at Europe, the tariffs have hurt both wine producers in Europe, and importers in the US. 

“It’s been extremely challenging, and continues to be,” said Charles Woods, owner of Bonhomie Wine Imports in New Jersey. Because they work with so many producers from countries affected by the tariffs, they are under significant strain, he said. “We had to cut off buying for a six-week period, where we didn’t want to order wine that might come in,” in case the tariffs were increased further.

Bonhomie Wine Imports continues to have difficulty bringing in enough wines for their clients, Woods said. 

They’re not the only ones. According to data from the American Association of Wine Economists (AAWE), wine imports to the US have dropped sharply since the tariffs began. French wine imports into the US alone dropped from $120m in October 2019 to $48m in November. Many in the industry fear that the damage already done by the tariffs will have long-term consequences, such as a change in the relationships between producers and importers.

“I’m definitely looking to diversify out of my three main European countries: Spain, France, and Germany,” said Woods, adding that any wines in his portfolio that need a lot of effort to sell could soon be dropped. “Some hard decisions will have to be made, and many of these suppliers are people that I’ve been working with for over ten years, and who are true friends.”

One category that is in growth, according to the AAWE, is imported wines with more than 14% abv, which are not affected by the tariffs. Such higher-alcohol wines saw an overall growth of $31m between October and January. 

But even with that ray of light, COVID-19 has knocked the wine industry onto its back foot.

Initially, European producers hurt by the tariffs had the option to sell their wines to other countries. “For instance, China. At the time that seemed like a logical argument,” said Caryl Panman, owner of Chateau Rives-Blanques in Limoux, France. “At the time it made sense, but of course it doesn’t anymore. Everything has gone into a tailspin. I think Covid-19 has rewritten everything for us.”

The German outlook is similar. “The impact will last a long time,” said Christian Schwörer, secretary general of the German Winegrowers' Association. The association had asked the European Commission for tariff compensation, Schwörer said; however now that Covid-19 has struck, any chance of compensation has vanished. “Now every sector is concerned for a crisis due to the corona virus, so it is not possible to have a special compensation fund for wine growers for the US [tariff] problem.”

In the short term, the impact of quarantines and lockdowns has been good for wine retailers, and dire for the on-trade. “The corona crisis is not good news for the China market, or for all the different markets in Europe,” said Schwörer. “Consumption will go down.”

What is clear is that the combination of tariffs and Covid-19 has left the wine industry shaken.

“It’s just been massively disruptive and entirely negative for my business,” said Woods. “And I believe that’s true for the industry as a whole.”

Jason Sych

The quotes here come from larger interviews that will be featured in the Perspectives section of Issue 2, 2020. Perspectives is available to subscribers of the print or online magazine.

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