U.S. importers and retailers of EU wine warn of closures, layoffs from tariffs

In this picture taken Friday, Jan. 31, 2014, Benedikt Zacherl spokesperson of sparkling wine manufacturer Schlumberger fills two glasses with sparkling wine in Vienna, Austria. (AP Photo/Ronald Zak)

LONDON — U.S. importers, distributors and retailers selling French champagne and Italian wines told Reuters that U.S. President Donald Trump’s threatened 200 per cent tariff on European alcoholic drinks would hit them hard.

Trump said the tariffs would be “great for the Wine and Champagne businesses in the U.S.” However, wine importers and distributors, retailers and bar owners that Reuters spoke to said that they would pay the price.

Mary Taylor, owner of European wine importer Mary Taylor Wine, told Reuters that she has 16 shipping containers of wine in transit - an amount that would wipe out her “entire net worth” if 200 per cent tariffs were applied.

“If I have to pay... I’m done,” she said, adding she was looking to see if she could cancel some of the shipments and had written to contacts close to the president to argue against the tariffs.

Under U.S. law, alcohol producers cannot sell directly to consumers, bars or restaurants. Instead, producers must sell to importers or distributors, who sell products on to bars and restaurants.

This means European wines are mostly imported by some 4,000 small American importers and distributors, said Ben Aneff, President of the U.S. Wine Trade Alliance, which advocates against tariffs on wine.

It is these U.S. businesses that have to pay the levies, said Aneff, also managing partner of Tribeca Wine Merchants, a wine store in New York, adding American retailers and restaurants would also suffer if suppliers hike prices to cover the costs.

“A 200 per cent tariff on imported wine would... destroy U.S. businesses,” he said, adding many thousands would likely be forced to close. “It would do significantly more economic damage here in the U.S. than it would in Europe.”

Gab Bowler, president of New York-based wine importer and distributor Bowler Wine, said European wines represent 70 per cent of his company’s sales.

He would first try to increase prices, he said, but this will impact sales. “What consumer wants to pay $45 for a bottle of wine that was $15 a week ago?”

“If this were to go on a long time, we would have to lay off about 50 per cent of our employees and borrow a bunch of money from the bank, putting us in a lot of debt,” he said.

A great thing for U.S. wine?

For every dollar U.S. companies pay European producers for their wine, American importers, distributors, retailers and restaurants further along the supply chain make $4.52 in mark up, Aneff pointed out.

Bowler, as well as two retailers or bar owners, said U.S.-made wines, which tend to have far higher prices and a different taste, could replace very little of their European wine sales.

Ed Buffington, co-owner of The Community Tap, a wine and beer bar and store with three locations in South Carolina, said the price of American wine means it could not substitute the European wines in his portfolio. His business makes 50 per cent of its sales from wine, with half of that from European wines.

“I would watch a huge part of my business vaporize overnight” if the tariffs were imposed, he said, adding this would mean layoffs.

Chris Beckett, analyst at Quilter Cheviot, said some U.S.-made wines could benefit from the tariffs, however.

Patrick Cappiello, winemaker and proprietor at Monte Rio Cellars, which makes relatively inexpensive Californian wine, said brands like his could see some benefit, but tariffs risked harming the distributors he relies on for sales and the sector as a whole.

“I’m torn,” he said, adding that tariffs would deal another blow to the entire industry at a time when sales are falling and supply outpaces demand.

Reporting by Emma Rumney; Editing by Alexandra Hudson.