Wholesalers Are Sitting on Wine, but Don’t Expect a Bargain

The tariff chaos is beginning to bite

Samantha Dugan buys Champagne and sparkling wine for The Wine Country, a small retailer in Southern California, and she doesn’t mince words.

“I’ve been in the business for 30 years, and I’ve never seen anything like this,” says Dugan.

She says that the critical O-N-D period, the lucrative last quarter of the year, is going to be different from anything that anybody remembers. “We’re just hoping we can scrape by.”

The reason for Dugan’s pessimism? The Trump tariffs, especially on wine. Mostly on labels from the EU, but also from South Africa, South America, and Australia. Retailers, restaurants, and importers all have had to figure out how to deal with higher prices, which can be as much as one-third for some regions. On top of that, supply is inconsistent at best, or actually declining as some foreign producers give up on the US market.

If that’s not enough, the value of the U.S. dollar has fallen to a four-year low against the euro, making EU imports that much more expensive.

LSE/Unsplash

Tariffs in a state of whiplash

The tariff landscape seems to alter daily, with new and contradictory pronouncements from Washington and ever-changing deadlines for when the tariffs will become effective. The latest is that they will come into effect, maybe, sort of, sometime in October. But even that depends on various court challenges that will decide whether the US Congress needs to approve the tariffs or if they can be implemented by presidential order.

“Yes, complicated is a good way to describe it,” says Vineyard Brands CEO and President Patrick Bennett, whose company brings wine into the US from most of the world’s major regions. “The tariffs certainly pose a financial challenge, but this is also coming at a time when consumption is down, inflation is rising, and the ‘value’ aspect of wine is increasingly diminished.”

Many importers, like Bartholomew Broadbent of Broadbent Selections, are splitting the 15% EU tariff with their producers, each absorbing one-third and urging their retailers to absorb the other third. For some inexpensive wines, like Portuguese Vinho Verde, the importer and producer are absorbing all the tariff. Otherwise, says Broadbent, the market would disappear; who would pay $15 for Vinho Verde? On the other hand, there is little that can be done for some regions, like South Africa and its 30% tariff, so he is passing on all of the increase.

The hunt for substitutes is on

Wine professionals like Dugan and Leonora Varvoutis, the sommelier and general manager of Coltivare, a trattoria-style Italian restaurant in Houston, are scouring smaller importers and wholesalers for less expensive wines to replace their usual choices. Sometimes, but not always, this means substituting lesser-known domestic varieties, like a Riesling from New York state, says Varvoutis.

They’re doing this not only to find better pricing, but to support the smaller companies that are most hurt by the tariffs. Varvoutis adds that she has all but stopped buying wine from Texas’s biggest wholesalers, citing higher prices and less interesting wine.

In other words, the holidays are no longer the focus — having enough affordable wine on the shelf is.

“I need to leave the $300 wines to the steakhouses,” says Varvoutis. “I really can’t have anything more than $16 by the glass, and I’ve been exhaustively searching to find those wines. And it hasn’t been easy, the longer the tariffs have gone on.”

Adding to the confusion is that some European producers either don’t understand the need to share in the tariff increases or are so fed up with the confusion and added expense that they’re giving up on the US market altogether. Everyone interviewed for this story cited at least one example of each, and most sympathized with the latter group.

By one estimate, the tariffs have already cost Italian wine producers an additional $61 million in duties, representing roughly one-third of all extra costs borne by foreign wine imports to the US.

French producers have paid $62.5 million.

The glut that won’t cut prices

This won’t lead to cheaper wine, says Frank Paredes, a long-time importer who now helps foreign producers enter the US market. Even as demand softens and some stocks build up, several factors prevent prices from falling. Most of the excess supply is domestic wine, while imports remain more balanced. A stronger euro is also keeping European bottles expensive. And with ten wholesalers controlling about 60% of US distribution, the biggest players can afford to hold inventory rather than cut prices.

“They’re not lowering prices unless they want to clear something out,” says Paredes, adding that they are sitting on normal levels of stock, so they are under no pressure to discount.

Slowdown in the economy

Complicating all of this is that the US economy may be on the verge of recession, which would further dampen demand in the already slumping US wine market.

“Everyone needs to eat, and as tariff-related inflation hits food in the coming months, people will continue to pay more out of necessity,” says Bennett. “No one ‘needs’ wine, however. It’s a wonderful, small, personal luxury that makes life more enjoyable. I don’t believe it has the same price elasticity that food does. When the financial impact of the tariffs is finally passed on to the consumer, I feel many may be isolated from European wines.”

Though many economists identify the tariffs as one possible cause of any recession, Dugan notes that the country is so polarised politically that it’s difficult to discuss the issue. In fact, one on-premise beverage manager declined to be interviewed for this story, citing company policy not to give interviews about the tariffs.

So far, says Dugan, her customers don’t seem to be cutting back on wine purchases, though foot traffic at the store is down. But what happens if three staples of wine imports — $10-to-$15 rosé, $10 Pinot Grigio, and $12-$15 Prosecco — have their markets destroyed by tariffs?

For now, the shelves may still be stocked and customers still buying, but the holidays no longer promise comfort or joy. If tariffs and recession fears collide, this O-N-D could mark the season when America’s wine glass finally runs dry.

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What’s at the Back of Your Liquor Cabinet?

When I was in Australia the other week, I helped to clear out a liquor cabinet. Along with the usual big brand suspects, we found:

• a bottle of truly disgusting limoncello

• a gift box of Canadian ice wine (vintage 2005)

• three bottles of McWilliams Sweet Sherry (half empty)

Then my colleague Lulie Halstead confessed that she has cherry liqueur sequestered somewhere in the back of hers.

So we’re going to do an episode of the A Question of Drinks podcast about what bottles languish at the back of the liquor cabinet. I put out a call on LinkedIn and, so far, have heard about Caribbean banana liqueur (in a banana-shaped bottle), plenty of Advocaat liqueur, and some baleful Irish cream whisky that was so past its use-by date, it made its rescuer extremely sick.

But I’m sure this is just scratching the surface. What have you got lurking at the back?And how did you come by it? Was it a re-gift that you couldn’t foist on someone else? A holiday purchase made in error? Or the ingredients for a cocktail that you made once and never touched again?

I want all the stories. Pictures welcome. All credit will be given.

Drop me a line at felicity@drinksinsider.com