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Complicated Situation in the American Wine Market, by Michael Yurch of The Bluest Sky Group

Wine marketer Michael (Mick) Yurch, of The Bluest Sky Group, has shared the following with me, in his circle of friends and colleagues. It’s a fascinating reading, from someone with international relationships in wine. It’s Mick’s job to prepare wine brands for the United States market. He’s been doing this since leaving his career, as one of the popular owners of Sherry-Lehmann, a large retailer in New York City. Being in retail for so many years, he’s got great perspectives and experiences. Spending time with him, in a small wine professional group in Italy, I’ve seen him in action and trust his insights and judgments.

Michael Yurch describes the complicated situation in the American wine market, as of the beginning of VinExpo New York, two weeks ago. He resides on the East Coast and in Italy.

 From Last Week ~ Michael Yurch

The US is not quite as bad as Italy for the virus so far, but people are staying home a lot and not going to restaurants.

I was in New York last week for the Tre Bicchieri event [the world’s premier Italian wine showcase] and VinExpo NY [the most dynamic trade only event in the fastest growing market in the world… Vinexpo New York]. The bigger problem in general (so far) has been the tariffs.

  • No tariffs (yet) on Italy is certainly an advantage there, but the tariffs paid on France, Germany and Spain by most importers have taken a large amount of cash out of the system.
  • Many were caught by surprise with holiday stocks in transit that increased in price by as much as $50,000 per container, payable in advance when the 25 percent Airbus tariff was applied in late October.
  • Some containers were refused and some smaller importers unfortunately went out of business.
  • Many were forced to raise prices immediately, and lost business due to prices higher than agreed upon, with their customers.

Those remaining are slowly recovering.

The larger importers, faced with threats of an increase from 25 percent to 100 percent in the tariff in February, bought large supplies of standard items as a hedge (in many cases a full year’s supply), and are now buying little else with warehouses full.

The threats of a new 100 percent tariff over the Digital Property issue still remain.

Before the virus issue, it seemed that there would be a good period for tariff-free Italian wine coming in the spring, as the smaller importers that remain regained their cash flow, but now with the expected virus-related slowdown in business, that moment will take longer to arrive and could be shorter in duration.

The Commission that enforces the tariffs will meet again in August to decide what it will do for the period of September through February 2021.

  • They can increase, decrease, or leave things as they are.
  • They could also decide to include Italy and Austria, but I myself do not believe that this will happen.

It is also important to note that the Airbus tariffs are NOT directly tied to the current administration in Washington, and will not automatically change with the election in November.  What remains to be seen is the amount of damage to sales that the virus issue will cause.

UPDATE, as of Today

Obviously things have changed since then, but a review of the tariff situation since their imposition last October is still worthy of review.

  • The rapid onset of the COVID-19 virus has and continues to effect all of us in a major way.
  • As far as the US market and the ability to sell wine here, bars and restaurants are being ordered to close in many cities.
  • As sales on premise slow, retailers have experienced sales GAINS as people begin to stock their cellars for an expected drop in supply.

Whether this continues is anyone’s guess.

A larger question is the threat of economic recession.

In the last recession, it’s good to remember that wine continued to sell, but with tremendous pressure against the higher priced wines with retail pricing over $25 (US Dollar rates).

Consumption patterns are also likely to change with the tariff exemption on wines over 14 percent alcohol.

White wine and Rosé depletions are quite likely to suffer.

FROM THE FRONT LINE AND MY FRIEND

… to you… As we all wait to see that the future holds for us all…

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