Retailers On How Wine Imports Are Holding Up Amid Tariffs

With imported wines facing new tariffs in the U.S. this year, retailers are monitoring the category to see how consumers react to the prospect of higher prices. “The full impact of federal tariffs on prices of wine and spirits is still unknown, and it will likely take additional time to feel the effects on individual product categories and brands,” says Darrell Clarke, chairman of the Pennsylvania Liquor Control Board (PLCB). “All of the items on our shelves right now were purchased before implementation of tariffs, and we have had no requests from suppliers to increase costs or retail prices due to tariffs.”

A preliminary trade deal with the EU lowered tariffs to 15% from a potential 30%-50%. Wines imported from New Zealand and Israel also have a 15% tariff. A baseline 10% tariff on all imported goods implemented in April remains in effect on wines from Australia, Argentina, and Chile. While the U.S. and foreign governments continue to negotiate new trade deals, South African wines face a 30% tariff.

In Pennsylvania, imported wine dollar sales decreased 6.3% to approximately $16.34 million on an 8% category unit slide year-to-date through August 19, according to the PLCB. Imports’ leading volume players Yellow Tail ($8.59 a 750-ml.) and Cavit ($10) are in decline this year at PLCB retail stores, but No. 3 Black Box ($24 for 3 liters), No. 5 La Marca Prosecco ($20 a 750-ml.), and No. 9 Kim Crawford Marlborough Sauvignon Blanc ($18 a 750-ml.) are up single digits in units and dollar sales. “Interestingly, there was a 3.4% shift in sales from domestic wines to imported wines between January 1 and August 19,” Clarke says.

At San Francisco, California-based online retailer Wine.com, imports comprise 55%-60% of overall wine sales. “The thing that has changed is not consumer buying patterns but more the industry wanting to protect itself on who’s going to eat the price depending on where stuff lands,” says CEO Mark Pinho. “We have seen average selling prices in the past year going up across the board and that might be contributing to consumers purchasing less.”

When the original tariffs were announced in March, Wine.com saw a two-week period where French and Italian wine sales spiked and then went back down. Meanwhile, Northern California wines’ volume has increased at Wine.com, but dollar sales have remained relatively flat. “There has been a lot of discounting on Northern California wines because there is so much wine in California right now,” Pinho says. “I thought we would have skewed more California than previous years because pricing has gotten better on a bunch of these wines and there are more specials to be had. The reality is people want imported wines.”

In Westborough, Massachusetts, Ryan Maloney, owner of Julio’s Liquors, expects that wine tariffs won’t have much impact at the higher end, but the situation raises a lot of unanswered questions. “For a certain point of time, some producers said they would absorb the tariffs,” Maloney says. “For smaller producers and importers, it’s a bigger issue. A lot of these guys can’t absorb it. If it’s not absorbed, retailers will be working on smaller margins. If they can’t absorb it, it is going to get passed on to the consumer.”

While the impact of wine tariffs hasn’t yet hit the market, Maloney believes the alcohol industry already faces bigger challenges, including a decline in consumption and a lackluster economy. “There are a bunch of things going on that as an industry we need to start pooling our resources together,” Maloney says. “We should all be uniting together to make sure the sale of alcohol is being protected. I would rather have a free-flowing economy system with no tariffs, but maybe it’s time to fix some of the other problems.”

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