"It's like déjà vu all over again" -Yogi Berra
I wrote two pieces five years ago for the Dallas Morning News, when a 100% tariff was being threatened. (HERE and HERE) Then, as now, the wine community braced for disruption. Fortunately, then it wasn’t long lasting, although there were residual levies which stuck around (HERE). I also wrote a piece on this blog about strategies which would be a good primer (HERE), again for anyone interested. But fast forward to 2025, and there is more muddle and disorder in the world. And folks just aren’t drinking as much now as they were in the middle of a pandemic, where we were all trapped within the confines of our abodes.
But let’s do some basic blocking and tackling, starting with the distribution side. Basically, I’m breaking it down to the super large distribs (SGWS/RNDC, etc.) and the small and medium sized ones. The SGWS/RNDC’s of the world already have bloated warehouses. Their sales are down, due to lowered consumption, migrating to other drinks ( euphoric ones and otherwise), and stressed economic conditions (inflation, job losses, general malaise in the world). Older drinkers from the Boomer generation and on back aren’t drinking as much, because as one ages, one consumes less. And while the younger generations can’t wait for the Boomers et.al, to step off the planet, the oldsters are generally a healthier bunch than their for-bearers were.
If you talk to Gen X, Millennials and even Gen Z’ers, they are having to do more with less too. The wealth of the world has been consolidated so much to the billionaire/oligarch class, so now going to the store and spending $40 for a bottle of Cabernet is a stretch for many people, especially on a regular basis.
Back to the large distributors. They have contracts with their larger suppliers to purchase a set amount of wine in a contractual year. They are obligated to buy the product. If not, the lawyers get involved. And in a downturn cycle, which is where we are, and with warehouses already bulging, something has got to give. One of the things that can happen, if this 200% tariff persists, will be large-scale discounting, in order to unclog the pipeline and make room for the new vintages that are coming. Most likely the lawyers will get involved as well, and re-negotiate the goals and/or work out some kind of an adjustment (like an FSA, a floor stock adjustment) or heavily discounted future purchases.) the larger importers will probably take a hit on their sales and their margins and their stocks will suffer and their investors will as well. Someone will pay for the tariffs.
The large distributors will also have to reduce their margins. And with automation barreling down the turnpike, most likely they will use this as an opportunity to reduce staff, starting with administrative workers, sales staff and middle management. They will also continue to consolidate the different sales divisions. Their larger supplier will not feel this as much as their small to medium ones. They will get pinched. Big fish swallows the littler ones. That’s the carbon life cycle.
Can they weather the storm? Of course. The C-suite execs will still fly in their private planes and play golf on Fridays. They will still have their expense accounts and their bonuses. If they take a 10-20% hit on them, they will still survive. But they probably won’t take the hit. The little guys down the food chain, what an owner of one of the largest distributors in the world once called “the worker bees” (to my face!), will feel it the most.
The small and medium disturbs will have a harder go of it. They work with a smaller margin of error (with less cash flow) and they depend more on just-in-time wine deliveries from Europe. Not that the larger distribs haven’t gotten the J.I.T. business down pat. But the small-to-medium folks have to make it work that way. They can discount some of their stuff, but once that’s gone, they don’t have as much reason to go into accounts as much if they don’t have anything to sell that the restaurants and retailers will buy. No one wants to buy a Cotes du Rhone in July for $15 a bottle when they were buying it in February for $8.
So, the small-to-medium distribs will get pinched and pinched hard, if the dealmaker-in-chief is allowed to go ahead with this inanity.
What to do? As I mentioned we have been through this before. I’d recommend folks pause, take a breath and don’t let fear get ahold of you. That’s the distraction autocrats want from the little people. It empowers them and stupefies the rest of us. Don’t let fear take hold.
The bad news about tariffs? For history buffs, the Smoot-Hawley Tariff Act of 1930, set into motion during the Great depression a series of hardships which exacerbated world economies and let to tensions which ultimately led to a world war (more on that, HERE). So, we’re dangerously poised before an abyss, for sure. And much of that is out of our hands. What we can do is maintain a personal balance and equilibrium. Anyone who lived through the Nuclear Missile Crisis of October 1962 remembers that we all went to bed saying our prayers, hoping not to go to Heaven right then, But it could have happened. And it could happen again. That said, take a breath. Take a pause. Get your blood pressure down. Have a glass of Chianti.
The restaurateurs and retailers are next. I talked to a wine buyer for a restaurant that depends on wine from Europe to complement their concept, which is centered upon Mediterranean cuisine. They told me they were being watchful and cautious but the wine buyer said this: “There will be opportunities to buy in wines that the distributors will want to move. Maybe they are slower, lesser-known wines. I might have to pivot from a Sancerre to a Saint-Bris. But an astute wine buyer can navigate this for his guests, as long as you stay on the floor and communicate with them, re-assure them, educate them.”
Retailers? That’s gonna be a different pivot. My little Italian store specializes in Italian wine only. They might have to dig deep into the smaller, regional appellations (Morellino or Montecucco vs. Brunello). They might have to comb through the close-out lists of distributors, large, medium and small. They might have to readjust their margins. Again, someone always pays for the tariffs. The little mom-and-pop store could be severely handicapped.
Large retailers, big box and grocery stores? Have you walked around a large liquor retailer lately? There are all kinds of euphoria producing products that have nothing to do with wine, bourbon or cognac.
I witnessed this the other day. A young sales woman walks in a store, dressed like a cheerleader ( I kid you not!) with a case of a product (samples) that have no alcohol in them. They have caffeine and kratom as the main ingredients.
Oh, and there are all kinds of cannabis-infused products flooding the market. So, there will be no shortage of euphoria producing products.
But wine serves in a myriad of ways. As a complement to the food. As a mild mood lifter. And a conversation easer. And as an artisanal product that can and should be appreciated artfully. It’s not just for “getting a buzz.” One producer of cannabis-infused products pitched it to the geriatric set thusly: “The 60-plus generation loves it because they don’t have to smoke it. Many of them can no longer drink for health or personal reasons. This allows them to continue the ritual of having a cocktail while still having some euphoric effects without having to drink alcohol.”
Huh? Talking ‘bout my generation? Not in my back bar.
Still the large retailers, especially the big box and grocery folks can pivot to Australia, South America, South Africa (wouldn’t that please you know who?) and any number of wine and spirit producing places that haven’t yet pissed off America’s used-car-salesman-in-chief. But wait, Argentina will probably be targeted for providing the world with cheap beef. Or New Zealand with their cheap lamb. And then what? Then, we are supposed to drink American wine, American bourbon, American vodka? Yeah, we can do that. Those of us who don’t lose our business or our jobs, our homes, maybe our families. Yeah, we can do that.
USA! USA!! USA!!! So much winning!
Bottom line - Don’t fall prey to panic. Don’t give in to the fear of a horrible future. Stay vigilant. Breathe. “Fear is the mind-killer.” We will get through this.
addl link here from a friend, Brad Willis: The Human Toll of Tariffs
