Burgundy wineries fear US tariff impact

Burgundy winemakers fear a loss of orders from the US if the country's new import tariff continues, meaning there could also be fewer bottles available for American wine lovers, according to senior officials from the French region.

Burgundy wine exports rose by 6.9% in volume and 9.3% in value to €650 million (£555.3m) in the first eight months of 2019, versus the same period of last year.

That’s a new record for the first eight months of any calendar year and it included volume growth of 6% in the US, the biggest overall destination for Burgundy wines, as well as a 40% rise in shipments to China.

But winemakers are concerned that trouble lies ahead, predominantly because of the 25% import tariff imposed by the US last month on still wines at 14% abv or below from France, Spain, Germany and the UK.

‘We have known all kinds of crises, but have never experienced such a tax,’ said Louis-Fabrice Latour, president of Burgundy’s Wine Council (BIVB), at a press conference ahead of last weekend’s Hospices de Beaune auction.

There is also concern among nearby Beaujolais producers, although US orders were maintained for this week’s Beaujolais Nouveau celebrations, according to Charles Rambaud, responsible for exports to North America for trade body Inter Beaujolais.

‘It is too early to have any reliable figures, therefore we remain patient and will assess the situation later this year,’ Rambaud said.

They are not the only ones watching the situation closely; analysts speaking to Decanter magazine recently spoke of a sense of foreboding on the global fine wine market. The US tariffs come amid ongoing Brexit uncertainty and also political unrest in Hong Kong.

‘Other markets cannot pick up the slack’

Wineries fear that US orders may fall and Latour said that, for Burgundy, the ‘indispensable’ nature of the US market would be hard to replace if that happens.

The US accounts for 60% of all Pouilly-Fuissé sales, for example. ‘Other markets cannot pick up that slack’, he said.

Burgundy can’t expect too much protection from US wine distributors, said Thiébault Huber, president of the confederation of Burgundy appellations.

‘They worry more about the bottom line and if the tariff remains in place for a longer period of time, they will find substitutes to our wines that would not have the 25% tax.’ he said.

Although the tariff is set to apply for an initial period of four months, it could well be extended and ‘we would risk losing shelf listings, and once they are lost, you need many more years to re-conquer them,’ said Latour.

There has been little sign of a swift end to the new levy, which is part of $7.5bn worth of import taxes imposed by the US on hundreds of EU products in response to a long-running dispute over aerospace subsidies.

The World Trade Organisation approved the tariffs and the EU has asked for permission to retaliate, via a parallel case – although both sides have claimed they would prefer to negotiate a deal.

Shipping in bulk

Some producers in the Mâcon, Beaujolais and Chablis regions have been contemplating shipping their wine in bulk and having it bottled in the US, which would exempt the wines from the new tax.

Although technically feasible from a quality point-of-view, Huber said the problem was ethical in nature; ‘Do you want to see village level, premier cru and grand cru Burgundy no longer bottled at the domains?’

At the press conference, Latour called on winemakers to not give into that temptation.

Extra reporting and editing by Chris Mercer.


See also: Burgundy 2019 excitement fuels strong Hospices de Beaune sales