The Office of the United States Trade Representative (USTR) is considering a second round of tariffs on European goods in connection with France’s Digital Services Tax & the WTO’s recent ruling on the Airbus/Boeing dispute. These tariffs could range from 25-100% on all EU wines, among other European goods.

The impact of such drastic tariffs would be devastating to all members of the wine industry, including importers, distributors, restaurants, retailers, and even domestic wineries. The US wine industry employs 1.74 million people, thousands of whom would risk losing their jobs. The American wine community as a whole–across all three tiers–has come out in extreme opposition to these tariffs.

Volio has respectfully asked that our administration remove the proposal to tariff wines from Europe. Read the letter below from Charles Lazzara, Volio’s founder and President, to Ambassador Robert Lighthizer.

What can you do?

• Comment on the US Trade Representative’s proposal here (public comments open until January 13, 2020.
• Sign a letter that will be automatically sent to your US Representative here.
• Sign a letter that will be automatically sent to your US Senators here.
• Sign Change.org’s petitions here and here.

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Letter from Volio’s CEO to USTR

Ambassador Robert Lighthizer

U.S. Trade Representative

Office of the U.S. Trade Representative

600 17th St. NW Washington, DC 20006

 

Re: Docket No. USTR-2019-0009 and Docket No. USTR–2019–0003

 

Dear Ambassador Lighthizer:

I started Volio Imports in 2007, at the age of 25, with no prior experience in the wine business.  The market was difficult but 5 years of sleepless nights and a lot of hard work allowed me to grow my business, hire talented people, and expand.

My experience has shown that it takes roughly seven years to build brand awareness with independent retailers and restaurants in the US. I have seen this play out as my business, Volio, has expanded from Colorado back in 2007 to now sell our portfolio of wines in 45 US states.

One may ask: why it is so challenging to build a wine brand in the US?

The response is simple:  there is a bottleneck (pun fully intended).

When the US repealed Prohibition, the federal government essentially said: “If you want your booze back, figure it out yourselves,” thus leaving each state to create their own liquor laws. The only federal stipulation was to maintain three tiers: Importer/Supplier; Distributor; Retailer. At the time, the US wine market was naturally immature. There were very few US wineries and little competition from around the world. Wine was culturally relevant in Europe and several countries around the world but it was still decades from having a consistent place at the American dinner table.

Fast forward to 2020 where there are roughly 10,700 US wineries, representing nearly one million acres of planted grape vines.¹ In Europe, there are 7.9 million acres under vine, representing roughly 45% of the total vineyards worldwide.² The majority of these wines dream of having a stable presence in the United States but struggle to navigate the complexities of our industry.

Enter the bottleneck.

Importers and US Wineries employ more than 64,000 people in the US as of 2017—an increase of 153% since 2001—and are the first gate keeper to quality wine in the US.³ We travel the world searching for wines that will resonate with our customers and uphold the principles that define our respective missions and visions. From literally thousands of wines tasted each year, we may add 10-20 to our portfolio. The average importer will market roughly 200-300 wine selections in a portfolio and operate on less than 30% margins. In order to build these brands, we employ sales people who spend 120+ days a year in hotels, traveling by car or air, regularly working holidays and weekends to educate and connect to consumers.

There has already been significant consolidation for US wine distributors over the past 30 years, with 1,100 distributors in 2017 down from 3,000 in 1995.⁴ The top three US distributors employ roughly 40,000 Americans and select wines from import portfolios or work directly with winery suppliers in the US.⁵ Most distributors operate on 25%-30% margins. They invest heavily in inventory and employ thousands of talented, highly skilled jobs ranging from warehouse and delivery professionals to accountants and sales people. These companies need a balanced, global offering of competitively priced wines and spirits to remain relevant in a super-saturated, highly-competitive market. Like the imports tier, it is not unusual for this level of the industry to work weekends, holidays, and 50+ hour work weeks to earn the business of retailers and restaurants.

Retail and Restaurants are the last stop. From hundreds of thousands of wines, spirits, and beers available in the US, consumers will see less than 150 wines from Europe at the average grocery store and less than 20 wines from Europe on the average wine list.

Our livelihoods, our families, and our futures depend on the balance we have struck over years of blood, sweat, and tears dedicated to this industry.

Since the initial tariffs, applied in November 2019, and the subsequent proposal of potentially 100% tariffs on European wines and other luxury goods, Volio has held off hiring three new positions for 2020. We are a small importer, by comparison, but our customers and colleagues have shared similar strategies as we wait to see if “Import Armageddon” sets in. These tariffs will break importers as we are asked to shoulder the pricing burden with our supplier partners in Europe.

The tariffs you are proposing have shaken our industry, caused thousands of new jobs to go unfilled, and delayed significant capital investments. We have become party to a dispute that we played no role in creating. The US government has decided to use our industry, among others, as a pawn in a game of global chess over one company.

The current administration campaigned on protecting American jobs, yet, as opposed to isolating the Boeing / Airbus dispute to its industry, our elected officials have decided there is greater geo-political benefit risking hundreds of thousands of US jobs across several industries to protect Boeing.⁶ In short, the bottleneck is about to meet the guillotine.

As unfair as this is to our industry today, it paints an even darker picture about future trade disputes.

I respectfully ask you to remove the proposal to tariff wines from Europe.

 

Charles Lazzara

Founder & CEO

Volio Imports

 

References:

¹The National Association of American Wineries

²Eurostat, October, 2017 (ec.europa.eu)

³Bureau of Labor Statistics, July 9, 2018

⁴Food & Power, Leah Douglas, November 30, 2017

⁵Wine & Vines Analytics, Stacy Briscoe, 9/2018 issue

⁶KPMG July 25, 2019 “France: Digital services tax (3%) is enacted”