Wine importers started the year weary. Since last October, they have been caught in the middle of a battle between Boeing and Airbus, the world’s largest airline manufacturers. To pressure European leaders to stop subsidizing Airbus, the Trump administration tacked 25% tariffs onto French wines, among other goods, and then threatened 100% tariffs on all European wines.
Jenny Lefcourt, owner of the natural wine portfolio Jenny & Francois, stopped ordering wine, fearful that the second round of tariffs would bankrupt her business. But her outlook soon brightened. Owing to customers’ shared fears over increased costs, Jenny & Francois had a record January with a 50% increase in sales.
After intense lobbying efforts, a second round of tariffs was defeated and orders resumed—until three weeks later when restaurants across the country shut down due to the coronavirus. On-premise sales plummeted to near zero.
“It’s like being perpetually kicked in the gut,” says Dionysi Grevenitis, owner of DNS Wines, a boutique import business based in New York.
Importers of all sizes have taken a major hit from hollowed-out restaurant sales, but the landscape is more precarious for smaller importers, like those owned by Lefcourt and Grevenitis, whose portfolios skew heavily toward on-premise wines.
Moving off on-premise wine
Despite looming tariffs, Jan D’Amore, owner of Jan D’Amore Wines, kept buying stock through January and February. Unfortunately, his portfolio was on the wrong side of a 70/30 split between on- and off-premise sales. “Now I’m stuck with a lot of wine, especially by-the-glass placements at restaurants,” he says.
Nationally, retail sales are booming. Nielsen reported that wine sales rose 66% the week of March 21, and online sales of all alcohol spiked 243%.
D’Amore has only seen a modest uptick.
In contrast, Frederick Wildman and Sons, known for its fine French wines, made a strategic move in 2019 to import mass-market Riunite. They’re now moving 1.5 million cases of Riunite a month, 95% of which is sold retail. President and COO Marc Hirten projected a 30% drop in sales after restaurants closed, but their numbers are only down 14%.
Terra Firma’s initial shipment of wines was on a boat in the Atlantic Ocean when the first round of tariffs went into effect…the federal government levied a tax bill that would have paid for a year and a half of their daughter’s tuition at University of California, Santa Barbara.
Another unexpected boost for Wildman came when Pennsylvania shut down all its state liquor stores. Desperate Pennsylvanians have been crossing the border to buy wine from stores in New Jersey, one of two states where Wildman is both an importer and distributor.
The biggest liability for large importers is overhead and payroll. Wildman had to lay off 20 sales people from its 165-person workforce, though they expect to hire them back after the crisis has abated.
“My hope and goal is to keep the whole team together through this,” says Lefcourt, who employs 10 people at Jenny & Francois. “I adore my team. It’s a bit of a challenge making sure that happens. We’re looking at a huge loss from restaurant revenue, having all this wine sold to restaurants in March that they can’t pay for. I don’t know if some of that will eventually come back in or if it’s going to a total loss.”
Even as some states have allowed restaurants to sell wines to-go, most are working through inventory meant for by-the-glass sales, and are now competing with retailers. Revenue from those sales is going toward paying staff or other unnegotiable costs.
“Some people have said they can’t repay us until they reopen,” says Hirten. “Others have been paying but postmarking the check for later. There aren’t a lot of delayed payments now because no one is buying anything.”
Federal help is slow to come, if at all
Hoping to shore up cash flow and pay their employees, several of the importers we spoke to applied for the Small Business Administration’s Paycheck Protection Program (PPP) funding. None received it in the first round. Along with restaurant owners across the country, they have watched government relief funds awarded to not-so-small businesses like Ruth’s Chris, Shake Shack and Pollo Tropical. Some of the companies have since pledged to return funds after an intense public backlash.
Kristen Talley, who owns Bay Area-based Terra Firma with her husband Ted Talley, planned on using $50,000 in PPP funding to bring her two-person sales team onto payroll rather than have them rely on uncertain commissions. She filled out an interest form with Wells Fargo 15 minutes after it was posted online. After two weeks of misformation and multiple website and form crashes, Kristen finally got in an application only to miss out on funds entirely.
“We seem to be really good at bad timing,” she says.
The Talleys operated as a distributor for 16 years before they converted Terra Firma to an import business last year. Their initial shipment of French wines was on a boat in the Atlantic Ocean when the first round of tariffs went into effect, and the federal government levied a tax bill on the wines that would have paid for a year and a half of their daughter’s tuition at University of California, Santa Barbara.
“Instead of giving us loans, just cancel the tariff, and we’ll have more money to pay people.” –Jenny Lefcourt, owner, Jenny & Francois Selections
Terra Firma’s wines didn’t arrive until the fourth quarter of 2019.
“If we had only a few more months under our belt…we needed time to introduce the portfolio,” says Ted. “Where we have placements with retailers, they’re reordering, but retail sales haven’t gone up for us. Our lower-end wines, at $240 a case, those are selling just fine. The wines that are $400, $500, or $800 per case, well, those are aging gracefully.”
It’s the esoteric bottles, the gems that sommeliers fall in love with and have to hand-sell to diners, that importers are struggling to move through the retail market.
The Talleys are experimenting with direct to consumer sales through a collaboration with The Taste Edit and Ceri Smith, a sommelier who owns the San Francisco bottle shop Biondivino.
“In the beginning, we joked that we got the direct to consumer permit just so we could sell directly to my dad,” says Kristen. “But like everybody, we’re exploring what we can do to keep our company alive.”
Can importers adapt to a changing market?
In the short-term, importing isn’t suited to the types of grand pivots that restaurants and other businesses have made during the crisis. Strategies have shifted, yes. More wines are being funneled into the retail space. But the general consensus is work, wait and see.
“I’m just bobbing around in an ocean. There’s no pivot,” says Grevenitis. “I wind up taking a few orders each day. I process the orders. I watch my bottom line and cash flow. You do the best you can.”
Similarly, winemakers continue to work in their vineyards, pruning and tending vines that are oblivious to the coronavirus. Winemakers Chiara Penati and Michele Conoscente from Oltretorrente in Paderna, Italy, sent a note to buyers, including the Talleys, about the shoots of new Timorasso vines emerging from the soil and grass to be weeded from rows—but also about big equipment purchases they made before the crisis, land they planned to purchase but cannot, and grandparents who will sit out harvest this year.
The pain is especially acute for small producers. Lefcourt buys from a rosé producer who can’t get anyone to help her bottle wine. Other winemakers, who drive cases to Paris’s wine bars and restaurants, have seen sales completely dry up. “They’re nervous, asking us if we can order wine,” says Lefcourt.
Grevenitis works with a Greek producer who buys bottles from Italy and crown caps from France. “The supply chain is broken,” he says. “It’s difficult to access raw materials, and then there’s the issue of getting labels printed and sent to the winery. All these things will create delays.”
Highly allocated and high-volume wines face fewer hurdles. Consumers can be confident Zachys will have super Tuscans, and Trader Joe’s won’t run out of $9.99 Pinot Grigio anytime soon.
“The orders I have going out are sitting in port. There aren’t enough containers being filled and not enough ships coming to the United States.” –Jan D’Amore, owner, Jan D’Amore Wines
One universal pain point is that cargo and freight costs have risen as demand has gone down. While Wildman, Winebow and Southern Glazer’s can easily fill whole containers at port, boutique importers must share.
“The orders I have going out are sitting in port. There aren’t enough containers being filled and not enough ships coming to the United States,” says D’Amore. “Normally in April, I need a constant flow of stock. But there’s so little movement of quantity, now I can live without wine for a month.”
On the bright side, highly allocated wines that diners could only purchase at restaurants will be available in greater quantities in stores. Lefcourt also says that if consumers continue to buy the wines they love, regardless of where and how they are purchased, importers can continue to bring them into the U.S. while minimizing disruption to the supply chain.
However, there will be still delays and temporary shortages of wines from small producers in Europe. And since the coronavirus arrived later in the Southern Hemisphere than the Northern, effects on South America and its wine industry are still unknown.
Specific vintages also may be delayed.
“Now is the time for me to order new white wine releases,” says D’Amore. “We usually start buying six to eight months out. It’s going to have a domino effect. Wineries will be stuck with new releases, because no one has sold stock of the previous vintage.”
Anxiety over a loss of premiumization
Another fear is that lasting financial woes will push consumers toward less expensive wines, as they did in 2008.
“Over a period of time, people buying $30 traded down to $20 and then the mid-teens,” says Grevenitis. “Inexpensive, volumetric wines did better than more expensive wines. We don’t know how long it will take to reopen. We don’t know whether the virus will resurface in the fall, or how it will impact OND—October, November and December—when we do a significant portion of our business.”
That will make two years of uncertain OND for importers, though having adapted to the tariffs, the industry is better connected and organized than they were previously.
“Last fall, I was down with 10 competitors, marching around the halls of Washington,” says Hirten. “We were captured in this Boeing Airbus thing, and it was just so absurd. All of a sudden, we were able to work together.”
Hirten and Lefcourt were instrumental in helping defeat the 100% tariffs, and they say that the best relief the government could give to importers is to cancel the 25% tariff on French wines.
“Instead of giving us loans, just cancel the tariff, and we’ll have more money to pay people,” says Lefcourt.
If there’s any silver lining, it’s the community that has emerged through the crisis. Facebook groups created to help defeat the tariffs lit up with information about applying for federal coronavirus relief.
“I am waking up most days optimistic…3 am to 4 am is a different matter.” –Kristen Talley, co-owner, Terra Firma Wine Company
Lefcourt has turned to Instagram Live to connect with consumers and give sommeliers and winemakers a platform to talk about the bottles they love. The Jenny & Francois feed has featured Miguel de Leon from Pinch Chinese, Hardy Wallace from Dirty & Rowdy and James Jelks, whose Florèz Wines Lefcourt just added to her portfolio.
The Talleys have been pleasantly surprised by the number of payments that keep flowing in. “I think it’s partly because when people look at us, they think, ‘They’re the little guys,’ ” says Kristen. “Everyone in our immediate circle has shown integrity and passion—we’re all in this together. I am waking up most days optimistic…3 am to 4 am is a different matter. But we haven’t lost our sense of optimism.”
Wildman is connecting its staff with European winemakers in twice weekly trainings. They ship out bottles to all employees, and then have winemakers like Valentina and Davide Abbona, from Marchesi di Barolo, lead virtual tastings and winery tours.
“This period of time has created a huge opportunity to train our own organization on all our fine wines,” says Hirten. “It’s also a nice way for us all to connect. Your job is your second family. When you see everybody’s faces on the screen, it gives you a sense of connection.”
Wildman is working with restaurants and retailers to promote winemaker dinners for which meals and bottles are delivered to diners’ homes, and Hirten hopes to soon hire out-of-work sommeliers to write articles, reviews and tasting notes.
An uncertain future
Importing has always been a business of relationships with wineries and vigerons on one side, and distributors, restaurants, and shops on the other. The wines that importers buy helps employ farmers, bottlers, boxers, truckers, salespeople, sommeliers, servers, receivers and captains. The chain of workers from a field in France to a cellar in New York City is intricate, and it’s currently broken.
The tempered good news is that wine can wait and most importers think they’ll be able to generate enough revenue in the next few months to survive.
“We must recalibrate and accept the fact that we’re not going to be a thriving business in 2020,” says D’Amore. “It’s enough to keep us going and to give us employment, but not the feeling like we’re on top of the world. We importers are still lucky to have a job. That’s the bottom line.”
Last Updated: May 8, 2023
