Trump Tariff War Raising Supply Chain Costs for California Wineries

Trump Tariff War Raising Supply Chain Costs for California Wineries

Ask small business owner Greg Martellotto his opinion of Trump tariffs, and he’ll talk about the unintended consequences that are not being discussed and are largely invisible.

“They’re trying to punish the Chinese for something that clearly has nothing to do with (glass.) And who’s paying the bill? Me! And American small businesses. No one’s talking about it, no one that I’m aware of,” says Greg. “These things don’t seem to be well thought out. It doesn’t make sense.”

Here is a bit of background of the U.S. - China tariff situation:

  • 5/10/2019: U.S. increased tariff rates on $200 billion of Chinese imports from 10% to 25%, an escalation of ongoing trade tensions with China.
  • 6/1/2019: China increased tariffs on American wine from 48% to 93%.
  • 9/1/2019: China increased tariffs by 5-10% on one-third of American imports. U.S. retaliated with an additional 15% tariff on $112 billion of Chinese imports.

Tariff War Raising Supply Chain Costs for California Wineries

The California wine industry, already dealing with tight domestic glass supply amid rising costs, shifted sourcing to China. Today most California wineries use bottles made in China. But now new tariffs on Chinese glass make managing costs and margins that much more challenging.

Greg’s Santa Barbara County winery, Martellotto Winery, produces Martellotto wine and private label wine. For a recent private label bottling, he absorbed a 21% tariff on Chinese glass, a direct impact on his bottom line.

“The Chinese glass that we use for an inexpensive private bottling now has a 21% tariff on it, as a result of Trump’s tariffs. When you’re dealing with inexpensive wines, this is a real number, because there’s not much margin.”

Finding alternative sources for glass can be a challenge due to timing and costs, but many find themselves searching. Shifting supply takes time, and many wineries, especially smaller ones, might not have that luxury.

For example, when Greg tried to buy domestic glass, the lead time was 3 months. U.S. suppliers were either sold out and backed-up with orders. He had to turn to buying imported glass from China in order to keep his business moving and bottle the wine.

The unintended consequences of tariff wars affect the wine industries in both the U.S., and China, on both sides of the supply chain.

When Trump increased tariffs on Chinese imports to 25%, China raised rates on a range of U.S. imports, including California wine. 

China Tariffs Raising Supply Chain Costs for California Wineries

China then levied rates of up to 93% on California wine, resulting in a dramatic reduction in the sale of California wines to China.

China can source wine from other countries such as Australia, New Zealand, and South America, which have much lower rates and free trade agreements in place. 

A small-businessman like Greg might seem to have an advantage because not only does he own a winery, he has an import/wholesale wine business, and a direct-to-consumer wine business. But the tariff wars impact each of these businesses in different ways. 

No one in the wine trade is exempt from some impact and even if the tariffs are short-lived, the consequences might not be.

Greg asks of the politicians in Washington D.C.:

  • What was the original intention of the duties and why? 
  • Who do we intend to punish?
  • What are the unintended consequences? 

All excellent questions that remain unanswered.

“If the politicians don’t consider the impact on small businesses of these decisions, more small businesses will suffer, and many will go out of business.”

Martellotto Winery

About Martellotto Winery

Set deep in the heart of Santa Barbara wine country, Martellotto Winery makes handcrafted, beautiful and exciting wines using selected grapes from across California’s Central Coast. American Viticultural Areas (AVAs) include Happy Canyon AVA, Sta. Rita Hills AVA, Santa Ynez Valley AVA, and Santa Maria Valley AVA. 

Owner and winemaker, Greg Martellotto, specializes in Bordeaux varietals. Martellotto Winery is one of the few wineries producing single varietal wines of all five of the noble Bordeaux grapes: Merlot, Cabernet Sauvignon, Cabernet Franc, Petit Verdot, and Malbec.

Contact:

Greg Martellotto, Owner            

Martellotto Winery

https://martellotto.com/

How to Make Insanely Delicious Private Label Wine for LESS Money!

How to Make Insanely Delicious Private Label Wine for LESS Money!

You CAN make your own private label, insanely delicious wine, and spend less than you would for the same wine at retail. 

AND you have a wine that no one else has!

Why Make Your Own Private Label Wine?

Many people want to make wine today. But instead of commercializing wine, why not make your own wine for personal consumption? Some reasons you might want to make your own private label wine include:

  1. It’s easy and it reduces your cost per bottle versus retail.
  2. You’ll have your favorite wine on-hand all the time.
  3. You can drink better wine for less.
  4. Friends and family will be impressed.
  5. You can give it away to clients or for birthdays, anniversaries, holidays, etc.
  6. Someone is getting married and you need a lot of wine.
  7. It is the ultimate in personalization.
  8. You can share a barrel among friends.
  9. Because you can.

In short: Better Wine, Less Money! You can be the pioneer among your friends.

What are the Benefits to Contracting with a Winery?

It’s no secret creating wine is an expensive proposition. The joke goes: to build a fortune in the wine business, start with a larger fortune. 

If you want to enjoy the benefits of having a premium custom wine with your own label, then contracting out with a winery makes sense. 

The winery does all the work, including licensing and compliance, such as label approvals, reducing most of the risk.

You can choose one of their existing wines or you can create your own custom blend. 

It costs MUCH less than if you bought the same wine at a retail store, so you save money.

You’ll learn a lot about wine depending on your involvement in the process.  According to Wine Spectator, an average wine barrel contains roughly 60 gallons of wine. This represents about 25 cases or 300 bottles.

You can arrange for one barrel of wine and have 25 cases sent to your home.  Each one of the 300 bottles could show your face, or your dog’s. At one bottle a week, the wine would last for six months. The cost runs about half that of buying the very same wine off a retail shelf. 

It’s Easy to Get Started

Find a winery partner.

For the wine, determine the quantity, the type and style, and the bottle and label you want. 

Cost depends on the quantity, the wine, the bottle size and style and the label. Delivery costs are additional. 

The winery will craft your wine, bottle and label it and deliver it depending on your needs. 

Too Good to be True?

In the past, bulk wine producers made most private label wines of low quality and low price. Many still do but other producers have entered the market. You find more higher-quality private label wines now.

But not many individuals have a private label wine to serve in their homes. Custom private label wines for personal use have not yet caught on in the market.

Producers haven’t really considered reaching out to those consumers who might be interested.

Therefore, it can be difficult to find the right winery that offers what you want, when you want it and at the price point and quality level you want. 

Not every winery has access to premium grapes or equipment to make and age such wines. And not every winery is interested in making wine at smaller quantities.

Drink Better Private Label Wine for Less Money 

If you are serious about having your own private label wine, and you love Santa Barbara County wines, contact Martellotto WInery.

Martellotto Winery offers a unique opportunity to have your own top-quality wine. Choose one of our wines or work with our winemakers to create a custom wine. 

With access to the best vineyards in Santa Barbara County, Martellotto will make your premium quality Cabernet Sauvignon, Pinot Noir or Chardonnay at a fraction of the retail price.

Minimum quantities run around 336 cases. Cost can run anywhere from $10 to $30 per bottle for wine retailing from $20 - $60 per bottle.

We do the work, so you don’t have to. Interested? Fill out this form to get started or call Greg at (619) 567-9244.