Tariff Fallout (hopefully this is our last tariff article ever!)

By |2020-02-27T07:40:15+00:00February 26th, 2020|Economics, France, Germany, Spain|

You’ve undoubtedly heard the news that we dodged two massively concerning tariff-related bullets this January and February. There remains a great deal of misinformation in the market about tariffs in general – Let’s take a few minutes to review United States Tariff policy, where things currently stand, and what we can expect moving forward.

Let’s give huge props to those in our industry who took the time to stand up to current and proposed tariffs between October 2019 and February 2020. An astonishing 25,624 public comments were logged on the USTR Large Commercial Aircraft Tariff docket, and 3,761 on the USTR French DST Tariff Docket. We believe that loud uproar made all the difference here, and if you were part of the noise, thank you. Individually we would like to thank Jon Bonne for his far-reaching guest post via CNN, Harmon Skurnik for his terrific contribution in The Washington Post, Marvin Shanken for his aggressive work in using his reach to generate consumer uproar, and the two dozen industry leaders who spoke on everyone’s behalf at the actual USTR hearing this January: Jeff Zacharia (National Association of Wine Retailers), Richard Blau (Sokolin), William Tomaszewski (Wine.com), Benjamin Aneff (Tribeca Wine Merchants), David Waldenberg (BNP Distributing), Peter Weygandt (Weygandt-Metzler), Michelle DeFeo (Laurent-Perrier U.S.), Annette Peters (Bourget Imports), James Federico (VINTUS), Barkley Stuart (Southern-Glazers), Jenny Lefcourt (Jenny & Francois Selections), Philip Burkhart (Latitude Wines), Eric Faber (Cutting Edge Selections), Timothy Gagnon (Selection Massale), Michael Daniels (Vintage 59), Mary Taylor (Mary Taylor Wine), Christy Franc (Copake Wine Works), David Bowler (David Bowler Wine), Edward Swain (Devenish Wines), Geoffroy Ducroux (Avant Garde), Lyle Fass (Fass Selections), and Eben Lillie (Chambers Street Wine). If you have yet to read Alder Yarrow’s account of the hearing you ought to. It is well-worth your time.


What is the deal with an American President imposing tariffs anyway? Didn’t our school textbooks consider this a duty of Congress? Responsibility for tariffs was placed in the hands of Congress in 1779 via Article I of the U.S. Constitution. This responsibility remained with Congress until the Cold War era, when several statutes were passed, which in effect moved the responsibility of tariff and trade enforcement to the Executive Branch. The rationale for these changes being that in a new Cold War-era, most trade disputes were more closely related to national security than to commerce.

The two tariff threats that stressed all of us out this December-February came way via “Section 301 Investigation.” What exactly is a Section 301 Investigation you ask? The United States Trade Act of 1974 authorized the President of the United States to impose tariffs on a country if the United States Trade Representative (USTR) found that an “act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce.” This practice was used moderately between 1974 and 1994 (123 total Section 301 investigations if we want to be precise). The practice almost completely disappeared after 1994 thanks to the creation of the World Trade Organization, which was created as a “better” (and most importantly multilateral) solution for all involved in the new, post-Cold War era. President Trump famously came to office with a “different” approach to established institutions, including an aggressive and unilateral take on trade negotiation, unlike anything we’ve seen in U.S. history. The President has brought the practice of the “Section 301 Tariff ” back from the dead, with his first bomb being the Section 301 investigation that sparked the well-documented economic mess that is the US-China Trade War.

This is not a political post and I’m trying to stick to the facts. Do a bit of reading, and you’ll find that almost all economists agree that Trump’s use of Section 301 tariffs have harmed all economies involved. When you lump together the various tariffs the Trump Administration has imposed during the last 24 months, The Tax Foundation’s “Tariff Tracker” cites a significant GDP loss, decreased average wages, and 394,000 lost jobs. The United States Treasury released similar findings this January stating that while the U.S. economy has remained healthy, this is “in spite” of destructive tariff-driven U.S. trade policy. With such results, we now have various groups of Senators and Representatives working to amend the current Cold War-era trade statues that give President Trump to execute tariffs and tariff threats at will. If some of these proposed changes go through we could see an increased role for Congress overall in tariff-related matters, limits to the types of threats a president can reference as a justification of tariff implementation, a time limitation on the duration of any President-determined tariff schedule, and possibly full shifting of the responsibility of tariff imposition from the President to other parties (Congress and/or the Secretary of Defense).


We’ve avoided immediate catastrophe on two fronts so far this year. Let’s start with the proposed “Up to 100% Tariff ” on all French Sparkling Wine. This was a hardline negotiating tactic Trump used to talk Emmanuel Macron into suspending the retroactive Digital Services Tax France unilaterally imposed in 2019 for implementation on January 1, 2020. There are interesting storylines and theories as to Trump’s strategy there, we’ve covered those in prior posts, and the bottom line is that an agreement made at the World Economic Forum in Davos this January means that both sides have kicked the issue to the curb until January 2021. In the meantime, the Organisation for Economic Cooperation and Development (OECD) will attempt to create a multilateral long term framework for the taxation of digital services in all developed countries. We are not holding our breath on a full resolution from the OECD between now and next January, as the issue is extremely complicated. By definition, any digital taxes imposed by individual countries or by a comprehensive OECD policy will disproportionately affect the U.S. based companies who control most of the globe’s digital landscape (Google, Apple, Facebook, and Amazon). Yes, we can think of this January Macron/Trump outcome as a temporary “win”, but know that this whole DST issue is an ugly beast due to make a return in the near future.

On Valentine’s Day we dodged the second big bullet of 2020, which was a potential restructuring of the tariffs imposed on wines from France, Germany, Spain, and the United Kingdom as reparations for the WTO decision that determined these four countries unfairly subsidized Airbus at the expense of Boeing. The USTR’s Section 301 Investigation found that Airbus subsidies had continued since the original WTO ruling, and the fear was that tariffs would expand to additional categories (all European countries, all alcohol levels, and formats, and up to 100%). In the end the USTR made little change to the tariff categories initially set in October 2019, with the most notable difference being a 5% tariff increase on aircraft parts imported from E.U. countries. In theory no further changes will be made to this tariff schedule until mid-August, which means that we can order with minimal fear of arbitrary tariffs coming into play during the transport time of EU-USA container vessels, which was the nightmare situation that resulted in a widespread stoppage to most EU-USA wine import activity from December through mid-February.


While it is nice to have some predictability, two threats loom on the horizon. First is Italy’s Digital Services Tax – This 3% tax went into effect on January 1 2020, and Trump has publicly denounced it as “no bounissimo,” saying that by definition any tax on digital services targets U.S. firms (the majority of Italy’s Digital Services revenues come through Google, Apple, Facebook, and Amazon). Whether this will escalate into a similar standoff to the one we witnessed between Trump and Macron is anyone’s guess, although at this point, we will assume that things are safe until January 2021.

The more provocative threat relates to a potential trade war escalation that could occur when the WTO releases final reparation settlement numbers to the European Union this May/June as a result of the second Airbus/Boeing case. This is the exact opposite case that spurred the tariffs awarded to the U.S. – It will almost certainly award similar tariff permissions to the E.U., as the United States illegally subsidized Boeing in the same capacity that the European Union subsidized Airbus. Should Trump take offense to E.U.’s actions on these tariffs, we may see the escalation of a real titfor- tat trade war on par with the 2017-present China debacle. With an election cycle in progress and as of this week plummeting global stock markets, we expect that the likely May/June tariff permissions awarded to the E.U. will mean a late 2020 settlement between both sides and the elimination of all Boeing/Airbus tariffs by early 2021.


As we detailed earlier, our direct import model has kept pricing reasonable for most of what we import, with our retail prices remaining below the pre-tariff national average for most wines in question. For some details on this please see our initial post from the grapex.com blog. Products handled through third-party importers have been much more of a challenge, we’ve discontinued a few dozen due to unacceptable proposed post-tariff price levels, and this will continue to be an issue if tariffs drag on. We guess that folks who function solely in the “importer” trade will cut down on employees to establish a leaner margin model.

We’ve experienced a large amount of growth with customers looking for compressed margin solutions, and our post-tariff sales figures are significantly up versus the same period last year, especially so for our Washington, Oregon, and California 3PL arm.

Some of us predicted a spike in non-tariff categories – We have not experienced action on this front, probably due to the efficient direct pricing structure mentioned above, but also because there are few actual substitutes for the impacted categories – New Zealand Sauvignon Blanc does not replace Sancerre, Oregon Gamay is still overpriced versus tariffed Cru Beaujolais, and nothing from the New World seems to beat $10-$15 tariffed Sur Lie Muscadet as a mineral-driven oyster companion.

The biggest issue for us at Grape this far was our decision to suspend shipments from the time of the December 6th announcement of possible tariffs and the February 14 resolution. We now have a backlog of containers on the water, and you can expect some short inventory gaps in staples like O+T Sauvignon, Fevre Fevre Chablis, Bonnamy Rosé, and Bag in Box Lumieres Cotes du Rhone.

Overall most of you on the “buyer” side would agree that there has been an oversupply of SKU’s in market. Buyers will see a thinner selection in terms of availability in 2020/2021. Smaller importers and distributors will be foreced to close (more than a few will be unable to handle the cash flow burden of 25% tariffs, which are due upon arrival in port rather than at 90 or 120 day terms as is customary with actual invoices on imported wine). We expect surviving distributors to act similarly to us in discontinuing, for example, that $17 pre-tariff third-party-sourced Cahors, which is now $22 and just outside of an acceptable price range.

These unilateral tariffs amount to a tax on every layer of our trade. They are paid by French producers, who are almost universally giving their U.S. importers and distributors a 10% discount to help combat tariffs. They are paid by American importers/distributors, all of whom are sacrificing margin as well. They are paid by American consumers, who, despite the sacrifices of the channels mentioned above, end up spending on average $2-$4/bottle more for the same bottle of impacted wine than they did this Fall. As we’ve stated on this platform previously, here is to a timely resolution of these unusual and mutually destructive disputes.

Comments Off on Tariff Fallout (hopefully this is our last tariff article ever!)

Tariff Update

By |2019-12-19T02:17:10+00:00December 19th, 2019|Economics, France, Germany, Spain|

Collectively all of us are beginning to experience the impact of the first round of wine tariffs which were the Trump Administration’s reaction to the WTO’s Large Commercial Aircraft decision in mid-October. Last month I posted about this initial tariff in some detail, and with the announcement of two more upcoming tariff waves my phone is ringing off the hook – For this reason today seemed like a good time to break the current situation down for you.


This is not a political post, and without taking any political stance I’ll say this: Over the last 80 years it has become crystal clear to anyone with a basic understanding of economics and/or history that in almost all instances tariffs decrease long-term economic prosperity for all parties involved. They restrict our natural human instincts to cooperate, limiting our personal freedoms while in the process inviting opportunities for distortion and fraud. Tariffs are as un-American as martian space dust – This is a universal truth that people on all sides of the political spectrum will agree with.

Tariff Round One

As we all know the October tariffs (aka Large Commercial Aircraft Tariff Resolution Round One) only impacted a select group of wines – Still wines at 14% or below ABV from France, Spain, Germany, or the United Kingdom. Because the US Government only gave the our industry 11 days of notice, all major importers inevitably had millions of dollars of goods on the water during the time of announcement and this spelled cash flow devastation for many…Why the cash flow devastation you ask? These tariffs are due (and in most cases auto-deducted from bank accounts) upon the physical arrival of product in destination port. Were you an importer with four containers of wine on the water on October 17th? Let’s assume each container contained $100,000 worth of wine? Congratulations you now instantly and unexpectedly owe the United States Government $100,000 (a 25% tariff on the value of each container means $25,000 times 4 which means $100,000). This “four container’ scenario is pretty mild. Most mid-sized importers/distributors in our industry had much higher volume than this on the water at the time of announcement. I did not get into the aforementioned cash flow angle when originally covering this topic, but at this point I’d say it is the most disastrous implication of the whole mess.

Cash, credit, and insurance…not the most exciting of topics, but essential in this discussion. Most European wineries rely on one of two credit insurance companies to cover their receivable risk, and these companies proactively dictate the amount of receivable debt a winery can hold for a given US importer/distributor. What happens if/when these credit insurance companies refuse to cover receivables for US importer/distributors? We’d end up in a situation where all business is prepaid, with the extra strain of a tariff bill due upon port destination. This is untenable and would mean a stop to most EU-US wine commerce. All is still “green light mode” with the major credit insurance companies, but my colleagues in London tell me they know of uninsured wineries who are now starting to refuse the release of new orders to US importer/distributors fearing that October’s tariff surprise will end up bankrupting their US importer/distributor customers due to the implications of the cash flow strain of the initial 11 day “surprise” cited above. An ominous sign.

From a pricing standpoint, almost all impacted European wineries graciously offered at 5-10% discount to help absorb the 25% tariff bill. From there one of two things happened. Firms who operated on an “Efficient” business model (i.e. one with minimal channel waste, most often this meaning a direct import route to market) accepted offers from wineries on this 5-10% discount on new invoices, squeezed their own margins to share in the pain, and made small upward adjustments to prices, resulting in retail pricing on average a few dollars higher than it would have been pre-tariff. For the efficient firms things are more or less going by math laid out in the example I used this October where a 3,40 Euro cost directly imported, $12 retail French Chardonnay ends up at $15 retail post-tariff. For this “Efficient” set life is lean but still manageable. How about firms who operate on a “Less Efficient” business model (ie one mostly dependent on three separate 30% margin tiers)? The majority of imported wine in the US comes to the consumer this way. Most of these firms panicked. Anyone in that camp knew that their $15 pre-tariff Chardonnay was already $3 too expensive and that seeing it go to $18 post tariff would mean a screeching halt on the sales front. A 10% reduction in ex-cellar cost from the winery does little to help when you have a 25% tariff with three margins stacked on top of one another, so what we have seen with the “Less Efficient” crew is either denial (i.e. no price changes and no new containers on the water), salespeople agreeing to lower commission rates, or end-of-year layoffs, and in some cases a depressing combination of all three.

The retail side has been slightly less interesting thus far but things will devolve quickly in 2020. At most chains distributor price increases are passed onto monthly shelf tags regardless of whether or not stock was purchased prior to the tariff/price increase. On this front we saw a relative slowdown in depletions of our impacted wines (yes we have fast container turnover and ended up with a long list of Nov 1 price changes) – Consumers in general snubbed their now-more-expensive “first choice” for a similar style replacement from a non-tariffed region. At bottle shops we saw smart buyers avoid early tariff items, preferring to purchase as much pre-tariff stock as they could find while it is still around. For the country’s largest independent retailers, who represent a huge amount of 3PL business for us, we saw a crippling effect – Pricing on this level needs to be competitive with global Wine-Searcher averages, a large volume of these sales are invoiced to end-consumers pre-arrival, and uncertain tariffs meant a complete freeze on futures orders for European wines. Many Bordeaux negociants are penciling in “0’ for their 2020 USA sales projections. Inventory turnover from winery to shelf with this retail sector is fast, and this sort of low margin 3PL business almost always necessitates immediate tariff payment on behalf of 3PL import partners – Something not in the business model or capability of most of the United States’ high-volume independent retailers. Dominoes will fall, even with just the initial 25% tariff.

As if this wasn’t enough chaos we were welcomed with two new tariff surprises in early December, which we will call Tariff Round Two: “The French Digital Services Tax Tariff” and the Tariff Round Three: “The Second Installment of the Large Commercial Aircraft Spat.”

Tariff Round Two

Round two brings us the Trump Administration’s reaction to the new 3% Digital Services Tax France retroactively placed on large American technology companies this summer with a 1/1/19 effective date. What is this tax you ask? In short it is France’s attempt to regain tax revenue that has “gone away” as fulfillment of goods and services continues to shift from French-owned brick-and-mortar firms to multinational digital firms. How does this go down exactly? Let’s say Amazon.fr invoices a baseball bat to a consumer in Dijon. Local French governments theoretically lose out on much the tax revenue that would have been created by a brick-and-mortar firm. Most studies quote this revenue loss at 13% in total (on average digital service “sales” generate 9% in combined French local/national tax revenues, whereas brick-and-mortar “sales” generate 22% in combined tax revenues). The European Union has been working on a unified taxation plan to address this revenue shortfall, but limited progress has been made and the French went rogue in taking a unilateral decision to blaze ahead with their own taxation plan. Why? France has a huge budget deficit and must pay for, among other things, the agreed pension and social safety net demands of the “yellow coat” movement (remember that last winter?). Ironically most experts on either side of the aisle consider France’s Digital Services Tax a tariff in and of itself and the odds are high that if this tax makes it to a WTO trial, France will lose in the same way the European Community lost the Large Commercial Aircraft case this October. Harvard Business Review breaks down this digital tax controversy thoroughly, have a look by clicking here.

Regardless of a person’s position on France’s approach to the taxation of digital services, a tentative “deal” was reached between the US and France this Fall where taxation of such services would be addressed and resolved by 2021 with any overpayments from France’s existing 2019-2020 rates refunded to Amazon, Google, etc. at time of a final multilateral agreement. Everything seemed fine, but earlier this month the Trump Administration decided open up a Section 301 investigation into the “discriminatory nature of the French tax,” playing offense by threatening tariffs during what most pundits assumed would be a balanced 24 month negotiation period. The gory details? The Trump Administration promises a tariff of up to 100% on all French sparkling wines along with many other French luxury goods including most cheeses, spirits, porcelain cookware, and designer handbags. To read the full list of items tentatively slated for this 100% tariff you can click here.

The Trump Administration by matter of policy accepts open comments which are due until 1/6, and we expect a final decision on 1/14. From there we project that this round of tariffs will go into effect 1/17/20 based on the short 11 day notice given the last time around. The consensus amongst government contacts in both the US and in Europe along with our colleagues in the freight industry is that this round of tariffs will proceed in full as threatened. Because it hits some very powerful interests (Louis Vuitton Moet Hennessy for example), things could get explosive and that is of course Trump’s whole point in targeting the categories listed.

As a frightening side note, other countries including Italy and Turkey are attempting to enact similar digital services taxes independently of a more coordinated EU approach. Not good.

Tariff Round Three

Now is the time to talk about Tariff Round Three, which is the result of a 12/2/19 WTO rejection of the EU’s appeal to October’s Large Commercial Aircraft case – The one that put the initial round of 25% tariffs into effect. Why was the EU’s appeal rejected? The WTO determined that the EU is continuing to subsidize Airbus illegally, which resulted in more Trump Administration activity and this new tariff threat. What are the details here? We are looking at a second round of tariffs on a broad assortment of European goods, all of which are threatened to go up as high as 100%, and this time they include all categories of wine and also all EU member countries. To read the whole list, grab a glass of scotch while you still can and click here. The Trump Administration is accepting comments on these proposed tariffs until 1/13, with a likely decision to be announced on 1/17. All final tariffs from this wave are expected to go into effect on product landing in port after 1/28/20, again, based on an assumed 11 day notice period. Kleenex are not on the list which is good because we will need them should this pass.

What Next?

Some importers are hot-shotting wine into the USA in “buzzer beater” fashion – This theoretically works for East Coast ports assuming wine is loaded in the next week or so. Strikes in France are making this difficult however. Others are shipping wine via air freight, which is an approach we’ve taken on some higher-end wines (it makes little economic sense for anything over 15 Euros in cost when you take into account that air freight plus airport customs clearance will run you upwards of $3.50 per bottle on a good day). Both are only band-aid solutions, and gambles at that.

This is all part of a perfect storm when you factor in the other two major global export markets for premium French wine: Hong Kong and London. The riots in Hong Kong brought fine dining/tourism/consumption/trade in that market to a screeching halt, and these riots were ironically triggered in no small part by the US versus China tariffs (attempts to absorb tariff costs on the production side squashed wages in China and Hong Kong fueling the tinder box of discontent necessary for these riots). London as we know is in the middle of Brexit, and amid the uncertainty that engulfs that situation merchants are afraid to make any moves. A Brexit-related exchange rate slump means 10-20% higher post-exchange cost for UK Merchants, and some professionals are predicting UK tariffs of 30%+ on EU wines post-Brexit once the dust settles. At some point inventories will pile up in Europe and we will see a downward price spiral, which will further strain the already modest livelihood of Europe’s farmers. Inventory could pile up for American wineries as well. Why is this? Retaliatory tariffs have already squashed American wine exports to China and retaliatory tariffs from the EU are on the way. When the madness all ends it will be a feeding frenzy of epic proportions for merchants who still have money on hand.

You might at this point ask about the status of the “other” WTO Airbus vs. Boeing subsidy case? You know, the one that is essentially the opposite of the October commercial aircraft case? The United States was found guilty for subsidizing Boeing in exactly the same way the EU subsidized Airbus, and “reparations” (i.e. acceptable tariffs against the US) will theoretically be determined by the WTO sometime in 2020. Why do I say theoretically? Two of the three WTO Judges who made the the October and December decisions are now finished with their WTO tenure. There are no successors to these positions because the Trump Administration is blocking any action on new appointees. You need a minimum of three WTO judges to try a case. This effectively means no WTO (for now anyway), and no WTO means no decision on tariff rights awarded to the EU, and more alarmingly a world with no limit on new tariffs.

As for us at here at Grape we pledge to carry on, fearlessly examining all possible routes to bring you the balanced, handmade wines all of us want to drink with our dinner each night. It will be a crazy year in 2020, but rest assured we will carve out creative/compressed routes to market for your vinous enjoyment. I put together a grid and YouTube video showing market route/margin combinations for some common European wine categories based off of current rates for major wine categories in question – Have a look by clicking here. When time allows I’ll place a editable spreadsheet link in the video notes.


Does this all sound hellish to you? Now is the time to make your concerns heard! Please take five minutes today to voice your opinions to the Trump Administration on both proposals. We don’t care if you live in the US, in the EU, if you are in the wine industry, or if you are a consumer – think of this as your duty as a freedom/choice loving human. To comment on Tariff #2 click here and to comment on Tariff #3 click here. All finished with your comments? Good work. Contacting both of your State Senators is smart as well, and also quick to do… most of the time they will even write you back. We made a US Senator contact cheat sheet for you, click here and take action.

Thanks for being part of our community at Grape, and here is to a fair and timely resolution these ongoing trade disputes.

Comments Off on Tariff Update

Living Anxiety Free in the Tariff Age

By |2019-10-24T16:32:04+00:00October 23rd, 2019|Economics, France, Germany, Spain|

Many of you have inquired about the tariff situation and how it will impact our portfolio. Let’s take a look at what we know, the good news, the bad news, and our plan moving forward.

Any non-sparkling, non-flavored, non-fortified wine labeled 14% ABV or lower arriving into the USA in a package 2L in size or smaller from France, Spain, Germany, or the United Kingdom is now subject to a 25% tariff, to be enforced at port of entry by US Customs Agents until further notice. Now there are plenty of exclusions if we think about this – Most notably any/all Sparkling Wine, wine from France’s warm regions (think Rhone), 3L bag-in-box wine, Modern-style Rioja, and Ribera del Duero to name a few – None of these categories are impacted. Other European countries, notably Italy, Portugal, and Austria, are also NOT impacted. Keep in mind the rest of the world (USA, Argentina, Chile, Australia, New Zealand, etc) are obviously NOT impacted.

Global warming crosses paths with Trump policy again here, albeit in a twisted manner, as warm vintages (2018! 2019!) mean ABV’s that are 14.1%+ thus avoiding the tariff. Believe it or not we just shipped 2018 Sancerre with labs that checked in at over 14%! An unintended consequence will be the rise of the 14.1%+ “Cuvee Américain” – Our friends at Domaine Clos des Lumieres, for example, just selected all of their higher alcohol tanks for our upcoming Rosé and Rouge 750ml Cotes du Rhone bottlings, which keeps us tariff exempt at 14.1% and 14.2% ABV respectively! Clos Lumieres Rouge and Rosé in 3L Bag in Box format? Those versions will come from the lower ABV tanks! Silliness. We might as well have a laugh.

I know where your brain is going right now…What about the a legal 0.5% +/- margin of error that has traditionally been allowed by governing bodies on both sides of the pond? The thinking earlier this month was to have wineries pull up their lab analyses on all categorically impacted wines labeled 14% or below, and have them relabeled at 14.1% ABV if their labs came in at 13.6% or higher. Quick thinking importers encouraged this, and dozens went as far as resubmitting TTB label approval requests with new 14.1% ABV levels on anything that qualified this way. Unfortunately this strategy will not work – US Customs is running their own lab analyses against randomly selected 14.1%+ wines, and proceeding with a tariff on anything that shows American lab numbers of 14% or below.

The big losers? Burgundy, Beaujolais, Provence Rosé, most Loire, most lower tier Bordeaux, Southwest France, Alsace, Alsace, traditional Rioja, Rias Baixas, German Riesling, and Natural Wine (pretty much all Natural Wine…).

HERE IS THE BAD NEWS. Initially we hoped the issue would be resolved prior to the October 18th deadline, but as things stand today we see no resolution with nothing apparent in the works. There are a few different thoughts as to where this is going and when it will end:

Cyrus The Optimist: “Trump wants the tariffs to ‘sting’ but not ‘cripple’ and that they will quietly go away in early December once he has made his ‘point’ in Fox’s news cycles.” Colleen The Realist: “Tariffs will be reversed in about six months (this corresponds to the timing of the expected WTO resolution against Boeing subsidies, which is essentially a reverse case of the Airbus related WTO case that opened the door to the current US tariffs, which would in effect create opposite counter tariffs against American wine imported into Europe).” Zane The Pessimist: “Dammit we are stuck with these indefinitely, or at least as long as Trump is in office.” Mary The Alarmist: “Nooo….We will end up in an escalated trade war with Europe and that these could expand into additional categories and push tariffs as high as 100%.”

Our take at Grape Expectations is that we end up somewhere in the middle between Colleen and Zane.

HERE IS THE GOOD NEWS. Compared to most of our peers our business will be minimally impacted. Why? First off, we only have 200 items in the impacted categories out of the 1,200+ items we stock. Most importantly, we import almost all of the wines in the impacted categories directly. Why do tariffs make direct-importation a larger advantage than ever before? Let’s break out the calculator on an impacted bottle of cool-climate French wine we import, which also happens to be carried by a well-known national importer in the states we don’t operate in ourselves:

Let’s say you have a national importer bringing in a bottle of 13% ABV French wine from a well-known producer, who after exchange rate is paying the winery $4 USD per bottle. This company would pay roughly $1/bottle freight and tax, bringing the landed cost at their warehouse to $5 per bottle. This type of national importer has a standalone corporate office, a marketing budget, a National VP Sales, a team of Regional Sales Directors, and some Area Sales Managers for the major markets. Add to that the associated travel and entertainment that these employees bill on company cards, and all in all this means the company needs to add about a 25% margin to cover costs, plus 5% in additional margin so that they can end the year with the customary 5% net income that the Board of Directors expects their well-compensated CEO to generate. This means the importer sells to the distributor at 30% margin or $7.14/bottle. The distributor pays about $0.50/bottle in freight and state tax, takes its (very necessary to survive) 30% margin, and we are looking at a $11.19/btl wholesale price point for the retailer. The retailer takes a 30% margin and prices this wine at $15.99 for the consumer. The consumer happily buys this wine from coast to coast where it is a leader in it’s high-volume category.

If you add a 25% tariff to this, you end up with a landed cost of $6/bottle, an $8.57/bottle price to the distributor, a $13.29/btl price to the retailer, and an $18.99 price to the consumer! Yikes.

But, you ask, what if you are a distributor who imports most of their wine themselves? That you work at our humbly appointed office space and import this same exact wine? You would pay the same $4/bottle to the winery and the same $1/bottle freight and tax for a landed cost of $5 per bottle. You would add the customary 30% distributor margin plus, say, maybe 10% extra margin to account for the financing/additional warehousing footage associated with direct importing, and you would sell this bottle for $8.39 to the retailer who would sell it at $11.99 to the consumer. Cool.

If you add a 25% tariff to this and keep everything else the same, you’d end up with a $10.49 price to the retailer who would sell it at $14.99 to the consumer, which still leaves you below the EXISTING pre-tariff national retail price for this item and this is with zero help from the winery.

What if we were to tell you that these are exact numbers on one of the best selling wines in our portfolio?

You mean to say Grape Expectations tariff-impacted prices will the same as or better than much of the pre-tariff status quo? Yes – Our ability to source directly puts us at a relative advantage as our West Coast Distribution pricing on own-imported products is generally 25% lower than similar quality (or in some cases exactly the same) products carried by national importers.

On a macro level this situation will mean fewer products in market. Many products carried by “old-model” national importers, small and large, will simply price themselves out of the market with these tariffs, if they stick around.

WAIT AREN’T WE ALSO NATIONAL IMPORTERS NOW? What does this mean for our distributor partners? We set up our “National” arm with current market conditions in mind (i.e. that margins would continue to compress in our industry), and therefore we are able to operate our National Portfolio at razor thin margin compared to industry standards (10-15% out of CA, and sometimes as low as 2-3% in the case of volume DI orders). Our offices and warehouses are paid for, and we reject the idea of a large national “sales team” instead assuming that our distributor partners prefer to manage their own sales internally, with the above-mentioned compressed pricing model used in place of “ride withs” as the recipe for success.


1) Will the volumes of our country’s larger national importers and retailers allow them to renegotiate prices with suppliers in this time of political chaos and end up at a competitive advantage compared to smaller firms? This sounds interesting, but thus far we don’t see that happening. We are seeing the opposite this week actually, with massive reservation cancellations from major importers and retailers. There just does not seem to be enough room to budge when you look at the realities of the 2019 vintage in many tariff impacted regions (Macon saw 40% lower yields in 2019, for example). Bordeaux will be an exception here, where yields were very high in 2019, with backstock also at record highs.

2) Will this sort of increasing populist wave continue to push downward pressure on the Euro for an even more favorable exchange rate? This is very possible – Think about Boris Johnson and his drive yesterday to push Brexit through by Halloween. A weaker Euro Zone economy will push exchange rates lower than the already delicious 1.13 rate, negating much of the tariff induced price pressure (remember, just a few years ago we were at a 1.35 rate).

3) Will bulk bottling European wine within the United States become a “thing”? It just might – Wine importers in China, for example, deal with their own autocracy and tariffs, and bulk bottling is common practice in China to skirt these. Bulk bottling is already the norm now here in the United States with grocery-category New Zealand Sauvignon Blanc due to the insane price of dry goods within New Zealand (i.e. it is cheaper to ship giant bladders from New Zealand to California and bottle stateside). Remember, anything crossing customs in a package 2L or larger is exempt! We will likely have a go at bulk bottling assuming the appellations in question allow it (some will and some won’t). Several of us here have done this already in the past.

HERE IS OUR PLAN. New shipments of many of our tariff impacted items will arrive stateside between now and the end of the year (we turn inventory fast and often over here). These items will see, on average, about a 15% increase in price effective November 1, with our hope being that we will be able to negotiate a 10% discount on most impacted items with most our winery partners, thus covering the 25% tariff in aggregate. As I mentioned earlier in many instances this means that our “new” price will still remain lower than what you’ve seen “pre-tariff” in states serviced by other companies on these same items. Have we been spoiled in Grape Expectations-land all these years? Yes. But use your imagination and plug some of your favorites into Wine-Searcher to see what we mean.

Items stocked from impacted areas by our national importer partners will remain at the same price through the end of the year as these are purchased from stock already in the USA, and have a more sensitive baseline price due to the national importer-related margin economics mentioned earlier. It is important to note that none of this talk is intended to implicate our fine partners on the importer side – The importers we do work with (it is a short list) are firms who share our lean philosophy, bring us wines at sensational value, and we project similar 15% increases on their items as they negotiate pricing with their suppliers and receive new loads from Europe Q1.

Hopefully this clarifies the subject for you a bit. Here is to living large without tariff-related anxiety and to a strong finish to 2019.

Comments Off on Living Anxiety Free in the Tariff Age

New Podcast – Gunderloch with Johannes Hasselbach

By |2019-06-20T15:18:42+00:00June 20th, 2019|Germany, Podcast|

We are pumped to distribute this iconic Rheinhessen producer in the Pacific Northwest! Our friends at David Bowler Wine sent sixth-generation winegrower Johannes Hasselbach our way to help get things started, and Johannes sits down with John to cover the bases on all things Gunderloch.

Click here for the episode link on Spotify, and here for the episode link on iTunes.

…and a full transcript is below if you still use AOL and don’t enjoy the convenience of passive audio!!!

JG:                    Hello and welcome back to another episode of Grape; Unfined, Unfiltered. I’m your host, John Griffin and today we’ll be speaking with Johannes Hasselbach of the historic Rheinhessen producer Weingut Gunderloch. I recently caught up with Johannes at the Ace Hotel in Seattle where we spoke about changing times, soils, Australian Riesling, and local beer. All right, let’s get to it.

JG:                    So Johannes, welcome.

JH:                    Thank You.

JG:                    Glad you could make it. How are you doing today? How was your, how was your day out in the market today?

JH:                    Pretty awesome I have to say. Some good customers you have here. Some really interested, uh, wine geeks and a lot of places for good German Riesling I would say, so that’s good.

JG:                    Nice. This is your first time here or…

JH:                    It’s my first time working here. I have friends in the area, so I was here privately, uh, 10 years ago. It’s a long time, but now I’m actually on business. Sounds strange, but it is like, it is.

JG:                    Well, you know what? Welcome to town.

JH:                    Thank you.

JG:                    So let’s see, let’s start off. So Weingut Gunderloch. Okay, so what’s the difference between your last name, ? Hasselbach and Gunderloch. Where does the difference in name come from, I don’t know.

JH:                    So we are, we are family business even though sometimes people think I’m like the sales representative or something because I have a different name. But actually since six generations, my family is running the estate at home in Nackenheim. But as it seems we have some gene defect or something because we only have girls as children. I’m actually the only, the first male person to take over the winery.

JG:                    Really?

JH:                    So every generation, the um, yeah, the name is changing and I have two kids at home, uh, two girls. My mother has nine grandchild’s, eight of them are girls. So it seems to continue this way. So the next generation you have to accustom yourself to a different name again.

JG:                    Wow, that’s, that’s, that’s incredible. Well you can always try for another child?

JH:                    Yeah, we’ll see.

JG:                    So you started touching on the history of the winery in general. So you’re saying right now you’re in your sixth generation. Who started the whole mess, who started it?

JH:                    So who got me into trouble, you mean?

JG:                    Exactly.

JH:                    Okay. Yeah. That was my great, great, great grandfather, Carl Gunderlochoffer, that’s a good German name, a very wealthy banker. He had a bank house called Gunderloch in Mainz in my, in a city next to my hometown. Um, for some reason he seemed to get bored of money and so he started to become a winemaker and made my life a little bit more interesting. Sometimes it would be nice to have a bank house in the back as well. But now it’s uh, yeah, it’s a different, different business. It’s a agricultural business that I’m in and it’s extremely interesting. But he had the vision to select land to make wine on that actually nobody wanted to have at this time. So he picked very steep slopes on very rocky soil. So that means we have to invest a lot of work power into that and you don’t have as many grapes as the other guys at the flatter part of the area. So people thought he was a bit crazy maybe.

JG:                    So at the time people were thinking more quantity versus quality.

JH:                    Yeah, but on the other hand, as a small family business as we are, you cannot compete with the big guys. Just like trying to be more efficient, trying to be faster, trying to be more on the cost side. As a family, as I understand it, you have to get experience with a piece of land and try to extract the uniqueness of this piece of land for that Riesling is the perfect tool for that is what we’ve been doing for the last six generation. I think my great, great, great grandfather was right picking this special spot for growing grapes.

JG:                    Wow, that’s cool. So are you doing other crops besides grapes?

JH:                    No, well, we have some chickens at home and we have some, some vegetables, but that’s it. Like I’m, I’m a winemaker.

JG:                    You’re sticking with the grapes?

JH:                    I am, that’s what I can.

JG:                    Oh that’s good. Sounds good. Tomatoes in the summertime. Grapes the rest of the time. Yeah. And your background. So if I remember correctly, you have been basically working with the winery now for what, 10 years?

New Speaker:   No, not as long.

JG:                    I mean did you grow up in the cellar as a little kid, like running around, getting in trouble and having your father yell at you?

JH:                    Yeah, picking grapes, getting yelled at and uh, throwing the ball in the press and stuff like that. Yep. That happened. Um, but I grew up on the winery. Um, my life plan was maybe a little bit different than what it ended up. I studied accounting at university. My sister was planned to be the winemaker, at out estate and for some reason she fell in love with a crazy Austrian winemaker, so she took happily off to Austria, making now wine there and that opened up the door for me, come back, uh, and continue the family business, so..

JG:                    Winemaking or accounting? Let me think about that for a second.

JH:                    It’s like the one thing that brings you into winemaking they say is if you like hard work and if you’re not good at math, that qualifies you as the winemaker.

JG:                    Or if you start off with a lot of money.

JH:                    Yeah. Right. So no, actually it’s like the first step into the winery was continuing the family business, my responsibility for what my generations before me created, but now getting experience working there again, understanding much more, tasting much more that really feeds the fun and really creates joy doing the work. When I was, uh, when I was young, I didn’t like work, it was too exhausting for me.

JG:                    I hear you.

JH:                    But now it’s a bit different. I really enjoy doing the physical labor. It’s a nice mix. If you sit on the tractor, you work in the vineyards, you go to Seattle, sell some wine, you meet customers. It’s amazing. It’s a great chance that I have. And it takes some time until you see the complete picture of it.

JG:                    But you grew up in the whole environment, so it’s not like your family was doing something completely different. Uh, running a retail store or something and then all of a sudden you decided to become a winemaker or to join the wine business. It was culturally in your family’s blood.

JH:                    Pretty much. It’s, it’s in our blood. Somehow, it’s in our genes and, and uh, when I’m away from the winery, uh, for four or five days, I start to miss the vineyards and I want to get back home. So it’s really nice. I didn’t, I wouldn’t have thought that it would happen this way because when I was young I really wanted to get out of the village. I wanted to go see the world and leave the small village of Nackenheim behind. Now it’s a complete different thing. I really enjoy living there and raising my family in the small village. Uh, yeah, it’s uh, it just changed everything.

JG:                    Yeah. You appreciate it.

JH:                    Yeah, definitely.

JG:                    Do you have… How many kids?

JH:                    I have two kids now.

JG:                    Two kids.

JH:                    Two girls, of course, as it is in our genes.

JG:                    Dog? Cat?

JH:                    A cat. A cat and some chickens.

JG:                    No dog!? Wow.

JH:                    We had dogs in our winery, every generation, but for some reason I ended up with a cat.

JG:                    Cats are easier to work with. Um, so when did you actually start working with the winery full time? So you were doing accounting a little bit.

JH:                    Yup. Did a one year trip around the world.

JG:                    Woe…

JH:                    Just to get some experience and didn’t feel like starting working right away after university. So I took my girlfriend at the time, now she’s my wife and the mother of my kids. We went around the world including a six week sailing trip around Vancouver Island, which was pretty amazing.

JG:                    Wait a minute.

JH:                    And then I started to come back home. Um, vintage 2013 was the first year where I took over the control of the cellar at home and then 2016 I inherited the winery from my parents. So it’s like, it’s a very historical estate with a rich history of over 130 years. But on the other hand, our team at home is very young and dynamic. We are really open to question and redefine what we are doing there and like that we are not falling asleep because we are a historical winery. I think we have to, especially as we see it right now, the weather patterns are changing tremendously in Germany. We see much different seasons than we have seen before. The vineyards react completely different to that and so the wine making is changing big time as well. So everything that my, the generations before us learned, experienced it, it’s not wrong, but it has to be questioned. Like, for example, just in the last generation of my parents between maybe 1970s and now everything changed like from grapes didn’t really get right because it was too cold to the question is it still cold enough for Riesling in our area? Um, I think that is like the question cannot be answered with yes or no, but I think there’s a lot of things that we actually can do to support our vineyards in extreme conditions and climate change and luckily and quite interestingly, we see that in the last series of very warm vintages, the wine actually maintain the elegancy, maintain their freshness and that has a lot to do with rethinking, winemaking completely like practices in the vineyards, practices in the cellar. Everything is now in question and we are trying to find the perfect way of helping our vineyards and guiding the wine in the cellar without influencing it too much. But believing inside what we are always have been doing and trying to extract the style that resembles the soil, the climate, everything. And that’s what Riesling is made for basically. Yeah.

JG:                    Okay. So you were working with your father for, I don’t how many years, when you started trying to, you know, maybe implement some changes or some new ideas like, hey look, the climate’s changing, we’re having warmer vintages, you know, and you’re trying to get your father to like, oh, except those ideas. Was it a battle?

JH:                    Um, it wasn’t a battle, but they were interesting times to say like this. So of course my, my father was a brilliant winemaker. He had a lot of experience and he produced wines that really are standing out. He knew exactly what he wanted and then all of a sudden a young guy comes around and tries to do everything different without any experience. There were some interesting discussions at the dinner table at home, but at the end we are reunited by the belief that we have to work for our vineyards. So that was what is always the same between the six generations making wine in our family, we always believed in the vineyards and so we have to do everything in their favor. And so I did a lot of experiments alongside working with my father, so I was working maybe like two or three seasons together with him. Then unfortunately he got sick and could not work in the cellar anymore. Um, and and this two, three years, I did a lot of experiments. I listened a lot to what my father told me. And I think somewhere there’s a mix between the two sides, like trying new stuff, but also soaking up the experience that at the end it’s a puzzle play. Like everything is a small piece of the puzzle. I’m not saying I have solved the puzzle yet. I’m still looking for some pieces.

JG:                    It’s a moving puzzle.

JH:                    Yeah, definitely and every experience can be a part of the of this. And I think that’s how it will hopefully continue for the next 30 years when I will make wine in our estate is that every season, every year gives us new challenges, new question marks, new ideas. And, and because I think as a winemaker you cannot believe that you will invent a cooking recipe for making wine. It’s not like a formula.

JG:                    For the next 50 years, it’s going to be like so. It doesn’t work that way. I mean that’s the thing. I would imagine that your father was probably thinking like, you know what? I have a lot of experience, I’ve seen changes myself, and the changes that he was seeing while you were working with him. You know what? He’s probably thinking like, yeah, this is good for the future, you know?

JH:                    Yeah. And as I said, it’s a mix between traditional delivery of knowledge and then I’also new ideas and yeah, that you take into, into the big picture of making wine.

JG:                    Wouldn’t it be fun to meet your great, great, great, great. I don’t know how many greats, grandfather and have a bottle of his wine with a bottle of today’s wine and see the difference and see the expressions, like that would be super fun.

JH:                    Yeah and I think a lot of these things are actually coming back to us. So we had a quite industrial phase in the last generation because the knowledge exploded basically. The knowledge that we know about wine, but it doesn’t mean that everything that has been discovered is useful for us because I think there’s much more interesting ideas and things that my great, great, great grandparents did before they had the knowledge, but they developed a kind of feeling. They looked at the vineyards, they looked at the grapes and that told them what they needed to do. So they had a different approach to winemaking, which is much less technical than sometimes we do it these days. And I think also there is a really cool mix to, it’s good to know what can go wrong, but that doesn’t mean that you really have to do everything to avoid it because that would also exclude a lot of this unexplainable stuff of winemaking. It’s, it’s, this is some part of the fascination that you cannot explain everything that happens when you make wine.

JG:                    Well, it’s like people almost want to have every year, every vintage taste the same.

JH:                    Yeah. It’s not Budweiser.

JG:                    Yeah, it’s not Budweiser, but you know what, Budweiser has it’s place.

JH:                    Are you selling Budweiser?

JG:                    No, but I drink it sometimes.

JH:                    And yet it’s, every year is different and every year the things we do to react at different and that makes I think our business so special that it cannot be replicated each year. No, none of my Riesling will tastes the same as it did the year before.

JG:                    And you as a small family winery, you don’t want to be that way. You want to have soul, you want to have distinct Gunderloch, something. Something that’s telling about the, you know, you’re steep vineyards and all these thing. And, uh, what was the red, the red rocks, the red…

JH:                    Red slate.

JG:                    Red slate.

JH:                    Red clay slate to be very technical. Um, it’s unique soil that you will only find in a four kilometer stretch along the river Rhine.

JG:                    Really?

JH:                    And it’s only 250 meters deep. So it’s like it’s really limited. The origin of our vineyards is tiny compared to all the other regions and it’s 80 hectares in size. My family owns around like 25 of these 80 hectares. So we are quite significant holder of this soil. But it’s so interesting to see that even though it’s just one soil, it’s only one grape variety that we really work with, the variety that we can create within this very small and dense (?), it’s quite fascinating and that’s what Riesling can do. It can be everything from bone try and the majority of Rieslings we sell is actually dry. Some people still have a picture that Riesling is always a sweet. I think that can be true. It can be fascinating sweet wines, but it can also be very serious, dry wines. Like there are not many grape varieties that can really create a wine that shows a sense of place and time. I think Riesling is one of them. Pinot noir definitely as well, maybe chardonnay, but they’re not many that really can show a certain region as good and as in such a big variety that uh, Riesling can do. And that is the fascinating part which keeps our family going.

JG:                    That’s true. I think it keeps a lot of families going. I mean, it keeps German Riesling going in general, I think. Because, you know, the top producers, people flock to these top producers because of that. And like, this really expresses this terroir or whatever you want to call it.

JH:                    Definitely.

JH:                    So the red slate thing is pretty funny because everyone sees black slate everywhere. Not Everywhere. But you know, you see it in Priorat, you see it in the southeastern part of Austria. But the red slate I’ve never heard of. That’s pretty, pretty interesting.

JH:                    To be more technical, um,

JG:                    Red clay slate.

JH:                    Yeah. It’s different. You find beautiful red slate vineyards in the Mosel Valley (I think that’s what he said) rarely, for example. But the type of red clay slate that we have, it’s unique to this small part where my family is making wine. Um, it’s uh, actually one of the oldest soils that you can make wine of. It’s 290 million years old. And what it basically is is compressed sand, desert sand. For sometime 290 years ago, Germany was on the equator and so there was a big, big desert and then the desert sand got covered and covered and covered and push down and put under pressure. And where the Rhine Valley carved out the steep slopes of the Rhine valley, that’s the only place where you find the soil. After that it digs deep. It goes away. But just where the Rhine was digging out the valley on the steep slopes, that’s where you find the soil.

JG:                    And over the years with erosion and the clay slate breaking down, it becomes , is there a threat of, you know, in the far future of it being gone.

JH:                    There’s alway erosion. It’s a defining factor of our vineyards. And it also defines very strongly how we can manage our vineyards. And I think when you look at this, like terroir is such a bad word because it has been abused and nobody really knows what it means, but if you think of our region, of its terroir, of its origin, of its specialities, these challenges of the erosion, they define what we do. So I would actually also include this in our thinking, in the definition of our area. We have special limitations that we can do and all of this makes us take different decisions and defines our way of making wine as well. So when I look at a piece of land and if I want to fully understand how the wine tastes, I also always look at what are the problems, what are the challenges? Because I think not, if you look at the greatest vineyards on the Earth, none of them is really good farming land. Like they all have their challenges.

JG:                    Rocky, too steep, two inches of topsoil. Woohoo, you’re not going to grow much cauliflower on that stuff.

New Speaker:   But I think this is also coming back to the founding moments of our winery that’s coming back where you can say like a piece of land has it’s characteristics had its challenges and that defines the wines that are coming out of it and I think this is something that you have to take into account when you look at a vineyard. Of course it has positive effects, but if it’s only fertile land, if it’s perfect water supply, if it’s like everything is like i in paradise, I don’t know if that would be a perfect vineyard land because then it would be like, vineyards need some challenges. They need to struggle a little bit. The winemaker has to think, has to develop a concept, how to best treat the vineyards to react to this challenge. I think all of this at the end makes up for the wine that comes out of it.

JG:                    I think the whole concept of terroir will definitely be facing some redefinitions in the near future because places that have famous terroirs, you know what? That terroir is going to change with rising temperature.

New Speaker:   In our 130 years of history, 2018 was the first year we ever started picking in August. And so this is something like my, my father, if he had experienced, he would have thought I’m crazy, but that was the only way how we could actually counteract these extreme temperatures that we had in 2018. On the other hand, it’s fascinating to see how elegant the wines of this vintage actually tasting right now. So in my microcosmos, in my small world, the answer to climate change is not growing different grape varieties. I mean, in a global picture, climate change has to be fought with all means. Um, and there are still some people that believe it won’t exist, but we see it. So in the global picture it’s a different answer. But in my microcosmos as a winemaker in Rheinhessen, in Germany, that makes Riesling, I think the answer is to find ways how to help the vineyards to react to this situation. And that is everything. We have a lot of tools in our hands. We have canopy management, which is extremely useful. We have changed our canopy management completely around in the last couple of years because we saw how effective that can actually be to help the grapes. For example, when we go leaf plucking, we strip the southern, uh, northern side where the sun doesn’t hit, we strip it open. It’s a very natural way of reducing the yields and training the skins to be more resistant to sun, to rain. So it’s really powerful tool. But on the southern side, we leave the canopy completely intact to prevent the heat and the sun hitting the grapes and then late in the season the only pluck the young leaves, the young light green leaves because they have a lot of photosynthetic energy. The old green leaves, they only shade. We leave them. But 20 years ago nobody was thinking about that. That was not an issue.

JG:                    They were just thinning.

New Speaker:   Yeah. And so canopy management, soil management, yield management, we are not like in earlier times you would say like the less yield you have in your vineyards the better and big yields are not good at all. But in this case, it doesn’t mean like less yield is always better. It can be too much reduction. So what we are doing in our winery, we trying to train our vineyards to a slower vegetative pattern, just like less soil movement. Uh, maybe start out with a normal year and then very carefully thinning out by leaf plucking by small corrections. But for example, I don’t like green harvest. Green Harvest for me is after long vegetation period you tell your vineyards, you have done a mistake, you have produced too many grapes. So when you cut out grapes, the reaction of the vineyard will be putting all its energy in less grapes. And that will mean we will have much more higher sugar levels and high…

JG:                    And a shorter season and it will rush to ripeness and it won’t be properly, ripe?

New Speaker:   Yeah. So this is like, it would be completely counter productive to do green harvest in some years. And so yeah, coming back to one of the earlier questions, like all of this has now to be experienced and learned and understood.

JG:                    And on another note, you were talking about the red clay slate. I’ll send you the podcast I did recently with Brandon Carter from Unico Zelo. He’s in Adelaide hills in Australia where they’re growing varieties and they came up with what would survive with minimal water, basically because it’s a desert almost, and it’s all red sand there. And it’s really interesting and they’re coming to a lot of the same ideas that you are.

New Speaker:   Yeah, we can learn a lot from these areas as well. How do they deal with the challenges?

JG:                    I mean their challenges are extreme. I mean we were talking the other day about Australian Riesling. You know, their growing season is short.

New Speaker:   Much shorter than ours. Yeah.

JG:                    It’s extreme and it can still manage to get really interesting dry Riesling, you know? And they’ve been doing it for a while there too. I mean it’s not like, it’s not like something new.

New Speaker:   But I think there’s a rich, rich Riesling history and some really amazing wines are produced over there. Some good friends of our winery make amazing Rieslings in Australia.

JG:                    So who do you like?

New Speaker:   Ah, I’m a big fan of Jeffrey Grosset and his wife Stephanie. They are, we have a exchange as well. We talk a lot and uh, Franklin Estate, Hunter Smith and his family in the Franklin River area. Amazing wines. And then, yeah, New Zealand, there are so many crazy areas and just having contact with these people and exchanging with them.

JG:                    You did some harvest than New Zealand, right?

JH:                    Yeah, I worked in New Zealand, which was pretty relaxed kind of making wine over there.

JG:                    Yeah. New Zealand relaxed!?

JH:                    Yeah.

JG:                    I thought it’d be really uptight and stressful there (joking of course).

JH:                    No, no. The people are, the Kiwis are really a good crowd. And I worked in Martinbourugh Vineyards. They’re a very nice Pinot noir producer. Some Riesling. Yeah. Fascinating culture and seeing so many young motivated people in the wine industry. That was kind of new to me. Going there, going to Australia, going to New Zealand and also, my first experience in winemaking was Canada.

JG:                    Canada!?

JH:                    Maybe not the prime destination. Not yet, but it’s a really, really amazing wine culture developing there. It was honestly an excuse to go skiing and I need to justify it against my parents “so why do you go to Canada”?

JG:                    So obviously this was in the Okanogan.

New Speaker:   Yeah, it was in the Okonagan.

JG:                    Yeah, because East Coast Canada. Uh, the mountains there aren’t so big and the snow kind of sucks. Okay. So we were talking about your estate vineyards, which are about 20, 20 how many?

JH:                    26 hectares.

JG:                    26 hectares. And that’s 26 out of 80 hectares that are basically based on this red clay slate.

JH:                    Yes.

JG:                    So are all the wines you produce estate wines?

JH:                    Um, the majority is, so we are focusing on our vineyard sites, that’s where we put all our efforts on. Of course you have to keep into account that working on the steep slopes is quite costly. So we have to invest four times the amount of hours that you are doing on the flat vineyard sites. And sometimes people forget that and unfortunately cannot charge four times the amount of money for our wines that the others do. Maybe in the future. We don’t know. But so we are also, let’s say, make the bank a little bit happy, producing

JG:                    The bank.

JH:                    A project wine wine together with growers from the region which is called Fritz’s Riesling. A wine that carries the name of my father because he basically was looking for the perfect tool to communicate a more modern style of German Riesling. Not like the really old traditional, big volume cooperative stuffs, but something that is addressed to the entry level. Interesting price point, but carries a soul that is produced by a small family estate in a style that is very flexible, not bone dry. There’s a nice fruit in it. So this is a project that we do together with some grape growers from the region.

JG:                    Oh really? So it’s kind of a collaboration.

JH:                    It’s yes, something like a cooperation, but it’s, it’s a nice addition to what we carry out on under our estate name Gunderloch because Gunderloch wines are like a true ambassador of it’s soil. Can be like for the first time wine drinker, they are serious wines. So they ‘re not just easy going. So the Fritz’s Riesling is really nice addition to that because it really is pure Riesling, 100% joyful wine and a good, for everyday drinking basically.

JG:                    And there’s a rosé I heard too.

JH:                    Yeah, that’s in the same line up. There’s a Fritz’s Rosé.

JG:                    Nice. I like the Fritz’s rosé.

JH:                    Yeah. It’s quite interesting mix because it’s not coming from the obvious grape varieties that you use for rose. It’s a Pinot Meunier-based rose.

JG:                    Pinot Meunier?

JH:                    Yeah, my father was a big fan of champagne, so we planted some Pinot Meunier around 20 years ago. We always lacked the time to really start our sparkling projects, also for the last 20 years it went always into the rose. So maybe I have now a little bit more time to start my sparkling project, which I really would like to, but for the meantime it makes an amazing, yet, characteristics with strong and different or so very fruity, but the typical Meunier kind of fruit. So it’s easy drinking. There are some, some nice character behind it. Yeah, perfect for the coming summer.

JG:                    All I know is we tried a bottle yesterday and it was easy drinking.

JH:                    That’s good.

JG:                    How much of that is coming to the US this summer, summer 2019.

JH:                    So it’s on the way here. It will arrive hopefully early enough to catch the good weather. We are not a huge binary so there’s not like not millions of liters around in our winery, but it’s a decent size. So you, if you like it, you will not run out.

JG:                    How many bottles? 20,000?

JH:                    Uh no, not as much. Like maybe 10,000 bottles.

JG:                    How many bottles does the winery total, more or less.

JH:                    So the total winery, like the Gunderloch estate wines are, depending on the season.

JG:                    Yeah, minus the Fritz stuff. Just the Gunderloch estate.

JH:                    Yeah, like around 150,000 maybe in a, in a really, really strongly year 200,000 bottles, but mostly around 150, 175,000 bottles.

JG:                    And the concentration of that is and which wine?

JH:                    The Jean Baptiste, which is probably the most renowned wine.

JG:                    Who’s that?

JH:                    Jean Baptiste was my great, great, great, great grandfather. The banker. Yeah. So he started our winery and we make this wine in his honor. For the last 25 years since we are doing this wine, this has every year been our most important wine. It’s actually bigger than the Fritz’s Riesling. It’s our liquid ambassador, our liquid business card. Perfect, like very balanced style. Very. It’s fruity, but it has a rather nice minerality in it. It’s light in alcohol, it’s very fresh, but crisp as well. So really balanced, perfect wine to pair with seafood, spicy food, but perfect apperitive wine by itself as well.

JG:                    Sure.

JH:                    Liquid the air conditioning, I like to call it.

JG:                    Mmmm, liquid air conditioning. Can I use that?

JH:                    You might steal that. Yeah.

JG:                    Cool. Okay, another question; It seems like a lot of the wines that you’re focusing on for the US are trocken.

JH:                    Well, that’s an interesting question. I have not answered this question for me finally because we see the tradition here in the US as it’s understood that the Riesling is always a little bit of sweetness involved. And this is what, it’s okay because this is we, we make amazing sweet Rieslings. What I want to do at the moment is to show that actually Riesling can do much more to it than just spesweet Riesling because the bone dry Riesling from our estate vineyard you get a lot of character and you get a lot of message and they’re not the easiest to understand wines around, definitely. But they are very strong ambassadors of their origin and I think, and I feel that there’s a really big chance for these wines in the future and the market, especially as we have a very open minded young generation of wine drinkers growing up and it’s two things. They’re not interested in only drinking sweet, easy drinking wines and they’re also not, they don’t have this background that they have, like they don’t carry around the knowledge of the, the old generations that have been only exposed to sweet German wine. So it’s like for us, like a blank piece of paper, but we can really try to convince people that it’s all about quality and no matter what style of Riesling you’re drinking, when it’s about quality, you will enjoy it. If it’s un-interesting sweet entry level stuff, you will forget it. But if it’s intelligent made wine with the history, with an idea behind it, it doesn’t matter if it’s sweet or dry, every time it will be a perfect ambassador from the region that it’s coming from and this is what I think where we have a great chance.

JG:                    Yeah, I agree completely. I think like you’re saying, the younger wine drinkers coming up, you know they don’t have a preconception of Riesling really. They don’t have a preconception of a lot of things. Rose. You talk to older people, you know, 50, 60 years old. They thought rose was going to be sweet, the stuff that came from California 30 years ago or something, 40 years ago, and it’s not that way. Younger people, boom, hey, you know what? Rose bring it.

JH:                    Yeah.

JG:                    Same thing with a Riesling. If they get a dry Riesling it’s like, oh, this is just like drinking a chardonnay or something like that. It’s dry, it’s delicious. It’s interesting. It kind of goes great with the food I’m having,

JH:                    But I think this misconception maybe is going away.

JG:                    I agree.

JH:                    Because as I said, there are young people, open minded, looking for great quality. It’s not only wine but products with a regional identity. And I think this is a huge chance that we have, especially with Riesling, to create an ambassador of our regional identity that we have in Germany.

JG:                    That’s forward thinking, unlike some parts of the world right now. They’re not forward thinking, but that’s a different story. Well, I think that kind of wraps it up actually for my questions at least. Uhh, well hold on a second. One thing. (The sound of a beer can being opened). Ah, prost.

JH:                    Prost.

JG:                    Um, what beer is this anyway?

JH:                    It’s a local Indian Pale Ale. Very beautiful. I cannot pronounce the name

JG:                    Uh, Bodhizafa. This is from Georgetown brewing in Georgetown.

JH:                    Very tasty.

JG:                    It’s very tasty. Well, Johannes thanks a lot for spending the time with me to talk about your family winery.

JH:                    Thank you.

JG:                    (Closing comments)Yes, that Bodhizafa IPA was pretty good and I don’t even like Ipa. Thanks again to Johannes for taking the time, and if you haven’t yet, be sure to check us out on Instagram at Grapexwine. Until next time. Have a good week.

Comments Off on New Podcast – Gunderloch with Johannes Hasselbach
Go to Top