Prosecco Rosé – Here’s the scoop

By |2021-01-20T01:27:02+00:00January 20th, 2021|Trends|

We sure are having a crazy run on bubbles so far this week. How about you?

It is like being in the toilet paper business back in May of 2020.

What on earth is going on?!?  Here are today’s “water cooler theories” in Grapeland:

A) People prepping for Inauguration Day “day drinking” parties.
B) Pre-Valentine’s Day stockpiling
C) Excitement over the just landed wines from Italy’s new “Prosecco Rosé” DOC
D) Celebration for the arrival of these vaccines **we actually know people getting theirs this week, how fantastic is this news**
E) All of the above

Whatever the reason for this “froth surge,” Montelliana’s Prosecco Rosé “Meliora” has arrived – If you’d like to know more about this “new” Italian DOC, scroll on below for our quick scoop, and feel free to use this in your own email blasts,  newsletters, etc.

Q: When did this happen?

A: The first examples showed up stateside this month.

Q: Why wouldn’t Italy time this so that the appellation was launched in time for the US holiday season?

A: The appellation rules were written by government bureaucrats, what do you expect?

Q: Ok so what exactly is this thing you call Prosecco Rosé DOC?

A: Prosecco rosé is a blend of the region’s naive Glera grape (this is what makes up most “regular” Prosecco) and Pinot Noir (producers may add up to 15%).

Q: Wait….Pinot Noir in Prosecco?

A: Yes, this is the only red grape allowed in the DOC, and even still, it is only permitted when fermented without skins.

Q; Everything I keep seeing in market this week is very pale in color – Is color regulated by the DOC?

A: Yes – This is intentional – By definition the color will be very pale as the “no skin fermentation rule” prohibits a situation where producers are able to add “red wine” to the mix as is common in other sparkling wine appellations around the world including Champagne. No skin fermentation means minimal color influence. The thinking here by the creators of the DOC was to mimic the elegant look, feel, and to some extent flavor, of Provence rosé. This leaves a producer two ways to control final color – The percentage of Pinot Noir used in the final blend, and adjusting how long the Pinot Noir component is macerated on skins prior to fermentation.

Q: Why are all of these new Prosecco rose’s vintage dated?

A: This is part of the regulation – The idea here from the officials responsible for creating the DOC was for this to be a “premium” category. With the DOC being brand new (created out of thin air) this is also quite convenient as a starting point. This quirk will be annoying for all of us in the trade, as any rosé wine with a vintage comes with perceived (and mostly invalid) shelf-life “baggage” towards the “end” of a given vintage in market.

Q: Prices on the big names look higher than I would have expected – Will Prosecco rosé be more expensive than a producer’s equivalent workhorse non-vintage bottling? 

A: Yes – Most of these are running 2-4 price points higher thus far compared to the same producer’s flagship NV bottling. Why? Easy – The provenance is usually better in these “vintage” wines, Pinot Noir is much less prolific and more expensive to grow than Glera, for those without Pinot Noir vineyards of their own high demand and limited supply within the appellation boundaries mean high fruit costs, aging requirements are longer, and above all else the market seems happy to plonk down $15-$20 on high quality bubbles from this area.

Q: As is the case with “regular” Prosecco, are these wines carbonated using the “tank method” rather than the “Champagne method”?

A: Yes – The soft texture produced by injecting CO2 in tank results in the soft palate texture consumers associate with Prosecco. In technical terms Prosecco has less than half of the carbonation as Champagne – 45 PSI in the former versus 100 PSI in the latter. Not only does this mean softness but it also means less perceived acidity (think CO2 = Carbonic ACID).

Q: I heard that Prosecco rosé DOC is required to be aged twice as Prosecco DOC – Is this true?

A: Yes – Prosecco rosé is required to be aged for a minimum of 60 days, versus the required 30 days for “regular” Prosecco. This will result in a touch more complexity in finished wines due to autolysis (think crusty, yeasty, honey-ish flavors). We are happy about this – The extended aging requirement will make the world a 0.0000000000001% happier place?

Q: Some of the “big brand” examples seem a bit sweet, while the few “indie” examples I’ve tasted are nice and dry – Is sweetness regulated in this new DOC?

A: Yes – Producers are allowed to finish with as low a sugar level as they dare for “brut nature,” and can leave sugar levels as high as 17 g/L for a most commercial “extra dry” bottling. Our version from Montelliana falls somewhere in between, finishing at what we consider a perfect 9 g/L.

Q: Why is this DOC and not DOCG?

A: The appellation did not want to affect the already existing premium (mostly hillside, high rent zones) of Valdobbiadene, Asolo, and Conegliano, so these areas are off-limits for Prosecco rosé and will continue to function as ultra-premium DOCG appellations for traditional “white” Prosecco.

Q: Has there been any pushback from smaller, more “indie” houses on the creation of this appellation?

A: Yes – Some question the designation of Pinot Noir as the “red varietal” used, arguing that a red grape native to the region would make for a more authentic final wine. We tend to agree with this sentiment, but also understand the thinking of those who wrote the rules here, that Pinot Noir grows well in this area of Italy, is probably the best option in terms of pure “deliciousness factor,” and is also something that the public can understand/wrap their heads around.

Q: What next?

A: Go out there, explore the market, and buy some of this pink goodness for your favorite merchants!

Rhône Tariffs. Seriously?!?

By |2021-01-06T00:14:12+00:00January 5th, 2021|Trends|

As you may have heard, the Trump Administration sent our industry a New Year’s surprise in the way of new tariff categories. My WhatsApp has been blowing up with questions from producers and all of you clients, so here is a quick, apolitical look at what is going on:

Q: Who is imposing these new tariffs?

A: The United States Trade Representative (USTR), which operates as part of the Executive Branch of the US Government and lies under the jurisdiction of the President, in this case Donald Trump. Upon entering office, President Trump appointed Robert Lighthizer, an economic nationalist, to run this department, which has resulted in a frenzy of new tariffs and trade wars across many industries at a rate not seen since the 1800’s.

Q: What categories of wine do the new tariffs affect, and at what percent?

A: These tariffs (with few exceptions) affect all French and German wine that is over 14% alcohol, in all size formats, with the exception of Champagne and other traditional method sparkling wine. They are collected as a 25% tax to be paid by importers over invoiced ex-winery cost at the time of customs clearance in the US port of entry. They go live on January 12th (yes again this frustratingly includes wine already on the water which means negative margins on presold programs).

Q: Wait — Didn’t the Trump Administration already impose 25% tariffs on French wine in October of 2019, and aren’t we still paying those?

A: Yes, but the original tariffs were limited to wines that were 14% alcohol or lower, in size formats of 2L or smaller, meaning many global-warming-era white wines (many checked in at just above 14% in the past several vintages), and most red wines (reds are usually higher in alcohol) were exempt. In many cases producers made special high alcohol cuvees for the American market in order to avoid the new tariffs (think about all of those 14.1% alcohol Sancerres and Provence rose’s that popped up last year, many of which were shockingly balanced/nervy/delicious we might add…were they really all above 14%? We don’t have a way to measure alcohol in house but we have our doubts…).

Q: What about people shipping French wine over in bladders and bottling them in the USA to avoid tariffs – Does this end that whole loophole also?

A: These new tariffs cover ALL sizes, with the idea being that any bulk bottled wine produced using this route would be subject to tariff as well…Those who impose tariffs hate smart loopholes and generally squash them right around the time new businesses are set to capitalize on them (this is the reason we did not get into the bulk Chablis bottling game in Grapeland). ***I’ll add that we did just book some brilliant (already stateside) Macon Uchizy that Guillaume Touton bottled in New York State using this strategy.

Q: Why was the original alcohol level set at under 14%?

A: Our guess is as good as yours, the most likely explanation is that the persons writing the tariff schedule assumed that most European table wines were under 14%. We will present this without further comment, but think back to the Clemson Football Team’s McDonald’s dinner at the White House and you will understand our line of thinking.

Q: Why did the Trump Administration expand the scope of these tariffs to include 14%+ wine and larger sizes?

A: The short answer was that this was an easy/major subcategory that had not yet been slapped with tariffs…The long answer is that this is all part of the continuing US versus EU trade war pertaining to aircraft manufacturing subsidies – The WTO issued Europe’s reparation ruling this Fall, Europe set their tariff allowance figures using Covid-era revenue data, and the Trump Administration cried foul stating that Covid era revenue data is artificially low and therefore unfair. These new tariffs on 14%+ wine/larger size formats is the Trump Administration’s way of “shooting back” at Europe for the use of what they consider unfair revenue accounting practices when setting retaliatory tariffs.

Q: Why is Champagne not included?

A: Your guess is as good as ours, but our thinking is that the Trump Administration needs one more high profile tariff threat to dangle in front of France for use in retaliation to the ongoing digital services tax dispute.

Q: We heard that Europe wanted to end this trade war by agreeing to erase tariffs on both sides – Is this true?

A: Yes, although like anything, the real story is more complicated than that. From what we hear and read, the Trump Administration seems uninterested in such a resolution and plans to issue new (non-wine related) tariffs literally the day prior to Biden entering office. It is what one could call “turning the volume to 11 at the end of the night?” We will again simply reiterate our opinion that nobody wins in a trade war.

Q: Since the United States Trade Representative (USTR) operates as part of the Executive Branch, does this mean that their leadership will change and that “Tariff Man” Robert Lighthizer will be replaced this month with a new “Trade Czar” appointed by President Biden?

A: Yes – Exactly – President Biden has tapped Katherine Tai to replace Robert Lighthizer as the person leading the USTR. Robert Lighthizer will return to public-sector work as an attorney/partner at Skadden.

Q: Tell us more about Katherine Tai…

A: Ms. Tai is a candidate who both sides of the aisle are apparently very happy with – A native mandarin speaker, she is expected to keep a firm stance on Chinese trade matters, and expected to approach negotiations with our European allies in a more traditional “pre-Trump” manner.

Q: Does this mean that when Biden enters office in a few weeks, that the new Katherine Tai led USTR will sign these tariffs away?

A: No. We do not expect any changes until Summer at the earliest – Trade negotiations take time, the Trump Administration has famously blocked any transitions with Biden’s incoming trade team, which means a slower timetable still (This is a most unusual circumstance and means that Biden’s incoming USTR appointees will start with zero information regarding ongoing trade related negotiations). Even then, Biden continues to imply that he will not come out and make fast changes to Trump-era precedents. It is a shame also that Biden isn’t a bit more like Obama (or most other former Presidents) in his approach to the personal appreciation of all things wine – The fact that Biden himself doesn’t drink at all isn’t very helpful here!! Think if this all happened upon Jefferson taking office…we’d see a rollback within minutes!

Q: Ok, so in a nutshell what does this mean for the wine market?

A: It means continued pressure on French and German wineries to further lower export prices, which will certainly force many multi-generational family wineries to sell or close forever (this is an awful one two punch coupled with Covid). Most producers will lower their ex-winery costs by 10%-15%, expecting importers to lower their margins in cooperation. Regardless of such adjustments, 25% tariffs mean higher laid-in costs for importers and distributors, and they also mean a huge cash flow crunch on importers (tariffs are due at time of entry in port and not in 90 days as are the usual terms between importers and wineries). Coupled with increased freight rates due to Covid and a continual decline in the strength of the US Dollar against the Euro you can expect a 15%-25% cost increase in our industry on any previously non-tariffed French and German wines. This will be most dramatic in situations where the wine changes hands through multiple middlemen (i.e. wines handled by national importers and resold to distributors will suffer the most – You’ll start seeing some basic Cotes du Rhone from the large importers trading in the high teens at retail).

Q: What does this mean for wine I buy from Grape Expectations?

A: Like everyone else, we will pass on some of the increased costs that come our way out of all of this, but we expect our 2021 pricing on staple categories to sit at or below where most of the market was in 2020 on the same categories (i.e. our culty single-vineyard Gigondas this year will trade at the same price that most other people’s culty single-vineyard Gigondas traded at before these new tariffs).

Q: How is that possible?

A: We operate on a notoriously lean business model, and your collective embrace of our digital platforms (Flash offers via email, Brine offers via web, and SOMM offers via text message) during this past year has allowed us to double down on this leanness. While we always reiterate that nobody wins in a trade war, EVERYONE WINS when wine flows in/out of our warehouse in giant chunks within days (as opposed to the average industry inventory turns of several times per year).

Q: In summary, what is the takeaway then?

A: We will approach this new reality in the same way that we’ve dealt with any of the other curveballs that have come our way in our 45 years of sourcing and delivering wine to you (and there have been many!!) – We stay positive, and will continue with the creative approaches. We see these tariffs as one more challenge to overcome in our mission to bring you jaw-dropping value, with great content to boot, in all price ranges, from family wineries who make things we deem exceptional. We made it through nine months and counting of Covid, we made it through the first round of tariffs, and we will make it through this little bump. First up on the “you dared us” docket (and a deal we are negotiating today) is tariff-era sub-$30 retail top-flight Chateauneuf-du-Pape, so stay tuned. There is nothing more celebrated in Grapeland than the hard-won completion of a tough challenge.

Geek Time: The Trinity

By |2020-10-13T17:04:42+00:00October 13th, 2020|Trends|

What things look like when global demand, exchange rates. and tariffs cancel each other out.

August’s tariff news was something we will take as a positive, despite any media spin to the contrary. In case you’ve been in the dark, mid-August marked the deadline for the USTR’s mandatory 180 day review in which existing tariffs related to the Boeing/Airbus dispute could be shuffled and modified (in this case there were threats of up to 100% tariff on certain items including wine). In the end no changes were made to the current tariff schedule – Wine at 14% ABV or below from Spain, Germany, France, and the United Kingdom in 750ml or smaller packages will remain tariffed at 25%, and we have another 180 day window until this will become an issue again.

Does this mean status quo for us? Not really. Over the last year, 99% of the talk about the business side of wine importation/distribution has centered around tariffs, yet tariffs are only one piece of what we call the “trinity” that guides our decision making when purchasing wine for you, with the other two pieces being global category demand and the USD-EUR exchange rate. Through the lens of this “trinity” let’s have a quick look at where we are as we head into Fall of 2020.

TARIFFS

We’ve covered the tariff issue forward and backward and don’t see a need to revisit it on this page. USTR tariffs have been a burden on cash flow for everyone involved since they are due upon arrival of product in port, and these tariffs have resulted in some modest price increases (most of which we posted this Winter). Many predicted doom for popular tariff impacted categories, and exports of these categories to the USA are indeed way down, in some reports implying a decline as steep as 50%. While overall import volumes are down, we say this is mostly due to cautious purchasing on the part of importers – For many importers in our industry uncertainty and resistance to change meant temporary paralysis. What about us at Grape you ask? We for the most part chose not to discontinue items or slow down purchases on tariff impacted categories and have not seen huge drops in demand for tariff-impacted wines.

We did, however, increase our position on 3L bag-in-box due the fact that this size category was exempt regardless of ABV, and the unexpected COVID situation created a surprise boom in 3L bag-in-box sales. With neither COVID or the current tariff schedule going away for at least another six months, you’ll see us quadruple down on 3L bag-in-box both in terms of inventory and new options. With 3L bagin-box being a bit of an outlier, our overall take on the tariff situation is that the market will take care of any export sales slumps, and that many categories of tariff impacted wines have arrived and/or will arrive in market at or even below PRE-tariff retail pricing thanks to the other two factors in the “trinity” – Changes in global demand and current exchange rates. Does this sound implausible? Read on.

GLOBAL DEMAND

Four markets dominate the global volume needs when it comes to exports from the European Union – The US, the UK, Hong Kong, and China. Demand for European wine could not have started more poorly in 2020, with Hong Kong essentially closed due to civil unrest, importers in the US market putting shipments on indefinite hold due to tariff uncertainty, UK importers putting shipments on hold due to Brexit/tariff/exchange rate uncertainty, and China partially closing due to the emergence of COVID there in January. By March we added a what had developed into a global COVID pandemic to the mix (meaning close to zero on-premise trade in all countries), and wineries were looking at a most unthinkable situation in terms of export projections.

Wineries in most cases held existing pricing through the Spring, and by early Summer we started to see volume-based pricing that we never would have imagined in categories with high percentages of restaurant consumption (think Sancerre and Champagne). The deals we’ve been presented in these categories have been more mouthwatering than a flute of Orpale, but we were forced to hold off on any speculative purchases in fear that the Trump Administration would shuffle tariff categories between loading date and late summer product arrival here in the USA.

Now that we are temporarily clear of tariffs, it is time to play. How low have things dropped though? If you looked at average costs now versus the menu of ex-winery costs by category we posted online this winter, you’ll see many have dropped quite a bit. Our low cost basis for Sancerre Blanc at that point was 7,40 euros – We’ve been seeing offers in the low 6,00 euro range lately. Our low cost basis for NV Brut Champagne at that point was 11,40 euros – Producers are creeping towards 10,00 euros at this point and wild one-off offers for cash strapped producers will only increase with global Champagne exports trending at just 50% of the appellation’s calendar year 2020 expectation.

So … You’ll see us pull the trigger on many of the mouthwatering deals that have been presented to us over the last few months as producers look to create cash flow (and space) for the 2020 harvest. In short, we will enthusiastically book as many crazy deals as all of you, our wholesale customers, think you can sell.

EXCHANGE RATES

Wild pricing on all of your favorite European wine categories sounds exciting, but exchange rates have as much an impact on the market as global demand and tariffs. In recent months the US dollar has weakened against the Euro – It now sits at 1.18 and threatens to weaken further into v the 1.2’s or beyond. For reference we were as low as 1.08 this Winter and as high as 1.35 at this time six years ago. As a rough yardstick, you can assume that for every 0.1 worth of exchange rate change you’ll end up with a retail shelf price change of between 7-10% depending on base cost.

TYING THINGS TOGETHER

With the above in mind, as you can imagine there are a dizzying number of exchange rate/tariff/price-based demand scenarios we could run, and many of you are asking us how things realistically look for Fall/Winter of 2020 compared to where we’ve been since this time last year. Warm recent vintages and no tariff changes mean that most Sancerre (and most appellations on the “edge” of 14% ABV in normal years) are coming in at a tariff exempt 14%+ ABV, and we will assume a mid-Fall exchange rate of 1.2

Fall 2019
Sancerre at €7,40 cost
No tariff
$23 retail

Winter 2019
Sancerre at €7,40 cost
1.08 exchange rate
Subject to tariff
$28 retail

Spring 2020
Sancerre at €7,40 cost
1.08 exchange rate
No tariff due to high ABV
$23 retail

Summer 2020
Sancerre at €7,40 cost
1.20 exchange rate
No tariff due to high ABV
$25 retail

Fall 2020
Sancerre at €6,50 cost
1.20 exchange rate
No tariff due to high ABV
$23 retail

This means that the average winery discounted, warm vintage, tariff exempt value-tier Sancerre you purchase this October will probably retail around $23 – the same retail price as the Sancerre you purchased last September, before the wine world went crazy with the one-two punch of tariffs and COVID. As far as direct import deals go, we expect to offer some options to you at or slightly below $20 retail.

We suppose this is a long way of saying that despite all of the noise, your wines should be on average coming in at the same prices this Fall as they did last Fall before everything went “crazy.” This isn’t really all that exciting, so you’ll never see it written about in the mainstream, but we find it kind of interesting if not a bit of a pleasant/positive surprise during a year when we will take any and all good news we can dig up.

Introducing the @grapexwine Spotify Channel!

By |2018-12-13T04:54:22+00:00December 12th, 2018|Trends|

All of us in the wine business spend our fair share of time in cars and planes, so it just makes sense that all of us in this fantastic industry owe the world some sweet playlists, right? Musical tastes here @grapexwine run the full gamut, from buttrock (RIP Neil Lindblad), to punk, to Mariachi and everything in between. This Winter we are all about Scandi-pop (aka Scandinavian indie hits, with a shout out to our favorite Scandinavian winemaker, Steffan Jorgensen @ Elqui Wines), so click the link on the upper right corner of our grapex.com homepage (or just click here), grab your favorite cans, and enjoy!

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