Retaliation Worries State Winemakers

Will Americans be willing to pay $9--instead of $3.50--for a bottle of German Liebfraumilch?

Probably not, says Bob Berning, the wine buyer for Trader Joe’s 49 outlets. “People simply will not pay that price.”

Berning said he was “busy on the phone all morning, un-buying wine that would come in after” Dec. 5--the date that the United States is scheduled to place 200% duties on European white wines and other products.

Sales of California wines might get a boost if the United States follows through with plans to impose the duties as part of an escalating trade dispute with the European Community. But even so, the state’s vintners aren’t popping any champagne corks just yet.

Shortly after the plan to impose duties was announced, California’s leading winemakers were worrying about retaliation from the Europeans--a potentially lucrative market that the Americans have only begun to crack.

“This is unfortunate, because two can play the same game,” said Daniel J. Solomon, spokesman for E. & J. Gallo Winery, the biggest in the country. “We would have as much to lose if they retaliate against American wines. Therefore, nobody wins. So we hope that this matter can be worked out without such action.”

Meanwhile, retailers, distributors and importers were scrambling Thursday to minimize damage from the duties, which potentially could nearly triple the retail cost of Liebfraumilch, Riesling and other white wine varietals from France, Germany and Italy.

They have 30 days before the trade sanctions would take effect. Most winemakers and wine sellers agree with Trader Joe’s Berning that consumers will buy more domestic wines rather than pay nearly three times the current price for a bottle of European wine.

In an effort to beat the tariffs, wine exporters on both sides of the Atlantic are planning to step up shipments.

“The French right now are sending (cargo) container after container of wines to America--to get here before Dec. 4,” said Michael Mondavi, co-managing partner of Robert Mondavi Winery, a premium vintner in Napa Valley. “They are scaring up every possible container and filling it. And so are we. We will probably ship a six- to eight-months’ supply, and the French are trying to ship eight- to 10-months’ supply. So if it does go only six months, very few wines will be affected.”

The United States has threatened several times before to slap punitive taxes, duties and tariffs on white wine from Europe. At least one such threat was tied to the same dispute--over European subsidies on oilseeds--that sparked Thursday’s action by U.S. Trade Representative Carla Anderson Hills. And in 1987, the Ronald Reagan Administration said it would put heavy duties on white wines and cheeses--striking fear in the hearts of those conspicuous consumers, the “yuppies.”

Those threats were never carried out. But American consumers have increasingly turned down European wines in favor of domestic ones. Now European wines make up only about 15% of the U.S. market for table wines. Of that, about half is white wine. France, Germany and Italy now sell about $269 million worth of wine a year in the United States. Their biggest sales are on the East Coast; on the West Coast, consumers overwhelmingly prefer California wines.

U.S. wineries have greatly increased sales overseas. This year, exports are expected to bring the domestic industry nearly $175 million, up from $35 million in 1985.

California supermarkets--where consumers increasingly shop for wines--often carry a few imported varieties. At Lucky’s stores in Southern California, shoppers can find about 10 kinds of French wine.

“But they are not big sellers,” said Lucky’s spokeswoman Judy Decker. “What adding tariffs might do, we don’t know. We’ll have to let the consumers decide. After all, we have limited shelf space and we can’t keep something on the shelf if it’s not selling.”

Like other California wineries, officials at Sutter Home in St. Helena are more worried about sales in Europe, which now account for a third of its total annual exports of 50,000 to 60,000 cases. “American wine producers have been making a concerted effort of late to open new markets in Europe and the Pacific Rim,” said Sutter Home spokesman Stanley Hock. “Retaliation . . . would put a big crimp in that export effort that has been picking up steam in the last couple of years.”

Mondavi said exports from his winery to Europe make up about 5% of the company’s total market. “We--and many of the better California wines--have been enjoying tremendous growth in the export business in the last five to seven years,” Mondavi said. “The great thing that has been going on in the global wine industry is that we in California are doing to Europeans, in the quality and value of wines, what the Japanese did to the U.S. auto and electronics industries.”