Wednesday, November 9, 2016

What President Trump means for the wine world

Photo by Jennifer C. Martin
President-elect Donald Trump owns a winery, but does not drink.

If the U.S. wine industry is looking for comfort in the wake of the election, it's in the first part of that sentence. Trump is unlikely to pursue legislation or regulations that hurt his own businesses.

People are not going to stop drinking because Trump is President. George W. Bush was a teetotaller and U.S. wine consumption rose steadily throughout his tenure.

However, foreign wine producers dependent on the U.S. market cannot feel comfortable today.

When French leaders spoke out against the U.S. invasion of Iraq under Bush, many U.S. drinkers turned their backs on French wine. No matter that France was right: we didn't want to hear it. People even renamed fried potatoes as "Freedom Fries."

French President Francois Hollande once said that Trump made him want to retch. His personal dislike of Trump may not matter.

Hollande's approval ratings are poor and he faces an uphill fight in an election next year. He might not get the opportunity to make the sort of philosophical stance against American policy that fomented last decade's mini boycott. But it's something to keep in mind if your business is dependent on French wine.

Other countries seem less likely to incur Red State wrath, but don't count it out. What if Trump decides he wants to park nuclear subs in New Zealand? Foreign leaders right now are deciding how much to swallow; the wine industry will not play a part in their calculations, but fortunes depend on their decision, and they know it: check out the congratulatory speeches that roll in today. If someone like Australia's prime minister Malcolm Turnbull later decides to take a principled stance against Trump, Australian wine exports here will suffer.

But the U.S. cannot make enough cheap wines cheaply enough for our own low-end market. And wine production might get more expensive here if Mexican-American vineyard workers decide life is safer south of the border. (Or maybe construction on The Wall will pay more?)

We're not going to stop buying cheap imported wine, and we're not likely to get into philosophical or trade wars with Chile. Cheap foreign wine might even make a comeback, because, after about five years of wine moving steadily into the luxury realm, we might be going back downscale.

You have to be a real optimist to think Trump's election is not going to lead to an economic downturn. People won't stop drinking wine, but they will drink cheaper wine. Remember the wine market of 2008-09? Luxury wines gathered dust on shelves and wineries had to retool to sell wines in the $20 range.

That said, Trump and the Republican Congress are likely to push through huge tax cuts for the wealthiest Americans -- the people who buy luxury wines. And though he doesn't drink, Trump's core business ideas tend to be about luxury: hotels that flaunt conspicuous consumption. We're not likely to see an immediate populist backlash against wine spending as long as it's domestic. So Napa Valley probably comes out of this OK.

If I were selling a $75 Pinot Noir from anywhere outside Napa Valley, though, I'd be worried. We might see an austerity on the part of left-leaning consumers as part of general unease and revulsion against conspicuous consumption.

And let's conclude back on the significance of Trump Winery.

U.S. wine regulations favor large distributors, who have money to spend on state legislatures. Small wine producers have thrived in the last few years by finding other ways to get their wines to consumers, especially by direct shipping, which is much easier now than a decade ago.

Large distributors will be looking to cut back on market access for wineries, and they will have a lot of legal targets, most of them at the state level as always.

Trump is not noted for his attention span. The wine industry needs to make the case to him early and often that what's good for Trump Winery is good for America.

Follow me on Twitter: @wblakegray and like The Gray Report on Facebook.
God help us.


Unknown said...

For correctness, Trump Winery is owned and operated by Eric Trump, the President-elect's youngest son.

I don't share your pessimism since we have no idea what the general economy will be going over the next 4 years. Once the initial shock wore off, the stock market not only recovered but hit a new high. Given Trump's business background we might expect expansion of the economy and not necessarily a recession.

Let's come back together, enjoy some good wine and not worry about predicting the future until at least early next year.

W. Blake Gray said...

Tim: I hope you're right. There's no doubt that Trump will be pro-business but both Bushes were pro-business also and we saw how that worked out. But I do hope you're right.