Yet Kennedy’s biggest concern transcends that of forcing customers to pay $40 for a bottle of wine that previously cost $20. Dining out is usually not just about eating food, but having a certain kind of experiential outing, often with one’s spouse or friends.
If the European wine has become too pricey to be ordered, “They will say: ‘Let’s stay home tonight.’”
Furthermore, the margin for wine is usually generous and enables most Italian and upscale eateries to charge a modest sum for chicken parmigiana, for example. “It is product offerings like wine that allows the restaurants to absorb razor-thin margins on entrees,” Kennedy says.
Because the follow-up tariffs to the 25 percent already instituted on wines are still in the works and not authorized yet, Kennedy says, “We’re in uncharted territory. We have never seen a proposal this dramatic before, going from 25 percent tariffs to 100 percent.”
At Commander’s Palace, the venerable, 128-year-old Creole restaurant located in the Garden district of New Orleans, Dan Davis, its wine director, says, so far, the wine tariffs have had minimal impact on sales because those increases have been absorbed by distributors and producers.
But he’s unnerved by the uncertainty that the next tariff could spike, which could come at any time, and would dampen future wine sales. “The marketplace doesn’t like uncertainty,” Davis says.
Moreover, orders made for wine in Europe are shipped by container, and take about six weeks to arrive. So that cargo of $300,000 wines could easily be valued at $600,000 upon arrival, and restaurants must pay in full on arrival to obtain it.
Davis says he will have to shift inventory and stock more South American, Australian, and South African wines because most of his customers “aren’t willing to pay $75 or $100 for wines.”
In the next year, Davis envisions the tariffs will not exert considerable impact. “But if these tariffs have dramatic effects on the marketplace and shift the most desirable French, Italian or Spanish wines to other parts of the globe like Asia, and we can’t get them, it will have an impact in five to ten years,” he says.
Nor does Davis think California wine sales will proliferate if European wines skyrocket in price. Customers who buy inexpensive wine for $20 will find replacements, and those with a more refined palette and buy $40 or $50 wines “won’t substitute California pinot noir rather than red burgundy.”