Bureaucracy from vine to table
March 18, 2012
If you are a wine lover – as opposed to a wine snob for which I have no use – chances are your wine purchases include imported wines. Despite taking a hit in recent years due to the strong Euro and debilitating recession, imported wines, primarily from Italy, France and Australia, still account for over 21 percent of total market case volume in the United States. And with this robust market comes consumers quest for knowledge about the wines: country of origin, varietal (cepage in French), appellation, vintage, flavors and aromas delivered to the nose and tongue, Wine Spectator rating (a useless parameter in my opinion) and so on. Sommeliers, and liquor store salesmen are often quizzed on these things before a decision is made. And rightfully so since enjoying wine is an experience that is unlike drinking a mere liquid like water or Coke.
But how many consumers know about the basics of importing wine to the point of sale and how the layers of bureaucratic red tape and taxes add to the price of that precious vinous liquid? Not many, including the folks who are selling you the wine. So this week I thought I’d give my readers a peek behind the curtain into the world of wine importation into Colorado. And I do mean a peek since this confusing system that helps to keep some lovely wines from coming to market in Colorado is far too complex to completely analyze in the short space I have. Sidebar – I’m only focusing on the importation and sale of wine. I need too much liquor to be able to write about spirits!
Why Colorado? Well, to begin with we live here and I did business here as a federal importer of fine Piemontese wines. But there is also another reason. America has 50 states equating to 50 separate regulatory regimes governing the sale of liquor and vinous spirits, from wine business-friendly states like California – a shocker, I know – to those like Colorado that add multiple layers on top of the surprisingly straightforward and easy to understand federal regulations. For whatever reason, Colorado’s three-tiered system of importing and selling wine is definitely something that favors big wineries represented by the likes of wholesale powerhouses Southern and National over small producers of 50,000 to 200,000 bottles per year.
To make my point, let’s look at two excellent family-owned and operated Piemontese producers, Ca’ del Baio from Treiso in the Barbaresco appellation and Deltetto from Canale in the Roero, about 20 minutes away. Full disclosure, I served as the wineries’ Colorado federal importer for about 5 years and have known the families for ten. Their background and experience in selling wines in America provides a good framework for personalizing the experience of wine importation.
Ca’ del Baio’s roots date to the late 19th century when the Grasso family owned the entire Asili vineyard – planted with 100% nebbiolo vines Ca’ del Baio uses to produce an award-winning Barbaresco cru by the same name. The vineyard lies just outside the tiny village of Barbaresco. Luigi Grasso, great grandfather to the youngest generation currently in the business, founded the winery in 1950. From the 62 acres of vineyards under cultivation, the Grassos produce on average 100,000 bottles of wine per year, of which 60% is exported to the United States. Giulio Grasso runs the winery with help from his daughters Paola Grasso Deltetto – wife of Carlo the younger – and Valentina Grasso, and two permanent employees. The employment ranks swell with cooperative workers when pruning and harvest are underway.
Three generations of Deltetto men and women have worked in the winery since Carlo Deltetto (the elder) founded it in 1953. Antonio – Tonio to local friends, Toni to us – and his son, Carlo, both oenologists, work in the cellar, the vineyards and as export managers. Toni’s wife Graziella and daughters Cristina and Claudia also work in the cellar, the vineyards and in marketing the family’s wines. The Deltettos’ annual production from their 51 acres averages 170,000 bottles per year with only 9% making its way west to America. A growing percentage of their production includes a labor and cost intensive Spumante produced in the classic champagne method. A wine-producing state of growing importance, Oregon, is a major market for Deltetto and Ca’ del Baio, not the least because of the popularity of Piemontese wines, but also because of the ease of sale in the state.
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As you can see, from the 370,000 bottles of wine these two families produce each year, numerous families are supported by the razor thin margins that can vanish at the whim of Mother Nature, the economy and regulatory insanity. The US does not have the monopoly on onerous regulations and those of some countries are outright wacky such as the special stamps producers must buy and affix to each bottle exported to Russia. But I’ll save that for another discussion at a future time.
From his winery in Canale, Toni Deltetto consolidated and palletized the Colorado-bound shipments of the four wineries my company once represented. The wines were then picked up and trucked to the Mediterranean port of Livorno for the long voyage to New Jersey where the first of four tiers of importation regulations hit the wines.
At the port, our agent-shipper took possession of the wines, paid the federal taxes and cleared them through customs. If we were lucky, the container holding our pallets would breeze through and be loaded on a westbound truck. But occasionally luck does not prevail and the customs agents impound the container – which can hold multiple importers’ shipments – for a complete check. It doesn’t matter if the shipment contains time-sensitive Christmas orders or that an unusual heat spell has hit. Anything from the correct spelling and punctuation of warnings on labels to paperwork needed since 9/11 for wood boxes is fair game. The COLAs – Certificate of Label Approval for each unique brand – are part of the shipment’s paperwork, certifying the labels meet Alcohol and Tobacco Tax and Trade Bureau requirements. When a container is held over, these documents are meticulously checked against random samples for accuracy. This once took a tortuous week, but the shipment was soon on its way again.
In an ideal world by the time wine shipments from abroad or other states cross the Colorado state line, the state importer – “sole source supplier” – has completed the job of registering the producers ($100 each) and each label ($5 each) based on the COLAs. By law, the state importer cannot take possession of or warehouse the wine. That’s left to wholesaler.
Once warehoused, inventory is reported each month with sales triggering state excise taxes. Increasingly wholesalers are demanding foreign producers, through their importers or their agents, warehouse wines in the U.S. to ensure a steady flow of product. While logically it makes sense, in practice it can be a deal breaker for small wineries and importers.
And therein lies the rub for small producers like the Grassos and Deltettos whose volume is small, but quality outstanding. The wholesaler takes a percentage of the retail price as commission and costs – usually 33 – 40%. The wholesaler’s risk is somewhat minimized by state regulation that requires retail sellers to pay within 30 days of wine delivery or refused further deliveries by the wholesaler. However, federal importers and producers might wait months or even years to be paid for wines that are often sold well before the wholesaler makes final payments on the stock.
And finally, after adding three tiers of regulatory costs, wines are ready for sale to the consumer. Once again taxes are levied. Given restaurants rely on alcohol sales for a chunk of their profits, wines often hit the list at a 3 to 5 cost multiplier, often perplexing diners. But considering the seasonality of Vail Valley business, restaurants have to optimize what they can out of seven months of business.
Producers must hope for good weather during the growing season, endure currency fluctuations and shipping cost spikes due to high-energy costs, struggle to get paid in a timely fashion and bear the brunt of the regulatory burden. So after the grapes are grown, harvested, vinified and bottled – with bottle and cork costs rising – then cellared and sold, producers’ average margin for this high-risk enterprise can sometimes be as low as a dollar a bottle. They with the most to lose, have the least to gain. Think about that next time you open a bottle of imported wine. Then raise a glass to the Deltettos, Grassos and the other passionate artisans whose love of terroir and wine makes it all possible for you.
Suzanne Hoffman is a local attorney, wine importer and the Chambellan Provincial of the Southwest Region and Bailli (president) of the Vail chapter of the Chaine des Rotisseurs. For more background information on her “Behind the Scenes” series, go to http://www.facebook.com/vailvalleysecrets. Email comments about this story to email@example.com.