Wine import tax: Make American Wine Great Again?

american wineEconomic policy has about as much clarity as a tank of Puligny after batonnage right now. There’s some reasonable certainty about various reforms (ahem, tax cuts) but one area that is shrouded in mystery: how imports will be taxed.

Trump made trade a big issue in the campaign and has continued in the same vein, doing industrial policy via Twitter since the election. Some policy wonks think that a huge change in the tax on imports may be forthcoming. A House bill from last year sought to impose punitive tariffs on imports to shame big box retailers such as Walmart, Home Depot and Target in their purchases from abroad.

Neil Irwin, writing in Sunday’s NYT sums up a relevant part of the destination-cased cash flow system:

A company that spent $80 making something that it sold overseas for $100 would pay no tax on its earnings. A company that imported goods worth $80 from abroad and them sold them domestically for $100 would pay tax on the full $100.

Perhaps there would be a carve-out for wine and gourmet items from abroad? Who knows. It’s not clear if this bill was targeting the retailers as importers or retailers, a key distinction in the wine world since the two “tiers” are (mostly) legally separated. Either way, about one out of every three bottles of wine consumed in America comes from overseas and could be subject to a new import tax, if one becomes law. In certain areas, such as New York City, it’s more than one out of every three bottles that is imported. And certain wine lists and shops feature imports as perhaps eight or nine out of every ten bottles on the shelf/list.

Would such tariffs be legal under the WTO? Does Trump care? Would there be retaliation against US products in overseas markets? Again, not a lot of clarity here.

But if there were a wine import tax or “border adjustments,” would it make American wine better? Probably not. US producers cannot make enough wine to keep up with US consumption. And stylistically, imports can be quite different. So it might be craft beer producers that emerge as the real winners of such a policy.

Again, there’s so little that’s been fleshed out beyond 140 character nuggets or campaign epithets. More will come in the coming weeks and months. Until then, drink up, foreign or domestic.

Wine on the wing: Emirates wine program

Apparently there’s a real rivalry among airlines for first class wine service–although you’d never guess it in the back of the bus where the wine selections are generally bad enough to drive a wine to beer.

A piece in Bloomberg details how Emirates has splashed out over $40 million a year on wine for the last twelve years. No comparative metric is given in the story (how much do other leading airlines spend on wine?) but it sounds like a big number to me.

Joost Heymeijer, who runs in-flight catering at the airline, details their buying strategy, which, interestingly, involves buying and then storing wines in a “Fort Knox-style” facility in Burgundy: The Emirates stash currently has almost 4 million bottles slumbering, some of which have escalated in value.

Sadly, that seems to be the point as Heymeijer said in the story: “It’s an investment. We look at it like a commodity.” Ugh. When they buy, they buy in 10,000 bottle lots, often from Champagne and Bordeaux. But they have even snapped up Burgundy, buying 2,000 cases of Corton-Charlemagne, cited as a tenth of the total production of the appellation.

They do pull some corks though, serving 9 million glasses of champagne last year, among other things. Check out the story for more details.

One amusing item appeared in the kicker. Asked about the Bordeaux 2015 vintage, Heymeijer replied “Not as good as 2010, but in Saint Emilion, Passat, and Margaux, it will be very good, probably better than the 2010.” Ah, yes, the renowned Passat appellation…probably a transcription error, but, yes, a case of top Bordeaux does sometimes go for about the same as a new Passat.
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Clos Rougeard sold to billionaire

rougeard“Winery X, in family for generations, sold to billionaire” is a headline that would normally barely raise an eyebrow. But the winery in today’s news is Clos Rougeard from the Loire.

Located in Saumur, Clos Rougeard is the Bentley of the Loire. The wines, almost all red, are expensive, rare and of exceptional quality–the kind of wines that can turn haters of cabernet franc into ambassadors. (search for Clos Rougeard at retail)

The 27-acre estate was owned by the Foucault brothers Bernard (a.k.a. Nady) and Jean-Louis (known as Charly). They were the eighth generation to run the estate and made it a pioneer of organic viticulture in the area as well as hands-off winemaking.

After Charly’s death in 2015, La Revue de Vin de France reports, the family resolved to sell the domaine. The buyer is Martin Bouygues, French telecom billionaire and 481st richest person in the world.

In a way it is kind of surprising that a billionaire is attracted to the Loire, which is generally a region that favors low-key wines and hasn’t attracted big fortunes to be tossed around since the day of Francois I. Perhaps that is changing? Doubtful. Clos Rougeard is arguably the pearl of the Loire, now snatched up as bauble for a billionaire. But at least he is discerning! And the estate doubtless cost less than one in Musigny. Bouygues owns Chateau Montrose in Bordeaux.

LARVF doesn’t report on changes in the wine making.

UPDATE: Yes, another “Winery X sold to billionaire” story appeared today–at this rate, will there be any family-owned and operated top wineries by the end of the year?? Stan Kroenke, owner of Arsenal football club and the LA Rams and Screaming Eagle, is said to have bought a majority stake of Bonneau de Martray. [Decanter]

Sour Grapes – wine fraud movie now on Netflix

sour_grapes_kurniawan
Sour Grapes recently went live on Netflix. Has Netflix recommended it to you yet? If not, you’re clearly not watching the right shows!

After speaking with one of the directors and seeing the trailer, I was ready to fire up the documentary when I saw it was available.

Sour Grapes tells the story of Rudy Kurniawan, the convicted (spoiler alert!) wine counterfeiter. We in the wine world know the story of how he came from nowhere in the early 2000s, ingratiated himself with some of the biggest collectors in the land, poured tens of millions of dollars into fine wine at auction, and then reversed and sold tens of millions of dollars of wine wine, including many fakes passed off as the world’s top wines.

But what is particularly compelling here is a trove of video of Kurniawan in action. Not only does he actually speak as opposed to the many court drawings we have seen of him, they actually have him utter the priceless line–in jest!–“I refill and put the cork back”! This old footage alone is reason for wine enthusiasts to see it. It’s fun to see some cameos for people in the wine world. (Though I still would like to see a movie version of this story told as fiction, with actors.)

It works as a movie too. I had a non-wine friend check out the film and he gave it a thumbs up. The film crew decamps to Burgundy to get some beautiful B roll footage; Laurent Ponsot comes off great in his role as inspecteur.

So put it in your queue, make some popcorn cooked with extra virgin coconut oil, and pop some champagne–just make sure it’s not a fake.

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Coravin uncorks $22 million in funding

coravinCoravin, the company formerly known as Wine Mosquito, has raised another $22 million in private equity funding. That brings the total equity sold to $40 million (plus another $3 million in debt). The lead investor of this round, closed on November 8, was not publicly disclosed. Neither were company revenues. Nor was the valuation.

The privately held company, based in Burlington, MA, sells a wine preservation/extraction device that uses a hollow needle to penetrate the cork of a wine bottle not unlike a mosquito if Bacchus designed mosquitoes. Over about 30 seconds, it injects argon gas to pressurize the bottle and then extracts a glass of wine without removing the cork. The device lists for about $300 retail and replacement argon canisters list at $18 a pair. That’s enough argon for about 30 glasses of wine.

While this price is low for restaurants compared to many by-the-glass systems, it does seem steep for consumers. Nonetheless, the company continues to raise capital at an astonishing clip. Sales were briefly halted in 2014 after complaints of exploding wine bottles. The company now recommends using a “wine bottle sleeve” when opening bottles.

The parody Twitter account @shitmysommsays recently tweeted “If you need a Coravin at home, you need more friends.”

The last company in the wine space to raise this much private equity was Lot 18, which raised $33 million in 2011.

UPDATE: Vivino, a wine app developer, raised $25,099,884 in private equity funding in January of this year.

Daniel Johnnes, Burgundy specialist, joins Grand Cru

johnnesDaniel Johnnes may be the closest thing the American wine world has to Burgundy royalty. Yesterday he announced that he has joined Grand Cru Selections, an importer and wholesaler based in New York City, as a partner. It’s a big move, if somewhat “inside baseball.”

“This is an opportunity to be a partner in a young and dynamic company that I didn’t want to pass up,” he said by phone.

Johnnes, 60, helped pique America’s interest in Burgundy wines When he was a sommelier at the erstwhile restaurant Montrachet in the early 1990s, he hosted winemaker dinners with the likes of Christophe Roumier and Dominique Lafon that encouraged American collectors to add Burgundy to their cellars. In 2000, he tapped his connections in Burgundy to hold the first “La Paulée de New York.” This bacchanal now alternates annually between NYC and SF and is marked in red on the calendar of collectors. It also functions as a sort of “Burgundy university” for the sommeliers who work the event. Johnnes brokers a number of wines including Roumier and Lafon that he will be bringing to Grand Cru. He was #4 on our NYC wine power list a few years back. He currently is spending a year in Lyons.

Grand Cru Selections was started in 2010. Ned Benedict, a founding partner, said of their strategy: “we’re trying to build a really well-conceived portfolio of wines. Burgundy is obviously really close to all of our hearts.” But, he underscored, “we’re not trying to become a house of Burgundy–other regions are very important to us too.” Their portfolio includes the wines of J.L. Chave, Marquis d’Angerville, and nine wines from Piedmont, among others.

Sour Grapes, a wine fraud documentary coming to Netflix

Sour Grapes, a new documentary about wine fraud, is being released on Netflix next month.

The movie centers on the case of convicted wine counterfeiter Rudy Kurniawan. In fact, the film’s two directors, Jerry Rothwell and Reuben Atlas, met at Kurniawan’s trial in Manhattan where they had ventured separately, each with an eye to making a documentary. In a phone interview, Rothwell said they quickly decided to join forces after speaking with witnesses who had testified in the trial.

One of those was Laurent Ponsot who welcomed them and the camera crew to his Burgundy domaine. Rothwell says that the film “a bit like a detective story.” Ponsot is positioned in the film as one of the detectives, trying to solve the mystery of fake bottles and the perona of Rudy Kurniawan. Others include the investigative team of Bill Koch as well as Maureen Downey and Don Cornwell.

drc_fakeOne of the things about the film that is apparent from the trailer (above in case you get this via email and the youtube clip doesn’t render) is that they have real clips of Kurniawan walking and talking as opposed to those courtroom drawings that made him look like an alien life form (but courtroom sketches don’t do anybody favors, just ask Tom Brady). At one point he even jokes “I refill and put the cork back”! Rothwell says much of this footage came from another documentary about wine collectors shot in 2002 but that didn’t see the light of day.

Rothwell says that the Netflix came on board early, as well as ARTE, the Franco-German TV network. He says that he started the project just after Kurniawan was arrested but work and filming in earnest lasted about a year, which is fast. Working with Netflix streamlined it too and made for fewer headaches.

The Kurniawan story seems a perfect fit for TV or movies. The rights to a dramatic version of the story were sold in 2012.

Charles Banks, owner of wineries, indicted on fraud

Charles Banks, a former owner of Screaming Eagle whose current wine and hospitality holdings have been pegged at $200 million, was indicted in federal court today on two counts of fraud. Banks, 48, is accused of defrauding Tim Duncan, the NBA legend, of $20 million in investments.

Yahoo sports has the story:

The indictment was unsealed Friday in a San Antonio courtroom, where Banks surrendered himself and was led into the courtroom in handcuffs. Banks surrendered his passport and a $1 million bond was issued for his release pending trial. He is facing a potential maximum sentence of 25 years in federal detainment.

The FBI has been investigating Banks for a year. The SEC later filed suit against Banks in Atlanta where he resides accusing the financial adviser of defrauding investors.

Banks has amassed a global portfolio of wines under his Terroir Capital that includes Mayacamas of Napa Valley, Qupé of Santa Barbara and Wind Gap of Sonoma. The company was a founding partner in Sandhi, though that stake was sold earlier this year.

Banks had previously denied wrongdoing, telling Forbes in January, “We are proceeding aggressively to have [Duncan’s] claims litigated.” Banks was released after posting $50,000, five percent of the $1 million bail set in his case.

* “Feds charge — and sue — Tim Duncan’s former financial adviser” Mysanantonio.com
* The SEC complaint


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