Wine Woes
While the House is in recess (again), the Senate has been working on its version of a massive funding bill that most likely will eventually go to a House-Senate conference for a compromise, which the Republicans hope can occur before the 4th of July. Among the key areas of contention are the total cost, provisions affecting Medicaid, and the level of a specific tax exemption. The current funding to keep the government open expires on September 30, and based on past years the drama will go on right up til the end.
Meanwhile, the grape and wine industry faces uncertainties in some key areas: tariffs and labor. The former have reduced or even eliminated sales of and orders for American wines in key export markets like Canada, which in normal times accounts for $1.1 billion in sales of US wines.. The labor uncertainty, due to on-and-off-and on-again ICE raids, comes right as harvest approaches in a few early states, with the others to follow. Predictability and stability are key to running any successful business, and neither factor currently exists in these areas. It’s a tough time for wine.
On a more positive note, but in the longer term, is the eventual possibility of a USPS Shipping Equity Act that would allow the postal service to ship wine just like FedEx and UPS, which would increase competition and reach more rural areas. A recent report by Rob MacMillan of Silicon Valley Bank showed how Direct to Consumer (DtC) shipping can affect profitability: In their survey, wineries which sold 70% or more via DtC were profitable, while those selling less than 40% were unprofitable.