California wineries are struggling to stay afloat in China with mounting tariffs, but no one is ready to relinquish contacts with the lucrative market yet. Against all odds, one Napa winery appears unfettered by the punitive tariffs, and keeping up with market demand seems to be more of a problem.
With punitive tariffs on American wines exported to China mounting to more than 90%, wineries in California, which constitute of more than 90% of American wine production, are reining in their investments in China and diversifying their markets in other parts of Asia.
Starting from last March, China has levied rounds of punitive tariffs on American products including wine, which pushed down American wine exports to China from US$78 million to US$59 million last year.
The impacts on Buccella, a small winery located in Napa with average annual production of 50,000 bottles, were immediate, according to Kevin Travis from the winery, which specialises in making Cabernet Sauvignon reds from US$ 60 to US$210 a bottle.
“Our importer stopped importing wines to China this year because of the tariffs,” says Travis at a California wine grand tasting in Hong Kong organised by the local trade advocacy group California Wine Institute on October 18.
Before the tariffs kicked in, he admitted the winery was doing quite well in the market despite its small volume. Its mainland importer was selling a pallet of its premium Cabernet wines priced US$120 a bottle ex-cellar a year.
The sense of disruption brought by the abrupt tariffs was shared by Silenus, another boutique winery in Napa.
The winery located in Oak Knoll in Napa Valley still maintains its presence in China, but admitted that more expensive wines from California are also starting to feel the pinch.
“We still sell wines in China but for a long time the high-end wines can escape it, but now they are feeling the pinch,” says its vice president Evelyn Pool, who was pouring the estate’s Silenus wines and its new release of more approachable Tyros range at the tasting.
Founded in 1968 by Bruce Newlan, the winery was previously supplying grapes to other iconic Napa wineries such as Robert Mondavi, Inglenook and Silver Oak before building its own winery in 1978. In 2008, the winery was bought by a Chinese businesswoman and changed its name to Silenus subsequently.
Describing the Chinese wine market as being “sporadic”, Pool says Silenus was fortunate in a way as it started to diversify its Asian market before the tariffs kicked in. “We were fortunate, as we were ahead of the curve,” she consoles.
It also further prompted the winery to actively expand its export market as well as domestic market. “It is a big year for us really, introducing the wine to the global stage. I have done national market. It’s hard and there’s a lot of competition. Export takes a while to get started and it’s just a slower ramp-up,” she explains.
This year, the winery has expanded its footprint in new markets such as the UK, Canada, Denmark, Korea, Hong Kong, and Taipei.
However, there’s one winery that appears unfettered by increasing tariffs and bucked the downward trend in China – Girard winery founded in 1975 by Pat Roney.
The Napa winery skyrocketed to fame in China after its 2014 Cabernet Sauvignon Napa Valley was served at a state dinner between Chinese president Xi Jinping and Donald Trump in 2017.
Since then its flagship Cabernet Sauvignon priced around US$ 70 per bottle has become one of the top-selling premium Californian wines in China, according to Chinese state-owned news agency Xinhua, even in the thick of ongoing US-China trade war.
Asked about the impacts of US-China trade war on the wine sales, its Hong Kong distributor Keric Tao replies, “It’s easy to sell. Even with tariffs, it doesn’t matter. This wine is famous in China and doesn’t require much marketing.”
It’s worthy to note that in California about US$1.46 billion worth of wines are exported last year, while its domestic retail value in the US stands at a whopping US$40.2 billion, which means majority of wines produced in California are consumed domestically.
Earlier in Napa when asked by vino-joy.com if the adverse trade row had any impacts on family-owned Viader Winery’s market in China, its winemaker Alan Viader replied with affirmation, “zero,” because it’s virtually non-existent in China, as it only sells two cases to the market.
But for wineries that spent years building up Chinese market, the stakes are high.