Tariffs to cause glass shortage and price rises
Welcome to February’s update from our friends at Saxco , on market dynamics in beverage packaging.
Over the past month, the wine industry has been caught in a whirlwind of shifting signals from the new US administration regarding tariffs. The rapid pace of change has left many wondering whether these moves are strategic negotiation tactics or actual policy changes that will directly impact pricing for wine-related goods and materials.
The Trump administration initially imposed tariffs on imports from Mexico (25%), Canada (25%), and China (10%) – the White House Fact Sheet is here . While a temporary 30-day pause has been placed on tariffs for Canada and Mexico, concerns about retaliatory measures remain high. Canada, for example, had already announced 25% counter-tariffs on US goods, including alcoholic beverages – a move that could significantly impact California wineries and other US producers exporting to our northern neighbor.
But it’s not just the challenges with finished goods that we are concerned about; it is how tariffs will affect the packaging components like boxes, bottles, capsules, and more. With our heavy dependence on glass from China and Mexico, the tariffs will cause a surge in demand for US glass, creating a shortage and upward price pressure. If producers cannot access US glass, they will be forced to buy inflated glass prices from countries with tariffs that increase the cost of goods from 10% to 35% across multiple packaging components.
There are also hints of potential tariffs on the EU. Some companies stockpile finished goods and raw materials to mitigate potential tariffs and avoid increased prices or shortages. Simone Luchetti, president of Banville Wine Merchants, has said : “A 20% tariff increase at the importer level doesn’t just stop there – it compounds through the supply chain. By the time it reaches the consumer, that 20% can turn into a 35% or more increase, which is significant.”
This compounds the wine industry’s rising costs. Wine is already the most expensive cost-per-ounce product in the Alcoholic Beverage category, and cost-of-goods inflation will only exacerbate the margin compression for producers as they cannot pass along those costs to consumers.
Most of the key drivers remain steady, but fuel prices increased from December’s $3.494 to $3.634 a gallon. There are concerns about increased fuel prices due to winter demand and Canadian energy tariffs (both direct and retaliatory).
Ocean freight from Asia to the US West and East coasts has decreased since last month, but there is still upward pressure on pricing coming out of the Chinese New Year, compounded by the anticipated increase in ocean freight activity from US producers stockpiling Chinese goods to avoid future tariffs.
Bottled Tidbits – Bottles come in many shapes, sizes, and materials. But do you know the most expensive wine and spirits have been a result of the bottle (especially the added flair). Here are the three most expensive bottles ever sold.
- The D’Amalfi Limoncello Supreme: Filled with Limoncello from the Amalfi Coast from the Antica Distilleria in Italy, a single bottle of this lemon-flavored liquor was commissioned by an anonymous Italian patron to be cased in a package specially designed by British designer Stuart Hughes, well known for his opulent creations of luxury items. He once made a house featuring over 200,000kg of solid gold. With this bottle, he encrusted it with an 18.5-carat diamond on its body and three 13-carat diamonds on its neck. The bottle is estimated to be worth $44 million.
- Isabella’s Islay Whisky: While 30-year-old Scotch produced by the Luxury Beverage Company fills the bottle, the English Crystal decanter covered with 8,500 diamonds and 250 rubies, topped-off with a coat of two bars of white gold, makes this bottle spectacular. Fortunately, it is a bargain compared to the Limoncello, coming in at a brisk $6.4 million.
- The Billionaires Vodka: This is a Saxco favorite because it is not just the flair that makes this bottle unique. The actual bottle is violet-hued heavy glass dipped in platinum and rhodium. It also has a faux fur cover and is encrusted with 3,000 white diamonds. The wrapper is topped with a miniature chapka hat. You can enjoy martinis fit for a czar for a mere $4 million a bottle.
This update first appeared as a paid subscriber feature in the Ciatti California Report on February 13th. If you would like full access to the monthly California Report, its actionable bulk wine and grape market intelligence, bulk inventory charts by volume and by varietal, and bulk/grape market activity barometer, do consider becoming a paid subscriber. You can check out our subscription plans by clicking below.
