American Distillers Look to Rebuild Business in Europe

Bruce Schreiner

Thursday, November 4th, 2021

American whiskey producers raised a glass to celebrate a trans-Atlantic agreement to end retaliatory tariffs that sank their sales in Europe. Now comes the challenge of rebuilding brands that were stymied in those ultra-competitive markets during the lengthy trade dispute.

Tasked with ramping up distribution networks in some their industry’s largest overseas markets, producers of bourbon, Tennessee whiskey and rye whiskey also have to overcome problems in the global supply chain from the COVID-19 pandemic.

But whiskey producers sounded optimistic Monday about reviving growth strategies for European markets after the U.S. and European Union announced a weekend agreement to settle their diplomatic rift over Trump-era steel and aluminum tariffs. American whiskey became collateral damage when the EU slapped a retaliatory tariff on those spirits in mid-2018.

“This is an amazing reprieve -- nothing but happiness and jubilation,” Amir Peay, owner of the Lexington, Kentucky-based James E. Pepper Distillery, said. “There are some obstacles and problems that we will need to deal with, as will everybody. But that’s business.”

There’s plenty of lost market share to make up in the EU.

American whiskey exports to the EU plunged by 37%, from $702 million to $440 million, from 2018 to 2020, according to the Distilled Spirits Council of the United States.

For Kentucky bourbon producers, sales to the EU plummeted by nearly 50% in 2020 alone, the Kentucky Distillers’ Association said. The EU accounted for 56% of all Kentucky whiskey exports in 2017 — the year before the tariffs hit — but its share shrank to about 40% by 2020.

In touting the agreement by President Joe Biden’s administration to settle the trade dispute, U.S. Commerce Secretary Gina Raimondo said “this deal is good for Kentucky’s workers and the iconic Kentucky bourbon industry.”

Kentucky Gov. Andy Beshear said Monday that Raimondo “went to bat” for the state, pointing to their multiple conversations about how hard the EU tariff was hitting Kentucky’s distilling sector.

The EU targeted American whiskey and other U.S. products in response to then-President Donald Trump’s decision to impose tariffs on European steel and aluminum.

Tariffs amount to a tax, which producers could either absorb in reduced profits, or pass along to customers through higher prices — and risk losing market share in competitive markets.

With the trade barrier coming down, Catoctin Creek Distillery in Virginia is looking to start reshipping its rye whiskey to EU markets, said Scott Harris, the distillery’s co-founder and general manager.

“We have a chance to go over to Europe now and compete fairly and bring our products back in at competitive prices,” he said. “This is what we’ve been waiting for the whole time.”

But it could take a few years to regain the lost European business, Harris said.

Distillers will have to decide how much of their finite whiskey supplies will ship to Europe. They can’t simply crank up production for immediate inventory bumps. Most bourbons typically age four to eight years before reaching market, getting their flavor and golden brown color during aging.

That patience will be necessary for American distillers in winning back space on EU liquor shelves, Peay said. His Kentucky distillery’s signature bourbon and rye brand is James E. Pepper 1776.

“It’s not easy to repair the damage that’s been done,” he said, adding recovery will be complicated further by supply chain woes brought on by the pandemic. And there’s still a lingering United Kingdom tariff on American whiskey owing to a separate trade dispute.

Nonetheless, he predicted a European comeback for U.S. spirits in the next few years, adding, “we are going to start seeing some serious mojo come back into Europe from the American whiskey space.”

Many employers across the country are pushing workers to return to the office.

This shift from remote work has triggered concerns among workers who are parents and caregivers. Who will watch their children and aging parents? Their loved one with a disability? How will they afford care workers?

Many Americans have put return-to-work plans on hold due to these concerns. According to the Census Bureau’s Household Pulse Survey, over 7.5 million respondents attribute caring for a child who was not in school or daycare as the main reason they were unemployed. Outside of retirement, that means child care is the No. 1 reason that Americans are not working today. An additional 1.9 million cited the lack of eldercare.

Our economy has made substantial progress in recovering from the pandemic. Since the president took office, we have added over 3 million jobs. But we are still missing over 7 million jobs from before the pandemic.

As workers think about what economic decisions make sense for them and their families in coming months, we need to pay attention to the lack of caregiving services, which has burdened workers throughout the pandemic. This is no small issue—unavailable and unaffordable care is an economic crisis driving current workforce challenges across the country. But in reality, too little attention has been paid to the sources of the problem.

Our “care infrastructure” is in tatters. Even before Covid-19, the lack of child care cost Americans $37 billion annually in lost income and $13 billion in lost productivity for employers.

Without adequate care services, we cannot expect everyone who is a parent or caregiver to fully participate in the workforce. Among leading economies, the U.S. has the most productive workforce in the world—when it can work.

There is an entire generation of Americans in their prime working years caught between their job and caring for their children, elderly relatives, or both. For this “sandwich generation,” the financial strains and time requirements of caregiving can be personally and professionally crippling.

I know personally how critical finding affordable, trustworthy care for my children was to my career. Even today, my ability to be in the office each day is dependent on the caregiving team that watches my 90-year-old mother.

In recent decades, the care economy enabled women to work and pursue careers. But the supply of care services has not kept up with demand. One study found that the cost of child care caused a 13% declinein the employment of working mothers with children under the age of 5 from 1990 to 2010.

The pandemic has amplified this issue, turning it into a full-blown crisis. Since February 2020, nearly two million women have left the workforce, resulting in the lowest women’s workforce participation in over 30 years.

To fix this crisis, we need to make sweeping investments in the care economy. First, we need to make care affordable. Child-care spending grew 2,000% over the past 40 years as more women entered the workforce, while child-care costs have grown twice as fast as inflation since the 1990s. As a result, many skilled mothers are driven out of the workforce.

Second, we need to start with our care workforce. Millions of women, primarily women of color, work all day, every day, in the care economy. In taxing jobs, they’re typically making poverty wages. For far too long, these women have been unseen, underpaid, and undervalued. Major investments can bring dignity back to these jobs by providing better wages, benefits, opportunities, and support.

Third, we need to address the lack of quality care facilities. Even before Covid-19, 43% of parents reported struggling to find an adequate child-care facility. This has only gotten worse as massive underenrollment triggered by the pandemic forced 1 in 10 child-care centers to close permanently.

President Biden’s Build Back Better agenda addresses these issues by making historic investments in the care economy. I’m proud to champion them in every conversation I have with members of Congress and the private sector.

I’ve spoken with dozens of CEOs. They recognize the return on investment. At a recent event, Dara Khosrowshahi told me how turnover at Uber, often caused by caregiving demands, costs $4,000 in lost productivity per employee. Businesses understand and support what the president’s investments are trying to achieve.

It’s time for our federal government to create a safety net that extends beyond the largest corporations and allows small businesses, restaurants, and even sole proprietors to access affordable, reliable care services. Doing so is not just the right thing to do for U.S. families, but it’s also good for business, and it’s good for the economy.

An analysis from the Council of Economic Advisers in 2014 found that every $1 invested in child-care and early-education spending returns $8.60 in societal benefits. And raising wages of care workers ultimately puts money back into the economy.

As we emerge from the pandemic, our economic priorities cannot be stuck in the past if we want to build a competitive economy for the future. It’s time for Congress to address our care crisis so that Americans can finally return to work. At the end of the day, care investments aren’t just good for American families. They’re vital for American businesses and critical to the recovery of the U.S. economy.