Covid 19’s impact on wine’s consumption, distribution and production

covid-impact-on-wine-consumption

Covid 19’s impact on wine’s consumption, distribution and production

How are winegrowers adapting to the crisis and its consequences?

 

Sales headed downwards in many regions, including the Champagne-Ardenne region, which estimates its financial loss at nearly a third of its usual annual revenue. Poor working conditions, a scarce workforce and falling yield production. Consumption and distribution habits turned upside down by an unprecedented context and crisis. This is the picture of a new reality: with the coronavirus crisis, the world of wine has been profoundly disrupted. This is a highly disconcerting period for winegrowers and the 2020 vintage which seemed promising at first but is now reduced to a logistical headache. 

A wine production in trouble.

The commercial difficulties of the last few months have led to an overstocking of bottles, which is particularly problematic in the run-up to the 2020 harvest.

 

Already penalized by taxes imposed by the United States, exports have slowed down significantly with the closure of borders since the end of March.

Stocks of previous vintages are struggling to sell. The closure of bars and restaurants has led to a drop in the consumption of seasonal wines, particularly rosé produced in Languedoc and Provence, and white wines from Alsace, which have been harder to sell.

Cellars are full, but 2020’s harvest is coming soon. One question thus arises: where will the next harvest be stored?

This is what worries a Languedoc wine producer, recently interviewed by the TV channel France 3. More than half of her Pays-d’Oc harvest is still stored in her cellar. She’s therefore planning to send a part of her production to a distillery. “I have two possibilities: either I use a distillation process, knowing that I lose on average €10 to €15 per hectolitre with this process, or I invest in new storage units to be able to keep the new harvest as well as the previous one.”

Similarly, Marion Borès, a wine grower located in Alsace, told the New-York Times that she would have to distil close to 19 000 litres of wine in order to stock the 2020 harvest. 

Faced with this storage constraint, winegrowers find themselves with two possibilities: either selling up their stocks at very low prices by selling their wine to be transformed into hydroalcoholic gels or increasing their storage capacity (which represents an important investment on the long term, dependent on their future harvests.)

In an attempt to help out wine growers and lighten this dilemma, Europe has offered winegrowers subsidies in cases of distillation. In France, AOC wines (certified wines which satisfy certain precise quality standards) are bought for 80ct, whilst non-AOC wines are bought for 65ct. As a result, no less than two million hectolitres of French wine have been distilled, in order to keep only their alcohol and transform these into disinfection products (hydroalcoholic gel and disinfectant). 

 

Chemin-de-la-distillerie

Photo Credit: BNIA

Some repercussions are to be expected upon the maximum allowed yields of grapes*: a subject of debate between winegrowers, cooperators and traders.

*the amount of wine produced per unit surface of vineyard. 

 

Let's-save-wine-producers

“Let’s save wine producers” – A mobilization of wine producers in Colmar, the 25th of June 2020 – Photo Credit: Gregory Fraize for France Televisions

 To cope with sales difficulties and the disposal of stocks, to avoid a serious fall in selling prices, regional wine committees governing the market are working towards a record drop in the maximum allowed yield. This decision has been difficult to accept and for many winegrowers, especially when the 2020 harvest looked exceptionally promising. 

This is a delicate subject in Champagne. The region, which already had a trade surplus of 400 million bottles, now finds itself with an additional 100 million of unsold bottles following the corona virus crisis.  Financial losses are estimated at €1,7 billion, either more than a third of 2019’s turnover (€5,05 billion). Cutting down the maximum allowed yield looks necessary to maintain the Champagne region’s image and avoid a serious price drop. In 2019, the maximum yield authorized the Champagne committee amounted to no less than 10 200 kg of grapes per yield. In 2020, according the estimates, the authorized number would only go up to 7 000 kg per hectare. Debates are heating up, dividing big Champagne Houses to independent wine growers, but the Committee’s final decision will only be publicly announced on the 18th of August. Several meetings have been adjourned without official decision being taken. This lengthy delay is further complicating the situation, as winegrowers hire grape pickers based upon the authorized yield. To make matters worse, the harvest is expected to be substantial this year and the AOC laws forbid to leave grapes “to rot on the vine”: the 2020 harvest will be a complex one. 

As in Champagne, the authorities governing the Alsace vineyards, such as the Alsace Winegrowers' Association (AVA), support a cut in the authorised maximum yield to solve the overstocking issues and avoid a collapse in grape prices. They are currently advocating for a cut of 80 to 60 hectolitres per hectare: most of the producers (cooperators and harvester-makers) are firmly rejecting this possibility and refuse to go below 70 hectolitres per hectare. This level of mobilization is unprecedented with demonstrations that brought close to 500 winegrowers together in Colmar. On the 16th of July 2020, the first vote of the AVA (Association des Viticulteurs d’Asace) General Assembly was in favour of the 80 hl/ha, promoted by grapes sellers and cooperators. However, the regional committee opposed itself to that decision the very next day. Next General meeting scheduled on the 18th of august: to be continued then… 

The 2020 harvest promises to be an incredibly complex affair due to the sanitation and logistical situation.

 

harvest-domaine-barolet-pernot

Harvest in the Domaine Barolet-Pernot – Photo Credit Cuvée Privée

Whilst the world was being confined, nature did not wait: vines continued to grow and green harvesting went on with a constant need for manpower. Managing a workforce in a period of sanitary crisis proved difficult… Indeed, as in offices and public spaces, barrier gestures are compulsory in the vineyards. 

Questions of recruitment and workforce management is all the more crucial today: the countdown to the harvest has begun. However, certain AOC wines require to be harvested by hand. Following different border closures, Spanish, Bulgarian and Polish workers, who usually come in large numbers to work in the vineyards during the harvest season, will not be able to come to France this year to help the winegrowers. Fortunately, thanks to this year’s vineyards’ precociousness, students and local workers will be ready to come give a hand and work during the summer period. 

Several questions still remain unanswered. In view of this unprecedented situation, will mechanical harvesting be authorized? How will sanitary and health risks be managed? Some of the first measures have been announced: winegrowers’ traditional lunch break during the harvest is now forbidden for instance! Moreover, housing grape-pickers will become is puzzling a large number of winegrowers, who struggle to find solutions as a large number of accommodation facilities are being closed down. 

This period of general upheaval for the wine world has equally induced its first consequences of the wine land transaction market, despite the fact that it was a very dynamic market in 2019. Some regions are already seeing a drop in the price per hectare, notably Champagne with a 2% drop and Bordeaux with a 9% drop.

The health crisis which we are currently experiencing is therefore leaving a significant impact upon the wine world. Beyond the sphere of production covid-10 has changed distribution and consumption habits. Local consumption, which has benefited local cellar-men (cavistes), e-commerce sites, supermarkets and certain winegrowers who have been able to adapt, has become a new established phenomenon despite traditional consumption in bars, hotels and restaurants.

Wine distribution and consumption: a world upside down

In France, a change in purchasing and consumption habits has taken place, forcing all players of wine’s value chain to adapt. 

 

wine-distribution-consumption-change

Photo Credit – Olivier Douliery for AFP

As wine consumption is deeply rooted within French tradition, the State has classified wine shops as essential stores. This decision may make some laugh, but it has allowed wine lovers to continue to consume – albeit differently- and wine sellers to rebrand and reinvent their marketing. Indeed, during confinement, the French did not stop drinking wine, quite the contrary. However, what has changed are drinking habits, as noticed by the popularity of “live-apéro” which has allowed people to continue to drink wine despite social isolation, experienced by many French citizens. According to an Ifop study, 42% of French people have even taken more drinks, or “apéros” as the French call them, than usual. 

Many wine sellers have therefore seen their sales increase. This was the case for Eric eppert, a wine seller in Ambazac interviewed the channel France 3 Région, whose cellar was mentioned in an article published by Le Monde during the confinement. “It was just before the Easter week-end. The fallout was incredible. I went from selling in average 500 bottles a day to 2 000. We quadrupled our sales!”

Wine merchants and cellar-men learned how to adapt their sales methods, favouring takeaway sales and contactless payments. Some have even introduced drive-through sales, usually reserved for fast-food outlets: customers could order online and pick up their orders an hour later in the store’s car park. 

Victims of the health crisis, professional wine tastings businesses, starting with the 2019 ‘”Primeurs” in Bordeaux; were able to quickly adapt themselves to this particular and odd context. 

 

hopwine-samples-vinovae

 

Samples created by the start-up Vinovae and sent to participants of the Virtual Son “Hopwine”.

Traditionally organised each year during the month of June in Bordeaux and gathering more than 7 000 guests, including 3 000 foreigners, the region’s primeurs wines’ tasting was made possible and took place despite the Coronavirus crisis. For the 2020 edition, wine merchants were inventive and relied on a company which creates small wine samples, entitled Vinovae, so that wine professionals and journalists could simply taste the wines from their living rooms.

As a direct consequence of the Covid-19 crisis (and more indirectly of the Bordeaux Bashing crisis that has been raging for a number of years), the 2019 Primeurs have been marked by a significant drop in prices, initiated by certain Châteaux. An average drop of 19%, but as much as -31% for the renowned Château Pontet-Canet, which released its vintage (the first organic vintage!) at a price of €58 instead of €84 the previous year. A winning strategy since the Château managed to sell its entire production in less than 3 hours.

Professional wine tasting has equally quickly adapted itself to this new environment, with online wine tastings organized by oenologists and clients all over the world. This new type of tasting method, which could go potentially last beyond the, is found to be disturbing for some people: it could be perceived as going against a crucial moment, usually made sacred through a physical exchange between buyers and produces. Christophe Thomas, Export Director of the Maison Joseph Drouin in Beaune, for instance, does not particularly appreciate these new methods : “We cannot create a similar relationship with our customers as when we have dinner together whilst controlling the quality of wine, matching the dishes with different products’ quality and aromas, not to mention the various technical problems we may encounter.” 

And how about the rest of the world?

 

Some countries such as South Africa have considered alcohol consumption as a potential source of danger in periods of confinement and social isolation. They have therefore taken the difficult decision to completely ban the sale of alcohol and tobacco during the confinement period, putting a total break on the sale of wine and spirits. 

In other countries, on the contrary, the purchase and consumption of wine has increased during confinement. For instance, in the USA, according to a Nielsen survey, wine sales increased by 29.4%. The same observation can be made in Great Britain and Australia, where sales seem to have surged.

In short, the crisis caused by Covid-19 is substantially destabilizing the wine sector. And this is without mentioning related players such as suppliers of dry matter or interims agencies specialized in recruiting foreign grape pickers, which are currently suffering and trying to recover from the commercial slowdowns.  Some regret that the State is not more involved in its rescue with an aid of €150 million, which seems relatively small in comparison to other sectors such as aeronautics, which benefited from a €15 billion subsidy. However, focusing sales on locally produced wine and the 2020 French harvest, which seems promising, is boosting the moral of wine professionals. At Cuvée Privée, we have only one piece of advice to give you: taste, drink and enjoy... French! 

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