Source: https://www.forbes.com/ — Kate Dingwall
As Coronavirus continues to sweep the globe, causing global stocks to plummet, major wine players are suffering.
Across the globe, 80,000 people are currently infected with the virus. Cases have been found in Austria, Croatia, Canada, Italy, Iran and beyond. AS Chinese consumers cut back on drinking and crates of wine remain stuck at Chinese customs, winemakers and distributors are watching stocks fall and inventory build.
China is one of the world’s largest luxury markets, accounting for 30% of LVMH (Moet & Chandon, Dom Perignon, Cloudy Bay) sales and 10% of Pernod Ricard (Campo Viejo, Jacob’s Creek) sales.
The slowing of the market means that global brands are stumbling. Torres, Spain’s leading wine and brandy company, is expecting a major hit, anticipating an 80% drop in sales this month, and a 50% fall in March.
Bordeaux wines, popular in the Asian market, saw a record low according to Liv-ex, falling 38.3% in the week ending February 13, down from 48.8% the previous week.
The fallout is felt strongly in Australia?-a particularly rough blow in the wake of the recent apocalyptic fires. Vineyards were damaged, and those that were not, suffer from smoke taint (a fault found when smoke absorbs into the skin of the grape, imparting a smoky, chemical flavor to the fruit).
Australia exports $1.3 billion a year to China, accounting for 20% of the national crop. According to exporters, sales are down 90% across January and February alone. On this trajectory, millions could be lost over the year.
The mammoth China Food & Drinks Fair in Chengdu in March has been postponed. Designed to promote Chinese liquors and connect global producers and distributors, the show attracts 3,000 exhibitors and 300,000 buyers annually. TaoWine, TWC Chengdu Fine Wine Showcase, China International Alcoholic Drinks Expo (CIADE) and Sud de France Wine Roadshow have all been canceled. Shows scheduled for May and beyond are moving ahead, for now.
The effects of coronavirus are particularly evident at ports, where a lack of customs staff means imports have slowed to a trickle.
A third of all Chilean wine is exported to China. Since the outbreak, exports have slumped 50% to 60%, with Chile blaming the downfall on both a slow in orders and a holdup at the ports.
Before coronavirus, China admitted up to 350 containers of Chilean wine a day. Now, an average of 50 cases per day pass through customs. The remaining cases sit in the port, unsold and unconsumed. Even with the backlog at the ports, few cases are being sold.
Howard Park owner Jeff Burch expects the worst. Park told the August Margaret River Times, that “There is a backlog on the [Chinese] docks, with none of it moving. The pipeline is so full it is going to take another 12 months to work through once this thing settles down.”
Brands are now trying to reroute China-destined shipments via other countries on the continent.
Italy, one of the world’s largest wine markets, may face similar rumblings soon. As of Tuesday, 50,000 people in 11 towns are under quarantine.
Another cause of concern: on-premise and off-premise venues are at a standstill. The China Culinary Association reported a 100% drop in operating income across 78% of businesses, meaning food & beverage venues are paying rent, wages, and insurance, but no money is coming back in.
With less diners and drinkers heading out, brands are looking to increased delivery efforts to make up for lost revenue.
Deliveroo has seen volumes increase 60% in January, with a dramatic growth in February.
Other alcohol delivery companies have seen a 50% growth over the first two weeks of February, and 60% prior to that over the Chinese New Year period.
Hindering this growth is a lack of drivers?-many are scared to be in that close proximity with potentially contaminated strangers. With this issue, a new e-commerce term has been formed: contactless delivery. Couriers wear face masks and gloves, but never come in contact with the customer?-they simply pick up a receipt, drop a package and continue on their route.