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How Covid-19 is Impacting the Wine Industry

  • by: Maggie Mahar
  • On: 18, May 2020
23 min read

As the novel Coronavirus continues to run its course, the beverage industry is still feeling the impact on all parts of the supply chain. And that’s not just beer and spirits -- the global wine market is carrying its share of the load as well. From growers to retail outlets, every piece of the puzzle in the global wine marketplace is being affected. Even as it seems the nation looks to turn a corner on the outbreak, the effects of COVID-19 are sure to be felt for months (and perhaps years) to come. Whether you grow grapes, make wine, bottle wine, ship wine, sell wine, or serve wine, the Coronavirus has certainly hit hard. Today, we’re going to take a deep dive into what that means for each step of the global wine supply chain -- but don’t worry, it’s not all bad news!

Amidst the coronavirus outbreak, we are lucky to have some hard data on how wineries are coping with the pandemic. Washington DC-based WineAmerica —a lobbying group for the wine industry—represents about 800 wineries in 46 states. In late March, WineAmerica issued a survey to wine producers in America, and it returned some grim results. According to WineAmerica, they received responses from more than 1,085 wineries in 49 states. This only represents about 10% of American wineries, but WineAmerica was able to extrapolate this data out to give some insight into the nationwide climate of the wine industry.

Based on extrapolations from this data, 4,582 events would be canceled and the total financial loss due directly to Coronavirus approximates $40,439,764. Yikes. In places like Italy and Spain, these types of losses are also expected (at a minimum). Tasting rooms -- a hugely important source of profit for wineries around the world -- are empty. Export orders are largely delayed or on hold. Restaurants and hospitality—a sort of lifeblood for many producers—have stalled orders almost entirely.

Moving on from the producers, the impact of COVID-19 can also be felt on the logistics and freight side of the global wine marketplace. Although a bottle of wine can’t really infect anyone (no matter where it was made) the virus is hitting the global logistics industry—and that’s a problem for wine. Cargo ships have global itineraries, and if a crew member has been exposed to the virus, that ship could have serious problems getting docked in any major ports. This domino effect can be traced all the way back to China, which manufactures a huge percentage of the world’s labels, caps, glass bottles, and packaging supplies. Without a reliable channel for these supplies, producers won’t be able to fill consumer demand.

As the world moves into the warm-weather, “rosé and prosecco” time of year, it will be difficult to say how disrupted the supplies of wine from Italy or Spain will be over the coming months. This is all assuming that there will be demand from the U.S. markets, as the country looks to reopen restaurants and bars.

As of now, though, the demand for wine hasn’t gone anywhere. In fact, consumers seem to be buying wine and other libations like never before. And this is where the picture starts to get a little brighter for the global wine market—despite (or perhaps because of) everything going on, people want to drink.

At the very end of the supply chain, despite on-premise sales having screeched to a halt due to statewide and national lockdowns, off-premise wine sales have never been healthier. Nielsen consumer data showed that wine sales were up 28 percent nationwide in the first part of March. Meanwhile, total beverage sales in the U.S. grew an equally impressive 40 percent for the 52-week period ending on March 22. This also came with a 33 percent spike in overall volume. Elsewhere, national online sales of wine have been up nearly 250% in March. Drizly, the alcohol delivery app, states that its sales are up by 300% over its previous year. People may not be buying wine at restaurants, but they’re still stocking up.

In fact, Danny Brager, the senior vice president of Nielsen's Beverage Alcohol Practice in the United States, recently had some hopeful information for Forbes. As illustrated by the figures above, wine demand has not significantly faltered but has instead shifted channels to a direct-to-consumer market.

For the month of March, 12 percent more households were purchasing wine from off-premise locations. As well, the overall dollar spend of wine on a per-buyer basis increased over 15 percent from the previous March. Looking at the overall rate of alcohol sales from e-commerce channels, the word ‘skyrocket’ comes to mind: we are seeing a +441 percent year-over-year growth there.

Brager went on to tell Forbes that this spike in off-premise sales would likely do well to negate the collapse of hospitality-based wine movement. In addition, consumers are now favoring much larger pack sizes when purchasing. The only question mark seems to be what consumers will do with this wine -- is it stockpiled for the long-term, or meant to be consumed in the near future? Burger claims it could be both: over the long term, retail sales generally turn into consumption.

So, what will this mean for a post-COVID wine world? Well, for retailers and producers alike, it’s going to be a major test of creativity. The wine market will be forced to find novel ways to create profits, as things probably won’t be ‘back to normal’ in the immediate future. Pop-up wine shops, new subscription wine clubs, and creative bundling of to-go food and alcohol offerings are all new avenues being explored by the wine world at large. As the demand for wine seems to continue growing, only time will tell how the rest of the supply chain will be able to keep up.

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