The Impact The Covid-19 Outbreak Is Having On The Global Wine Industry

23/03/2020 What is clear is the sheer global scale of the Covid-19 outbreak is going to impact certain industries in some sectors for years. Particularly one as international as wine.

Trying to evaluate the impact the worldwide outbreak of the Covid-19 virus is having around the world is as hard and elusive as picking up the wet bar of soap we are all being asked to wash our hands with to keep it at bay.

The situation is moving and changing so fast that any analysis made one day is quickly out of date the other. What is clear is the sheer global scale of the Covid-19 outbreak is going to impact certain industries in some sectors for years. Particularly one as international as wine.

Thousands of wine producers have built their businesses on the back of being able to export their wines to tens of countries around the world. Now, one by one, the majority of those markets are going through their own personal version of the Covid-19 nightmare.

Winners and losers

What’s already clear is the situation for companies up and down the global wine supply is going to be very different depending on what sector of the wine market you are in. Whilst off-trade and online businesses are booming, some even enjoying record sales, the on-trade has ground to a halt as more countries order restaurants and bars to close.

This is not just a potential commercial disaster for those individual outlets, but the vast network of suppliers, importers and wine producers who only make and sell wine for the on-trade.

The pressure is now on them to move resources to build off-trade sales, and join the already hyper-competitive direct to the consumer market.  

Global shipping is normal

It’s arguably no good for them to hear that, overall, wine is still moving around the world. With only Italy, according to the global logistics provider, Hillebrand, facing serious issues in terms of getting wine in and out of the country. “All our key partners and service providers are fully operational too,” claimed Hillebrand last week.

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But as the virus spreads the pressure is being ramped up and Hillebrand says the future situation is “very uncertain”. It likens the impact of a “domino effect” around the world. It explains: “Logistics throughout the world now are facing reduced available capacity, pressure on equipment availability, possible congestion in specific ports and extra related costs and congestion surcharges.”

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Which has resulted in 45% less capacity of shipping containers (across all sectors) travelling between Europe and Asia and the transpacific region.

Then there is the issue of natural supply and demand in the market for those wines to be shipped at all. Major buyers the world over are understandably being cautious about how much wine they are buying now, and what prices might be available in a few months time.


Tackling local issues

The bigger issue is more a local one. How is the regional supply chain doing when in large parts of the world, notably Italy, Spain, France, Argentina and Chile, where countries are in total lockdown? Yes, necessary goods can still be distributed around those countries, but are there the drivers and the support staff available to drive the lorries and run the distribution hubs?

That’s where the supply chain is struggling. Can producers get their wines out into the global logistics supply chain?

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The situation by road, particularly in central Europe, is very hard to assess with different measures being taken by individual countries. Philip Cox, the owner of Cramele Recas, Romania’s largest wine exporting producer, said he is experiencing “big problems with international logistics” with “huge confusion” about what is possible and “massive tailbacks of 50-60 km on many of the borders between Romania and Western Europe”.  

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Pier Sfriso of the Sfriso Winery in Veneto in north Italy is now into his fourth week of lockdown and said he has done “zero” business in that time. The local distribution is not working.

The 2020 harvest

Sfriso is already worried about the 2020 vintage and what he is going to do with all the wine he has in his tanks that he can’t move.

“There are going to be massive volumes of bulk and bottled wine that we will have to be sold (across Italy) before our new wines come in (from the 2020 vintage),” he said.

There is already a glut in parts of the global bulk wine market from the large 2019 harvest with millions of litres of wine unsold in a number of countries, including California, Argentina, Chile, Moldova. What happens to that wine when new volumes from 2020 come on stream.

Lack of vineyard workers

Whilst most of the southern hemispheres are coming to the end of their 2020 harvests, the concern across Europe is the restriction of movement on people means they will not be able to call on the large numbers of people they usually use to help work in the vineyards in the months up to harvest.

Having good quality, healthy grapes is no use if you don’t have people to pick them. As Cox explains:  “So many vineyard owners are extremely worried about getting enough labour to do the critical spring work in the vineyards which is happening right now.”

Global ups and downs

With such a fast-changing situation around the world, there are going to be peaks and troughs for wine around the world in the coming months. Particularly as parts of the world recover, whilst others go into decline.

There are signs, for example, that parts of China are now over the crisis and that business is very slowly starting to come back. Just as the United States is set to go into what is likely to be a nationwide clampdown of its own.  

If the wine industry can take any solace from the situation it is the fact it is operating in a truly global market and has the flexibility to adapt and go where the demand is. However troublesome the 2020 harvest might end up being to produce, it will also provide large volumes of new wine to feed into whichever parts of the global supply chain are working in the months ahead.