As the world moves into the second phase of its COVID-19 response – gradually easing restrictions and learning to live indefinitely with social distancing guidelines – we can see the first phase has left behind a significant level of inventory that would in normal times have supplied the on-trade. Spain, which implemented one of the world’s strictest lockdowns, has now permitted the reopening of outside terraces of restaurants and bars, albeit at a third of capacity and not in Madrid or Barcelona – a tentative early sign, perhaps, that on-trade demand may at least recover somewhat in the coming months even in those countries hardest-hit.
Many suppliers of on-trade wines have been working to redirect their supply into the off-trade channels and online, mainly to the supermarkets which have remained open throughout the lockdowns and which, in most countries, have been permitted to continue selling alcohol. This redirection is not always possible for suppliers, as they may lack relationships with retailers, may not be able to scale-up supply to meet retailer distribution, and often must accept a price ceiling that is, of course, lower than it is in the HoReCa (Hotel/Restaurant/Catering) trade. We at Ciatti can offer guidance, and we have been fielding large numbers of enquiries.
With the inventory build-up, and their 2020 harvests on the horizon, the wine industries in Europe are lobbying the EU and their respective national governments to roll out crisis distillation plans. You can read more about what this would entail on this month’s France, Spain and Italy pages. There is no denying that buyers – those with off-trade and private label brands to fulfil – currently have the advantage over growers and suppliers, with solid carryover inventories in most supplier countries around the world. The weakness of emerging market currencies such as the Argentinian peso, Chilean peso and South African Rand is also a boon to those international buyers transacting in dollars or euros. For buyers, opportunities abound, but most are covering only their short-term needs as market visibility looking ahead is minimal. Afterall, who could have foreseen the predicament the world is in just 10 weeks ago?
In better news for suppliers, an uptick in off-trade wine sales triggered by the announcement of lockdowns in March has been sustained in at least some markets: consumers in the US, the UK and Australia, for example, appear to have increased their at-home wine consumption, buying from the supermarket or online wine retailers/clubs. Buyer demand from China, which has been steadily reopening over the past two months, appears to be gradually rising again. Furthermore, other than in the Western Cape, the main Southern Hemisphere harvests came in below their long-term averages: perhaps 15-20% down in Chile and 20% down in both Australia and Argentina.
Last month, even in the thick of lockdown, we could say wine around the world was getting loaded, bottled, shipped, and bought by consumers. And so it follows that, a month on, with countries tentatively opening back up, that statement is now even more true. The marketplace is carrying on and Ciatti is here to help you navigate its twists and turns, drawing on decades of expertise, so don’t hesitate to get in touch. In the meantime, stay safe.