Given the tremendous impact of the COVID-19 pandemic on the wine industry, what is being done to cope with the situation? What are the options? Here are a couple of perspectives, one from an industry consultant and the other a retailer, Esquin Wine Merchants.
A few days ago, I received an email with an attachment from Erik McLaughlin, a wine industry consultant with METIS NW which has facilitated major winery acquisitions in the Northwest. Recognizing that there will be a "slow and painful recovery," he wrote a lengthy article, "Thoughts on Winery response options in the midst of Covid-19." Here are excerpts from the introductory paragraph:
"It is hard to fathom any real recovery with unemployment nearing 20% (and likely to exceed it). You can't have that many people out of work and have a real recovery. The business mortality in this cycle is going to be substantial, so many of the jobs these folks would go back to might not be there waiting for them. I'd be pleased with a "V" shaped recovery, but I think it is extremely unlikely. Certain sectors are clearly more affected than others, with hospitality being both the most squarely hit and the least capable of weathering this.....Though they are key to the wine industry in several ways (restaurant, retail, tasting room, distribution, etc.) the core wine consumer is likely the least affected by the quarantine effects. Now their behavior may change, and ultimately our economy is one big ball of string so there are indirect and psychological effects on then, but most of the people who have been buying $25+ bottles of wine are still just as capable of buying that wine."
Among the winners who are doing right are those in DTC (Direct to Consumer) who have good data, talk DIRECTLY to customers, create meaningful discounts/incentives and have authentic online presence. Only the favorites are getting the lift while everything else is being left behind. Erik recommends that wineries help distributors, talk to their bankers, adjust inventories and fruit intake and do time management. For on-premise (tasting rooms, restaurants, and tourism) things are going to be heartbreaking. For some, an unpalatable but viable option is a managed wind-down of the wine business.
In conclusion, Erik states, "Turbulence creates both challenge and opportunity, by definition. Self-honesty, agility, and the willingness to make the hard decisions - doing the hard work will be the key to being one of the businesses that can grasp the opportunity in this time."
For the full article, go to www.metisnw.com and then the Blog link.
To get a retail perspective on the response to the COVID-19 pandemic, I contacted the people at Esquin (which I sold in 1997). Here is the reply I got from Chuck Lefevre, the owner:
"Esquin, like everyone else has been substantially impacted by COVID-19. We are open but not to walk in traffic - curbside pick-up, delivery and shipping only. Sales have skyrocketed to record highs for March and April, normally a quiet time of year. Delivery orders for example, have gone from 10 to 20 orders a day to over 100. As you might imagine those sales channels are much more labor intensive. We are needing to take the orders, pick the orders, ring the orders, then deliver or pack and ship the orders. Stephanie and the staff are overworked and exhausted - even more so than in December. We are paying the staff weekly hazard pay bonuses and are thankful they are working during these challenging times. Between the bonuses, overtime and additional expenses such as delivery costs and packing supplies, we are not making much if any profit. We are glad to be in business and our focus is on taking care of our customers and keeping the staff safe. We are hoping things return to the new normal soon - whatever that is."
This looks like Esquin is winning in DTC by doing right.