This is a follow-up to my earlier post. As noted there, these predictions are obviously speculative.
As discussed previously, the current societal restrictions (lock-downs, business closures, social distancing, event size limits) have produced dramatic effects for the wine industry:
- A collapse in sales to restaurants/bars/hotels, which entire sector is bearing the full brunt of the fight against the pandemic.
- An increase in sales to the retail sector due to consumers switching to wine consumption at home.
- An increase in online (direct to consumer) sales due to consumer preferences for product delivered to homes.
- The closure of winery tasting rooms, although many on-site stores are still operating for online sales and \”curb-side\” pickup.
- The closure of restaurants located at wineries.
- The cancellation of traditional promotional events such as winemaker dinners and larger tasting events, both in respect of trade and consumer events.
- The cancellation of on-site winery events including consumer-focused ones (such as wine club release parties) and social events (such as weddings).
The Future of the Restrictions
The strategy of most governments is to control the number of infections (and hospitalizations) through the use of the restrictions such that the medical care system is not overwhelmed (i.e. \’flattening the curve\’). As noted previously, in China it took 3 months of very significant restrictions to \’turn things around\’ (or \’flatten the curve\’ sufficiently to ease the restrictions). The longer term goal would be a gradual easing of the restrictions in North America, including BC. However, scientists are warning that the relaxation of restrictions too quickly, could cause a \’second wave\’ of infections and problems creating a recurring cycle of problems and re-imposed restrictions. As such, and barring a miracle cure/vaccine or a radical change in government policy, it appears that the most likely outcome is a continuance of some level of restrictions for at least 2-3 months, with a possible gradual easing over a longer number of months (Bill Gates has predicted a shutdown of 6-10 weeks). What are the implications of this for the wine sector?
- Restrictions on hospitality businesses might continue for many months albeit perhaps with some easing. As a result, sales to this sector may continue to be negatively affected.
- Sales to the retail sector would likely stay strong, although the surge may level off somewhat.
- Online DTC sales would likely stay strong.
- Winery tasting rooms may not be able to re-open or may have delayed openings. The traditional tasting room model may not be allowed … rather, they might be restricted to appointments or other models that could incorporate limits on the number of customers present at any one time. Winery \’tour bus\’ models may not be possible.
- Winery restaurants may not be able to re-open, or could be subject to restrictions.
- Traditional promotional events may not be possible or may be restricted to smaller numbers.
- On-site winery events may not be possible or may be restricted to smaller numbers.
A second, potentially more optimistic scenario, is that mass testing and increased protection of vulnerable groups (following a successful effort to \’flatten the curve\’) results in better and more targeted management of any ongoing cases and outbreaks. This strategy seems to have worked in some other countries, such as South Korea and Singapore, which have not had to impose such significant broad societal restrictions. Nevertheless, these countries have relied on monitoring and compliance programs which are more intrusive than anything seen to date in North America (e.g. GPS or technology based location reporting to enforce self-isolation or quarantine). This approach could conceivably allow for a faster relaxation of the restrictions – and a faster return to \’normality\’.
Your Sales Channel Mix
Wineries may need to review their past sales channel mix and actively re-calibrate it. If a high percentage of sales was to the hospitality sector (including an on-site restaurant), you may need to find other channels for most of this wine. Similarly, if a high percentage of sales came from \”walk-in\” tasting room traffic, you may need to re-think. This is of obvious concern if the restrictions continue into the summer tasting-room \’high season\’.
Here are a few ideas:
- Treat your existing customer lists as the \”holy grail\” (you were doing this before, right?). You may be able to increase sales to your loyal clientele through promotions and/or effective direct marketing. For example, one winery that I visited recently sent me both a hand-written thank you note and a corkscrew in the mail a few weeks after I visited.
- If you don\’t have a wine club, think about starting one.
- Upgrade your DTC capabilities. If necessary, re-vamp your web site and online sales processes. If you haven\’t added free shipping, do so now.
- Create a \’Plan B\’ for your tasting room. If it can re-open, could you do \’appointment only\’? Could you make it work with restricted numbers?
- Create a \’Plan B\’ if you have a restaurant. If it can re-open, could you do \’take-out only\’? Could you do \’picnic packs\’?
- Think about what alternate marketing you would do if dinners and tasting events do not resume. Can you work with your existing retailers? Can you ramp up online marketing? Think about wine clubs. Think about joint marketing initiatives.
- Think about re-scheduling winery events. Adopt a flexible cancellation policy.
- Cross your fingers … and hope that things get under control sooner rather than later.