Sales at British liquor stores leapt a third in March, while those for alcohol at U.S. retailers shot up more than 50% in the week after the country entered a state of national emergency.
But the drinks industry isn’t celebrating.
The surge in demand came as sales through bars, clubs and restaurants fell to zero as they were closed to contain the COVID-19 virus. And even as countries start to ease restrictions, these venues are likely to be re-opened in the very end of lock down.
“There are various estimates that in Europe, the closure of this important distribution channel could lead to a 35% reduction in sales volume, which could reach more than 50% loss in sales value”, said Pau Roca, managing director of the International Wine Organization (OIV) during an audio conference.
Pau Roca estimated that the impact of these containment measures would not be the same in all regions and, for example, that the Mediterranean countries would be “probably more affected than the others”. He puts forward two reasons to support this forecast:
“First, the highest incidence of bars, restaurants and sidewalk cafes, and second, the radical suppression of the highly developed tourism industry, which will be severely limited, even a once containment has ended ”.
The top three global wine producers in 2019, Italy, France and Spain, alone accounted for 25% of global wine consumption last year, according to data released at the press conference.
If the OIV mentions an increase in sales in grocery stores and supermarkets, “this good news does not compensate for all the losses caused” by the reduction in sales in hotels, cafes and restaurants, underlines Pau Roca. The characteristics of the retail commercial distribution channel “limit purchasing capacity”, he says, referring to an offer more geared “towards low and homogeneous prices”.
Finally, it plans to develop distance selling or electronic commerce offered by various virtual stores. “Via this third distribution channel, orders could not always be guaranteed” due to a saturation of logistics and delivery services, said the OIV manager.
“Once this problem is resolved and the sector adapts to this new demand, direct home sales will certainly continue to increase in the future,” he adds. Nevertheless, “even if we are witnessing a spectacular transfer between the distribution channels, the overall balance expected is a reduction in consumption, a reduction in average prices and therefore an overall decrease in the total value of sales of turnover, margins and ultimately the profitability of producers, vineyards and in particular SMEs which are linked to traditional distribution channels and which are located outside supermarket networks, ”says Pau Roca.
“After the taxes of Trump, who planted part of the wine companies, today with the closing of restaurants, the closing of lounges, the closing of cellars, the closing of sales on farms, French wine growers are in the process of to be completely suffocated, “said French Minister of Agriculture Didier Guillaume on LCI TV Channel.
While Europe proposed new measures for other agricultural sectors in crisis, such as milk and meat, Pau Guillaume now hopes for a gesture for viticulture from the European Commission.
French, Italian and Spanish wine cooperatives, which claim a total of half of European production, asked the Commission “to open without delay a European crisis distillation of 10 million hectoliters with a budget exceptional European investment of 350 million euros ”.
A crucial measure to relieve producers, even if last year, world production fell by 12% compared to 2018, a record vintage, to 260 million hectoliters, according to the latest figures from the OIV.
While more than four out of ten bottles usually cross borders, “trade flows are and will continue to be seriously affected,” said Pau Roca. He believes that the two largest markets in the world, Europe and the United States, could reduce their imports, but hopes on the other hand that “other regions less affected by the pandemic or which could recover more quickly, such as the countries Asian ”, will provide“ short-term partial relief”.