Tag Archives: pandemic

Six wine questions to answer as we come out of the pandemic

wine questions
Who knew we could have this much fun drinking wine without a bar or restaurant?

No one knows what wine will look like post-pandemic, but the answers to these questions will shed some light

So far, so good – infection numbers are down, vaccinations are progressing, and some sort of return to normal looks more and more possible. So what will that mean for the wine business as the pandemic winds sown?

Because, of course, no one knows . There are expert analyses, prognostications, and the like – but since this sort of thing hasn’t happened in a century, how can we be sure? Hence, six wine questions to answer as we come out of the pandemic:

Where will we buy wine once businesses re-open?

The biggest changes in wine during the pandemic were the boost in supermarket, winery sales directly consumers (or DtC), and Internet sales. Will that surge continue? Or will wine buyers return to the previous mix – supermarket, chain, and big boxes; then independents; and then DtC and Internet? There has been lots of cyber-chatter about how much the pandemic boosted independent wine shops, but much of this evidence has been anecdotal. It’s difficult to believe that some of the changes, like the increase in supermarket sales, won’t continue – and to the detriment of independent retailers and smaller producers.

What will prices do?

Go up, almost certainly. This may be the only thing that’s not much of a guess. The wine supply chain is so bonkered, thanks to the pandemic, that supply is often short. And that raises prices. Throw in continuing consolidation among the biggest producers and wholesalers – which never would have passed anti-trust muster a generation ago – and higher prices are almost inevitable.

Will there be a wine boom?

No less than Silicon Valley Bank’s Rob McMillan expects a boom, and he knows more about this stuff than almost anyone. But, again, this situation is not comparable to anything that has happened in the past century. We assume there is pent-up demand, but there has been little evidence to suggest that. So a boom would not be a surprise – but neither would the opposite.

Will wine tourism come back?

It’s amazing how many people I talk to expect wine tourism to come back, just because they expect it to come back. But, here, too, that’s little evidence one way or the other. Regional tourism seems to be doing well enough, but how many people will be willing – or will be able to afford – to fly to San Francisco, rent a car, and drive to Napa or Sonoma any time this year? That’s the sign wine tourism is back, and not whether someone in the Washington, D.C., area drives an hour to northern Virginia or someone in Austin drives 45 minutes to the Texas Hill Country.

What’s the future of restaurant wine?

Kyla Peal, writing in Bon Appetit: “Perhaps we’ll see [restaurants] with smaller and smarter wine lists that also include more budget-friendly bottles to safeguard against being saddled with lots of high-end inventory should another shutdown occur.” And if pigs had wings. … Sadly, everything I’ve seen over the past 15 months points in the other direction – restaurants using wine to recoup losses during the pandemic. One steakhouse in the Dallas area is charging $36 for a bottle of Meomi pinot noir, and that’s the second cheapest wine on the list. So, no, I’m not optimistic about a recovery in the restaurant wine business.

Will we continue to eat at home?

Consumer spending on restaurants was higher than supermarket food spending in 2019, a remarkable development. The pandemic reversed that, and there is lots of evidence – and even some decent numbers – that more of us will eat at home post-pandemic. If so, we can kiss off any hope for a revival of restaurant wine, which was muddling along even with record restaurant sales. On the other hand, more people eating at home might be a boost for wine, as I’ve noted many times. Buy a couple of chicken breasts at the supermarket, pick up a $12 bottle of white wine, and you’re having wine with dinner at one-quarter the cost of the same dinner at a restaurant.

Photo: Kelsey Chance via Unsplash

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Winecast 57: Patrick Mata of Ole & Obrigado and imported wine during the pandemic

patrick mata
Patrick Mata, right, and Alberto Orte of Ole & Obrigado. “American companies are paying the tariff. How does that punish Europe?”

Patrick Mata:  U.S. companies are paying the wine tariff – how does that punish the European Union for airplane subsidies?

Want to make sense of the European wine tariffs, which seem to make no sense at all? Then listen to Patrick Mata, whose Ole & Obrigado is one of the leading Spanish wine importers to the U.S.

“I thought we might go out of business,” says Mata, whose company specializes in importing quality, $15 or less wine from Spain and Portugal. “Our margin is 30 percent on a bottle of wine, and the tariff is 25 percent. How were we going to stay in business?”

The good news is that Ole & Obrigado did, despite the tariff and the pandemic (which clobbered its restaurant business). Sales fell only 20 percent in 2020, which Mata considered a victory of immense proportions.

Mata, a long-time friend of the blog, was open and honest about how the tariff and the pandemic have hurt the wine business. Among the topics we talked about:

• Why raising prices to cover the tariff doesn’t work, and why it especially doesn’t work for the $15 wines that Ole specializes in.

• How to give back during a crisis, and why there should be more to the wine business than just making money.

• What Americans are drinking during the pandemic, and why it’s a victory for Big Wine at the expense of small producers — another unintended consequence of the tariff.

Click here to download or stream the podcast, which is about 15 minutes long and takes up 9 megabytes. Quality is mostly excellent – Zoom didn’t act up this time.

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Winecast 53: Doug Caskey and Drink Local during the pandemic

doug caskey
Doug Caskey and his spiffy Colorado wine Zoom background.

“The situation isn’t good, but it’s difficult to make a monolithic assessment. The situation depends on where you are, and it can be all across the board.”

Colorado’s Doug Caskey has been one of the leaders in the local wine movement for almost as long as there has been one. He has been the executive director of the Colorado Wine Industry Development Board since 2000, and has served in a variety of roles with the Wine America trade group. As such, he is well-placed to discuss how the pandemic is clobbering regional wine.

Perhaps the biggest problem, Doug said, is that state laws classify wineries as bars. This means they suffer from the same restrictions as places people go to pick up girls and boys and to get drunk. Which, of course, is hardly the case with a winery tasting room. In addition, local wineries depend on events like weddings and concerts to stay in business, which are also limited by pandemic bar restrictions.

Among the topics we discussed:

• The recent spike in coronavirus cases doesn’t bode well for Drink Local, since wineries that have been able to re-open their tasting rooms may not be able to keep them open.

• The pandemic hasn’t been a boon for Drink Local at retail, despite all the glowing sales numbers. Consumers seem to be buying the best known brands instead of trying lesser known regional labels.

• The Trump wine tariff, advertised as a help to Drink Local, has actually been a tremendous hindrance. It has wreaked havoc on the wine supply chain, making it more difficult for local wines to get on store shelves.

• Yurts, as a solution to outdoor winter dining. Yes, yurts.

Click here to download or stream the podcast, which is about 13 minutes long and takes up almost 9 megabytes. Quality is mostly excellent. And yes, I was able to post Doug’s Zoom background.

New study says we’ll be eating – and drinking – more at home, even after the pandemic ends

restaurant wine
USA Today reports that 2.3 million restaurant jobs have been lost during the pandemic.

As many as one in four say they anticipate forgoing restaurants – and restaurant wine – in the future

A Florida consultancy predicts that restaurant spending could fall by as much as one-half by the time the pandemic ends. Even more surprising, says its study: Consumers seem content to cook and eat at home. If true, this has tremendous implications for the wine business.

That’s because about 40 percent wine sold in the U.S., measured by dollar sales, is sold in restaurants. So if that market goes away, there’s going to be even more wine glutting the market – and there’s already a glut.

And if that happens, we could be looking at lower prices but also more winery failures – and especially on the high end, since that’s where much restaurant wine comes from. This might also lead to more winery consolidation, which means less consumer choice. The biggest wineries have the deepest pockets, and will be better able to survive a massive glut.

The results come from Florida-based Acosta, in a study called “COVID-19: Reinventing How America Eats.” It described what seem to be massive shifts in consumer eating habits: 44 percent report eating breakfast at home daily, compared with 33 percent pre-COVID. Similarly, 31 percent are eating lunch at home every day versus 18 percent pre-COVID, and one-third are eating dinner at home daily versus 21 percent pre-COVID. All of those people eating at home, says Acosta, translates into 31 to 50 percent less spending at midscale, casual and fine dining restaurants.

Don’t panic yet

But let’s look at the caveats:

• Acosta didn’t respond to a couple of requests for an interview. The study is based on “online surveys of Acosta’s proprietary shopper community” in early July, as well as industry data and “proprietary information sources.” Proprietary means the company doesn’t discuss how the survey works, which means it’s OK to be skeptical about the results. We know how Nielsen measures sales; we don’t know how Acosta divines its results.

• On the other hand, Acogta’s pessimism about the future of the restaurant business dovetails with most of the gloom and doom prognosticated elsewhere. USA Today reported in early October that 2.3 million restaurant jobs have been lost during the pandemic, while 12 percent of sit-down restaurant chain units that were open before COVID-19 had closed.

• The 40 percent restaurant wine sales number is misleading, since it’s measured in dollar terms. Given that restaurant wines tend to be more expensive, and that restaurant markups inflate that total, the amount of wine sold in restaurants in actual bottles is probably much less than 40 percent of the U.S. total. Hence, the loss of the restaurant market wouldn’t be quite as devastating, and it would also be mitigated by people buing less expensive wine at the supermarket.

• Some of the results in the survey require a second look. For example, “35 percent of consumers said they’ve discovered a new passion for cooking amid the pandemic.” Which is all well and good, but does it actually mean anything? And one-fifth to one-quarter of the respondents say they anticipate eating out less in the future, which is understandable in July but may not mean much next spring.

So, yes, more not good news for the restaurant and wine businesses. But maybe, given all the bad news we’ve had, not quite as bad as it seems.

The WC wine business index: How much has the pandemic hurt the wine business?

wine businessThe statistics are all over the place; can we tell what’s going on in the wine business from the WC wine business index?

It’s a running joke among those of us who pay attention to the wine business that almost all the sales figures you read here and elsewhere are unreliable; the best numbers are educated guesses that have been fine tuned based on the data that is available.

There are many reasons for this, including the fact that lots and lots of wine is sold by lots and lots of independent retailers who aren’t tracked by companies like Nielsen. So why does this matter now? Because, according to one set of numbers, the wine business is in a pandemic-fueled crisis and things are going to get much worse before they get better. Or, if you believe these numbers, the past six months (as well as the past couple of years) are just a bump in the road and worrying about it is for small-minded people.

The reason for the discrepancies? Most agree that wine sales have declined since U.S. restaurants closed in March and April. What they can’t agree on is whether retail sales have made up most of the difference, so that the decline is insignifcant. Further complicating matters, based on yet more statistics, is that some insist sales are up for the year thanks to lots of foofry about the Internet, e-commerce, and wine delivery.

The WC wine business index

But no one has actually been able to figure out where we are seven months into the pandemic. Which is why the blog is unveiling the WC wine business index, where numbers aren’t the be all and end all. Instead, I’ve talked to retailers, producers, and marketers from around the country to see if I can sketch where the wine business is and what it means for consumers. Hence:

• There’s some desperate marketing going on in an attempt to boost sales. One major Texas wine event, forced to cancel, is trying to sell wine via email solicitations. Shudder. And one trade group wants you to buy its wine for the “iconic, uniquely-designed rose bottles that can be used for crafts and ingenious displays. …” Double shudder.

• Producer after producer, mostly smaller but also some larger, has told me that many of the 9,000 or so wineries that make up 90 percent of the U.S. total may be in danger of closing. The pandemic has shuttered their tasting rooms, and since most of them don’t sell much, if any, at retail, they depend on tasting room sales to stay in business.

• How about an Oregon pinot noir with a suggested retail price of $12.50? That means the street price is $10.99 or $11.99, almost unheard for Oregon pinot. In fact, most Oregon pinots that used to cost that little long ago went to $15 and $18. This points to way too much wine being made in Oregon, as well as slowing sales; the wine in question may be close to being sold at cost.

• The pandemic apparently clobbered the keg wine business, which has been a bright spot over the past couple of years. Wineries were putting their wine in kegs, just like beer, to sell to restaurants. But no restaurants means no need for keg wine. So keg producers are spending time and money to repackage their wines, often in boxes.

• Big Wine, save for a few glitches, seems to be doing better than most. One reason: It sells less wine, proportionally, to restaurants and more to supermarkets, which fits the pandemic consumer profile. In addition, consumers seem to be focusing on brands they know, and that fits the Big Wine product line.

And what about consumers?

Your guess is as good as mine. Most retailers tell me we’re trading down, and that Big Wine supermarket sales are OK speaks to that. And I’ve seen signs that some high-end wines, the $100 and up kind, are clawing for new business in a way they’ve never clawed before. That implies there is some trading down, though trading down from $150 to $75 isn’t exactly the traditional definition.

In this, there is still a lot of money in the hands of aging Baby Boomers, who will continue to buy their overpriced 92-point wine despite what else is going on. And the wine business will be happy to sell it to them to paper over any other problems.

So what’s the overall impression from the WC wine business index? That we’re in a holding pattern, though likely headed down sooner rather than later. Specific parts of the wine business are already suffering, and some are suffering badly, be it smaller producers or independent retailers.

But consolidation among producers and distributors has insulated the biggest companies from the worst of the pandemic. So expect to see two levels of pain over the next year or so: Something akin to an ankle sprain among the biggest companies, compared to a broken leg (or worse) among the smaller. And the consumer will get caught in the middle, which is exactly where the wine business likes us.

Photo courtesy of Philadelphia Inquirer, using a Creative Commons license

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Winecast 49: Janie Brooks of Brooks Family Winery and enduring the pandemic

Janie Brooks
Janie Brooks: “We have to be creative, and we have to go outside the usual winery audience.”

Janie Brooks’ forecast is blunt: Small family wineries aren’t doing well and their plight could get even worse

Janie Brooks doesn’t mince words: The pandemic could force a lot of family producers out of the wine business, and anyone who expects things to get better any time soon is going to be disappointed. She paints a picture of lost sales, consumers trading down, producers skipping vintages because they can’t sell what they’ve already made, and way too many grapes in the supply chain.

In other words, Brooks told me, everyone who isn’t a big producer — which is about 90 percent of the 10,000 wineries in the U.S. — is in big trouble.

“If you’re not at sensible price points, and that’s $25 or less, your wine just isn’t moving,” she says.

Brooks perspective is clear, sharp, and national. Not only does she run her family’s self-named, 20,000 case winery in Oregon’s Willamette Valley, but she is the board chair for Wine America, a winery trade group that includes producers across the U.S.

We talked about how consumers can help family wineries, as well the wine business’ need to do something other than market to the same old aging Baby Boomers. This is a subject Brooks is smart and passionate about. Her vision includes cross-marketing, something the wine business has mostly ignored for 20 years. In cross marketing, producers reach potential customers by sharing information with companies that make similar products; in this case, beverages like coffee and sustainable and green products.

Click here to download or stream the podcast, which is about 13 minutes long and takes up almost 9 megabytes. Quality is very good to excellent; in fact, would that my interviewing skills were up to the subject.