As we start trying to right the ship, there is little doubt that the wine and craft distillery world will be changed greatly. There is little doubt that the forecast is grim on the number of closures for wineries, distilleries, breweries, importers, distributors and restaurants.
The way we Americans have changed in this time will be reflected upon many things in the industry's future.
Eating out became the routine for two-income, hectic-lifestyle households. Life slowed down, and family meals at home became the new normal. With an average of 31% of Americans reporting they are not ready to go back out to restaurants, this does not bode well for the hospitality industry.
Sadly, it is being reported that 20% or more restaurants nationwide will close permanently.
There was already a downturn in on-premise wine sales in restaurants because of higher glass costs versus cocktail pricing. That is not going to change with re-openings. However, what is interesting is that consumers were upgrading their normal wine drinking habits during this time period.
This drove up off-premise wine sales 30%. Luxury brands fell sharply, as did the $15 category. It jumps from $8-10 to $18-25 being the two biggest gains. California wine sales jumped the most as consumers turned to big branded names they could trust. Italian wines came out on top after starting out in the negative at the height of the virus.
European wines as a whole did not fare well compared with Americans buying U.S. wines.
What else has changed is the way we will continue to buy wines. Small wineries will have to make this jump if they, too, want to thrive upon re-opening. With a reduced capacity in tasting rooms, if wineries continue to offer free local delivery, add in the dreaded phone sales, sell online, and make the effort to market to local and state wine stores, they can expect a projected 15% overall year-end loss.
Direct-to-consumer wine sales are projected to increase even when the shelter-in-place orders are lifted. Wine club memberships are projected to fall further with tourism taking a nosedive for the rest of this year. The numbers for walk-in traffic will take a tumble.
Local wineries should see an increase in local traffic and support, however.
Sadly, there will be an untold number of closures, or the sale of small wineries nationwide.
Wineries across the state, and nationwide, have scaled back production. This will also greatly affect grape growers, as the demand for juice, or grapes, will not be there. A surplus inventory is definitely on the horizon. This may result in cheaper bulk buys to get it disposed of, or juice will be made and stored for later years.
Now to continue the trickle-down effect, a category going unnoticed by consumers are the importers and small distributors. They specialize in small, boutique wineries. These small wineries depend upon these smaller negociants to get their wines into boutique restaurants, bistros, wine bars and wine shops.
With a decline in sales due to closures -- temporary and now permanent, these wineries are losing their visual to consumers, along with these smaller places’ unique capability of hand-selling craft wines. Already, French wineries’ contracts are being canceled, or scaled back. Small producers worldwide, not just statewide, are going to be left with excess inventory.
What we are seeing at present time are these hard-to-find wines appearing on the shelves of stores. Distributors are dumping these great labels knowing they will be losing on-premise sales.
Also included in closures will be several importers and small distributors who cannot afford to honor their contracts to buy with a sluggish on-premise sales forecast, and cannot afford to sit on inventory, either.
Trouble All Over
Forgotten about, but nonetheless in true dire straits, are the craft distilleries and breweries. Not everyone is in a liquor store, they fall under different rules and regulations pertaining to sales direct to consumers.
These distilleries and breweries have seen a 64% decline in sales during this time period. The economic climate is truly dire for this industry. They rely heavily on walk-in traffic to their tasting rooms. Approximately 43% of their workforce has been let go.
Approximately two-thirds do not believe they will be able to sustain their business for more than six months.
About 42% do not believe they will be able to sustain their business for more than three months.
Approximately 21% believe they can only sustain their business between three to six months.
Over half of them have canceled purchases for agricultural products, stills, bottles, barrels and more.
So again, the trickle-down effect will hurt many, many people.
It is sad to watch so many give all they have, pour their heart and soul into their passion, and have their dream be slammed shut. Yet, that is exactly what is happening.
Wine sales overall are still falling. Off-premise may have gained, but the huge on-premise sales will drag down the final numbers. Billions of dollars are lost. Market shares of traded companies have fallen an average of 13%.
If the trend to eat at home more often and buy a bottle of wine to go with the meal continues, then the overall numbers could raise wine sales, if not even them out. Before the shelter-in-place, the yearly trend of consumers buying wine was steadily dropping.
Even with a negative projection overall, we will rise again. Americans will rise to the occasion. And as we do, always remember: Life is too short to drink cheap wine (or craft distilled spirits and brews)!
Shop local. Buy local. Support local.
Wine in Review
William Chris NV Skeleton Key Proprietor’s Red (Texas)
About: William Chris Vineyards are in Hye, Texas, off U.S. Highway 290 between Fredericksburg and Johnson City.
Tasting notes: Nice heady aromas of cinnamon-dusted blueberry and baked plums. Nice full palate of blueberry, blackberry, black plum and vanilla. Nice structure throughout with medium-bodied tannins.
Cost: $29-$35, depending on location. Available through winery and select locations.