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When the Queen of England is forced to sell gin made from dead leaves found on the grounds of Buckingham Palace to supplement lost tourist revenue due to Covid-19, it doesn't bode well for the rest of the world economy.
British newspapers reported this month that the Queen has started selling her own homemade gin to fill the coffers laid bare from the coronavirus crisis. The £40 ($51) official Buckingham Palace gin, infused with citrus and herbal notes, is made from ingredients handpicked from the garden at Buckingham Palace but, for the rest of us, solutions aren't that simple.
Best case scenario, Covid will cost the world $76.69 billion, forecasters say. A more realistic impact is likely about $346.98 billion. About one in five people in the US are collecting unemployment benefits according to the Labor Department, and 19, 23, 29 and 41 percent of people in the UK, Germany, Italy and France respectively are furloughed, according to the International Monetary Fund.
The emergency short-term measures individuals and businesses took to deal with the novel coronavirus pandemic must be extended, and to do that, a paradigm shift may be necessary.
The wine business, which is centered around encouraging people to do the fun, social things that make transmission likely, has suffered more than its share of the impact. Numbers as of yet are hard to come by, but data from Yelp, the National Restaurant Association and WineAmerica are grim.
Measuring the body count
On Yelp, 17 percent of all the businesses that closed since March are restaurants, and 60 percent of those closures are marked as permanent. The National Restaurant Association reported that restaurants lost $30 billion in sales in March and $50 billion in April, and have furloughed or laid off more than 8 million workers, an estimated two-thirds of the US's restaurant workforce. Restaurants are on track to lose up to $240 billion in sales by the end of the year.
A study from WineAmerica that managed to survey 10 percent of all American wineries found that the financial impact just from March was an estimated $400 million for those wineries alone. Most noted that the impact was due to lost sales, but also extra expenses to keep staff and any customers safe and socially distant. Multiply that $400 million by 10 and you get $4 billion. By May, respondents reported an 88 percent decline in visitor numbers, with a 70 percent decline in tasting room sales. More distressingly, a whopping 13 percent halted production completely, and more than half slowed it down.
And yet there are (micro) pockets of hope. While on-premise wine sales were down 69 percent year over year in June, according to the recently released Wine Analytics Report, DTC shipments were up 30 percent.
On-premise blues
By March, on-premise operations hit the skids across the US. But in June and July, restrictions began to loosen, until Covid cases began rising again. In Texas, Florida, Colorado, North Carolina, Louisiana, Arizona, California, Michigan, Massachusetts and New Mexico, bars have been shut down again. In Washington, Oregon, Idaho, Wyoming, Arkansas, Alabama, Mississippi, South Carolina, Nevada, Delaware, Indiana, New Jersey, Connecticut and Nevada, reopenings have been put on pause.
While many restaurants, even white-tablecloth establishments like Daniel and Eleven Madison Park, began selling food and alcohol to go as permitted by law, the notion that even the most elevated brown-bag service could prop up vast teams of dishwashers, servers, sommeliers and managers was always farcical.
"We have 16 bars and restaurants across the country, and only four are open right now in some capacity," says Charlie Palmer, founder of the iconic luxury restaurant group, the Charlie Palmer Collective. "Dry Creek in Sonoma and Charlie Palmer Steak in Napa are open with outdoor seating only because of the resurgence. We're shifting and jiving as much as we can, trying to get our staff back to work. We have been lucky to set up a lot of contracts with big companies in New York, so we’re doing a few hundred meals a day that way, and at the height of the outbreak in New York we were doing 2000 meals a day for World Central Kitchens and 300-400 for frontline workers. We are also making our annual gala and private events virtual."
But Palmer admits that, even with charity work, brisk to-go sales and an increasing number of virtual events that institutions with deep pockets put on for high-net-worth clients, the group is in the red. Bringing in new wine and spirits inventory for the restaurants is out of the question – he is selling cocktails and wines to go, but is still sitting on an enormous volume of product – so to support producers he has personal relationships with, he has pivoted to Pigs and Pinot cooking and wine pairing demos on social media with winemakers like Sonoma’s Black Kite (25 percent of the proceeds for wine sales go to support Palmer's hourly employees, making it a win for his team too).
"These winemakers can't turn off their supply chain, and harvest is coming," Palmer notes. "The response has been huge and winemakers have been able to move their product DTC. People seem to be drinking more wine right now, and it also seems to be a small luxury they feel they can allow themselves. We want to do everything we can to help them, and this is our way of supporting the community without taking on inventory."
Will Henry’s much smaller restaurant, wine and cocktail bar (with a retail wine element) Pico at the Los Alamos General Store in Los Alamos, California, echoed Palmer's observations. No new orders have been made unless it was a restocking issue. But while business is down 80 percent overall, on-premise wine sales are down 50 percent and cocktail and spirits sales have plummeted 40 percent. Retail sales, however, are flat.
The LA-based Bar Covell's co-owner Matthew Kaner says that sales are down 70 percent year over year, and while they used to offer 150 wines by the glass, they are now only featuring 15. Covell has reopened with outdoor seating only at this time, and Kaner predicts his business – and the industry – will never be quite the same.
"Our landlord is a piece of shit, he's not giving us any sort of break on our rent after 10 years as good tenants," he says. "When we opened, everything was word of mouth. We started small and had killer wines and a great space. Now that's not even close to enough to succeed. The whole business has changed. Sommeliers are essentially DOA after this, no one is going to be able to hire them back. It breaks my heart because so many of my good friends are somms. It's dire right now, I'm not going to lie. This virus essentially ruins everything about what makes the human race so great. If you hang out with people, laugh, dance, have fun, the risk of transmission is sky-high and everyone knows it."
While he hopes to "weather the storm and survive", Kaner is pivoting to online wine sales, an avenue that he views as a safer bet all around. And instead of relying on word of mouth, he'll be using targeted ads on Facebook and relying on a network of influencers to drive the sales of his new wine club, Solovin, set to go live August 1.
The online lifeline
As Kramer indicates, the one category that appears to be soaring across the board during this crisis is online sales, for established behemoths and small-scale newbies, as many find themselves in need of a drink, but no one wants to contract the plague while acquiring it.
As of June 30, the largest online retailer, wine.com, saw revenue growth 283 percent year-over-year, with Millennials and Generation Z increasing their portion of spend by 121 percent.
Cellar 503, a wee wine club focused exclusively on small-scale Oregon-made wine, (10,000 cases annually and smaller), saw 35 percent growth year-over-year, with 200 new wine clubs enrolled since March. Other specialty small-scale sellers, like the wine club Orange Glou have also seen astounding growth, with sales up 60 percent since the pandemic began.
Meanwhile, hybrid operations are pouring their energy into e-comm. Benchmark Wine Group, a fine and rare wine seller to retailers, restaurants and collectors, saw an almost immediate shift in their revenue stream, and CEO Dave Parker doesn't see that changing any time soon.
Benchmark features wines with an average retail price of $250, and moves about 100,000 bottles annually. Prior to Covid, 80 percent of the business was retail, and 15 percent was business to business; the bottom fell out of the B2B, but individual consumers began spending more, so their sales are essentially flat.
Demand is highest in the affordable luxury market, Parker says – highly scored bottles at about $100-$400 apiece, with the greatest interest in California, Burgundy and Bordeaux.
"White Burgundy and extremely high-value collectibles over $5000 are being bought more carefully," he says, "but surprisingly, our lowest-priced category at $100 or less is not in high demand."
Experienced enophiles can put on their big girl pants and make good choices online all by themselves, without the assistance of a shopkeeper or sommelier to guide them. But what about younger wine-drinkers, neophytes and the generally clueless?
New services like Sippd, in partnership with Wine.com and Drizly, are hoping to slip into the gaping market maw created by coronavirus. Part robot sommelier, part online wine store, part delivery service, Sippd aims to use AI and machine learning to rank a user's personal affinity to various wines. It is capable, it claims, of "surpassing the accuracy of wine critic scores and community reviews", all while staying within budget.
Storefront struggles
As more people point and click their way to happy hour, brick-and-mortar stores are struggling to adjust, with mixed results. Storefronts with a strong online presence are, in some cases, thriving. ShopKeep, an ecommerce and point of sale assistant for tens of thousands of small businesses reports that their wine and spirit store clients saw in-store traffic decline by 18 percent, but online sales increase by 10,000 percent, with a surge of 45 percent in the average purchase, resulting in an overall increase in sales year-over-year. ShopKeep enables customers to order wine through the store, and secure curbside pickup or delivery.
City Hive, a similar platform that powers digital commerce and marketing for more than 1500 wine stores, found that online sales grew 700 percent between March and May.
Stores in residential areas with deep community ties are also doing well, especially ones that hopped on the virtual bandwagon.
"Even though we are deemed essential in Virginia, we opted to close to the general public on March 14 out of an abundance of caution," says Crystal Palate Wine & Gourmet's owner-sommelier Crystal Cameron-Schaad. "We began offering delivery and curbside options, and conducting Facetime calls with clients to discuss new products and offer ideas for wine and food pairings. We also offer a weekly Zoom workshops with winemakers from around the world."
Cameron-Schaad says that Italian and French wines are selling well, and that many are treating themselves to slightly higher price points; year-over-year, sales are flat, which she sees as a victory. Acme Fine Wines in St. Helena has also turned to the virtual hand-sell, reaching out to clients via email and pivoting to curbside pickup. Sales for Acme have also been flat.
But other stores, like Bottlerocket, in a half-residential half-office neighborhood in Manhattan's Flatiron District, has seen a "big hit" in sales.
"The residential population is affluent and have mostly fled to their second homes at the beach, so it's a ghost town here," owner Tom Geniesse says, adding that while they have an e-commerce element to their business, clients tend to be more price-conscious when buying online.
"Covid-19 has compressed 10 years of digital growth into three months," he says. "E-commerce got a huge shove forward across the board. If they haven't already, players in the wine and spirits industry need to adapt quickly."
Wine country woes
Off-premise wine sales grew 16.6 percent in dollar sales year-over-year according to Nielsen's latest numbers, but clearly not at every point-of-sale, or for every type of producer. Gallo, Constellation, the Wine Group and other mega-conglomerates have the muscle and infrastructure to quickly adjust sales strategies, as do the handful of distributors that control much of the market.
Even established, critically beloved wineries like Piedmont's Pio Cesare, with about 40,000 cases of annual production, has seen sales plummet by about 35 percent year-over-year.
"We are very worried because the situation doesn't seem to be improving, and every day more and more infected clusters break out in the most important markets around the world," says Federica Boffa, a fifth-generation member of the management team at Pio Cesare. "Since we have always concentrated on the high-scale on-trade business, this has really affected us."
She says that she and her cousin Cesare have been reaching out more than ever to current and potential clients and members of the press via video meetings, tastings and live talks. While she hasn't seen an immediate uptick in sales, she's hopeful.
"This way of communication is without any doubt, less expensive and quicker than traveling," and is a way of reaching out and showing their faces, until physical travel is safe again, she says.
Ancient Peaks, in Paso Robles, CA, with about 60,000 cases in production, entered the business in 2008 during a recession, so hardship and spinning on a dime is part of their DNA.
"We still drive old pick-up trucks and even during boom times, we kept our business diversified," says Amanda Wittstrom Higgins, executive vice-president. "It's not sexy, but we farmed grapes, made wine and also sold a lot of our grapes to other winemakers. When we did invest, we invested in a national sales team and aligned ourselves with distribution partners that have a strong national presence, and worked our tails off with them until relationships in the market were established."
Sales have been up 20 percent, something she says she "almost feels embarrassed to admit", knowing how hard "everyone in the business is working right now".
Like Boffa, Wittstrom Higgins sees a brave new virtual reality ahead for the businesses that ultimately succeed.
"It's hard to trace sales from Zoom meetings and social media, but I think that virtual mindshare leads to market share down the line," she says. "We have reached out multiple times to every single person in our wine club, and we hold virtual meetings and tastings daily. One day of virtual meetings equals several days on the road. It may not be as beneficial as being in person, but when you cancel out all of the expense of flying and hotels, you probably come out about even."
Don't like Zoom? "Get comfortable being uncomfortable," Wittstrom Higgins advises. "Stretch yourself. It's the only way you and your bottom line will grow."
The new recipe for success appears to be a cocktail of e-commerce, community outreach and virtual Kumbayahs on the 'Gram, topped with a sprig of luck. It's not as sexy or delicious as the stiff blend of world travel, late-night parties and vertical Barolo tastings, but it's all the bartender's got.
Take it or leave it.
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