Stay-at-home orders affect California wine business

Issue Date: April 1, 2020
By Steve Adler
With tasting rooms closed due to stay-at-home protocols intended to slow the spread of COVID-19, wineries have offered incentives to boost online sales.

In moves aimed at continuing to sell wine during this time of restrictions intended to slow the novel coronavirus, California wineries are resorting to creative new ways to provide wine to customers—including virtual wine tastings, curbside delivery and free or low-cost shipping for online orders.

Watching these developments with fingers crossed are California winegrape growers, as they monitor vines that have started to bud for the 2020 crop.

Jeff Bitter, president and CEO of the Fresno-based marketing association Allied Grape Growers, said the disruption in the wine business comes at a time of oversupply.

"Market pressure will filter down to growers, but growers were already in an unfavorable position, regardless of COVID-19," Bitter said. "Most growers had already considered their future and were making plans to adjust to a difficult market."

Bitter said he believes the coronavirus will cause disproportionate harm to smaller wineries, whose livelihood depends on foot traffic and events at places of business—and that will have a direct impact on farmers who supply grapes to those wineries.

"Many times, these small wineries do not have the market power or even staffing capability to effectively break into the broader market with their products, so they rely on local consumers," he said. "There will be a trickle-down effect on growers, as these smaller grape buyers lower their supply needs in response to lost wine sales."

Bitter said wineries have been taking a cautious approach when it comes to offering new contracts to growers.

"Many wineries have favored a more conservative buying stance," he said. "However, we are also seeing that wineries are using the opportunity to 'upgrade' their supply and cull out weaker vineyards, while making moves on superior vineyards at prices that are favorable to them. We have signed thousands of tons of grapes to contracts since January based on certain wineries filling needs in this manner."

As tasting rooms have closed and wine tours have been suspended due to stay-at-home protocols, wineries and growers alike hope people will shift from drinking wine with their meals in restaurants to purchasing bottles of wine for home consumption.

"If you assume many consumers will now be considering enjoying wine at home versus in a restaurant or other social venue," Bitter said, "I think that behavior could be coupled with being cost-conscious. I believe consumers may experience a new-found appreciation for affordable wines."

A Nielsen survey shows U.S. off-premise wine sales grew 27.6% in the week ending March 14 compared to the same week a year earlier.

Efforts to bolster sales include a series of video tastings on Facebook by Comstock Wines in Healdburg and other virtual tastings. In many locations, wineries offer discounted prices, onsite pickup for online orders and free shipping or local delivery for a minimum bottle purchase.

Aaron Lange, grape grower and winery associate with LangeTwins Family Winery and Vineyards in Lodi, said wineries are adapting in different ways.

"Some have closed entirely, some are open for deliveries and pick-up orders, and I imagine some are working on ways to do 'virtual tastings.' I am concerned about wineries which rely nearly 100% on tasting room traffic to sell their products," Lange said.

"We all need to think outside the box to work within the 'shelter-in-place' order but still support our customers, employees and community," he said.

LangeTwins, for example, is one of many wineries offering free or low-cost shipping on online orders and curbside pickup at the winery.

Glenn Proctor of wine broker the Ciatti Co. in Novato said it is too soon to determine how COVID-19 will affect the overall wine and grape markets.

"We have seen many buyers and sellers acting as if it is business as usual, and we have seen others who have said they are holding off on all buying and selling until they get a better understanding of the current situation," Proctor said. "As we get a better idea of how consumer buying habits will change because of COVID-19, we will have more information on what areas may be affected."

A survey of U.S. wineries conducted in late March by WineAmerica, a national association of American wineries based in Washington, D.C., showed participating wineries had suffered total financial losses of more than $40 million, which they attributed to COVID-19 concerns.

In a related development, Bill Newlands, president and chief executive officer of the wine producer Constellation Brands, said recent decisions to close the northern and southern borders of the U.S. have not affected commercial traffic, which is essential to enabling supply chain operations and the building of critical inventories needed to meet customer needs.

"This will prove helpful as we and other companies in the consumer product goods space work to provide a bit of comfort in this otherwise difficult time," he said.

(Steve Adler is associate editor of Ag Alert. He may be contacted at sadler@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.




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