Dec 16: A study conducted by the Geisenheim University has concluded that the Covid-19 Pandemic has caused severe disruption of distribution channels with hotels, restaurants and exports hit hard and unfortunately the recovery would be slow with further losses in 2021expected though digitisation and structural changes are taking place at accelerated pace, writes Subhash Arora who wonders who could feel the impact more than ProWein which has had to cancel the Show in 2020 as well as 2021 and will be back only in March 2022
The survey based its conclusions on the feedback from experts from 49 countries at the end of 2020, thereby covering the entire value chain of the wine industry and focusing on the effects of Covid-19 on the global wine industry.
The ProWein Business Report is globally the first report to quantify the global impact of Covid-19 on the different aspects of the wine sector and observe the expectations for the necessary future direction of the wine industry, according to Prof. Simone Loose, Director of the Institute for Wine and Beverage Research at the University of Geisenheim which had been engaged by Prowein to carry out the Survey.
"The extraordinary importance of the Covid-19 topic for the wine industry is demonstrated by the very high participation rate of international experts, doubling to almost 3,500 participants compared to previous years," says Bastian Mingers, Project Director of ProWein, underlining the informative value of the current Business Report.
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"Everyone in the industry has a high interest in comparing the effects experienced on their business with others. At the same time, all businesses are looking for clues for possible strategies and ways out of the crisis”, he adds.
The resulting decline of the economic situation due to the Pandemic is the most acute threat to the wine industry, which is suppressing other challenges such as health policy, climate change and the international trade war.
Hotel and restaurant closures caused by the pandemic have led to a global disruption of wine distribution channels. Food retailing and online trading, and to some extent the specialist wine trade, have benefited from these shifts in many countries. However, the lack of foreign tourists caused by Covid-19 led to a sharp drop in local wine consumption in many wine-growing countries.
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The impact of Covid-19 crisis on wine producers varied depending on their sales focus. Smaller wineries were particularly affected by the closures of restaurants and hotels and a lack of tourists. The simultaneous global impact of the pandemic also led to a decline in wine exports, especially to countries with a high proportion of wine consumption being at social gatherings and restaurants.
The industry expects only a very slow recovery of tourism and exports and anticipates a further deterioration of the economic situation in 2021.
For the majority of wine producers in Spain, France and Italy, several of their strongest sales channels, in terms of value and volume, have been negatively affected at the same time. Though online sales compensated to some extent but these steps could not help the producers redeem the heavy loss of sales.
Both retailers and producers did intensify their online communication, opened online shops, conducted online tastings and offered delivery services in most countries (including India to some extent). This digital transformation of the wine industry, which was greatly accelerated by Covid-19, will continue in the future, according to the experts.
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Cost reductions and government aid programmes have so far been able to avert extensive redundancies and plant closures. However, the experts believe the industry will consolidate and become increasingly concentrated as the pandemic progresses, with some businesses forced to close down.
In future, companies will strive for greater diversification across different sales channels and markets in order to spread their risk more effectively. Producers are, in fact, trying to switch mainly to direct customer business and food retailing, which will further intensify competition in these channels. Cost reductions and postponed investments will also slow down the process of the wine sector’s focus on the climate change and improvement of environmental sustainability.
Although many consumers have been drinking excessive amounts of wine during the pandemic, experts believe that the economic consequences of the Pandemic will lead to more price-sensitive consumers resulting in lower sales of premium wines in future. However, the global sales of wine as a whole are expected to recover for the most part after Covid-19.
Also Read: Go for Geisenheim for Golden Wine Education
Geisenheim University is one of the oldest and the most renowned institutions of Germany in enology and viticulture. It started a Bachelor of Science programme in International Wine Business in English from October 2014 and offers a golden educational opportunity for the young Indians who want to make a career in the wine Industry-editor
Part 2 of the Report in the next edition will look at the challenges faced by the wine industry, changes in consumer behaviour during the Pandemic and expectations for the future in the next 867th edition of delWine. So watch this space next week-editor
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