As I said in my last blog post, I want to devote the next few posts to the world of wine and its changing social and cultural context post Covid-19 (then a more normal service will resume!) The last post also explained how I think that the impact of the plague will not be to revolutionise the world of wine but to accelerate existing changes which are in train. So in the current post I want to use this lens to examine how wine production and its culture may be changing in the future. There are two things which I want to consider: one is how the structures of wine producers may change and the other is producer contact with consumers.
I don’t want to be too economic or business focused, but we need to start with a little bit of business economics. One is the historic failure of wine businesses to make a return on investment – that is to pay for all of their expenses, including land value, and make a profit as well. In many parts of the world wineries are not profitable. One well-known New World wine region, famed for its (often expensive) Bordeaux blends, was the subject of a study a few years ago which suggested that only two of thirty vineyards made a profit; they were kept going by money from other sources. Equally, in much of France domaines are only profitable because the current owners inherited the land. Thus, as land prices rise dramatically in regions like Champagne and Burgundy those who inherit vineyards valued at many millions of euros per hectare cannot make the business pay in the future.
The Covid-19 crisis is likely to accelerate this. In France we already see a number of smaller hospitality businesses close because it just isn’t worth continuing, and this is a good place to stop. Likewise, I heard anecdotally early in the crisis that it was suggested that in excess of 700 (mainly) small wineries in Australia would have to close because the plague would destroy their distribution. The age of the ‘lifestyle winery’ (the New World especially) or the domaine without a viable business plan (all over the world) may be drawing to a close. That doesn’t mean all small and medium-sized producers will disappear: many will stay. Yet it isn’t a question of the quality of wine – rather good wine allied to business sense – which will keep the survivors going.
Different places will have differing problems with Covid-19. Champagne grapes are all picked by hand. Each harvest the sides of the vineyards are full of coaches parked with Polish, Bulgarian, Romanian and other eastern European registration plates; 120,000 pickers, most from other countries, pour in for the harvest. Lockdown in Europe is easing – but will the same number of pickers want to risk the journey for a few French meals and a fistful of euros? This source of labour is likely to dry up at some point soon anyway as the eastern economies grow and approach those of the west. Why do eight hours backbreaking work in northern France when you could have two weeks on the beach in Crete, Croatia or the Costa del Sol? Perhaps, then, the pestilence will accelerate this trend; the problem, consequently, will be who will pick the grapes? The French no longer want to, nor do students, nor the Spanish nor the Portuguese; yet the grapes must be picked by hand.
In a wider sense, the management of harvest – starting in the northern hemisphere within the next six weeks – will be complicated. How do you maintain social distancing when people pick or work in the cellar in proximity? Furthermore, how do you stay healthy when you party afterwards? Are we going to have to revise the protocols for working together not just this year but for the mid-term?
There may be a different issue in the vineyards of California. Traditionally these many of these were worked and harvested by hand, because cheap Hispanic labour needed less capital than machines. This has been changing in the last few years; the obvious reason for this may be the xenophobic policies of the current President yet there is another cause too. The boom of the now-legal cannabis industry has caused many agricultural workers to shift from vineyards to cannabis plantations. The money is at least as good and the work is less back breaking: cannabis plants are easier to work. Again, it may well be that the plague will accelerate this trend, thus producing the more rapid mechanisation of the vineyards.
Meanwhile, the fledgling UK wine production industry thinks it is in crisis. As a comparatively new entrant to the world of wine making it is less secure than most other wine regions. Additionally, its wines – while excellent – are comparatively highly priced, in a country where price points are culturally very important for wine consumers. (Wine there, although quite cheap generally, still has connotations of luxury for some consumers – especially sparkling wine which is the main focus of the local industry.) This is compounded by fears for the coming harvest. As in Champagne, much has to be picked by hand, and following Brexit the supply of harvesters from eastern Europe is even more under threat than it is in France.
* * *
One group in the production process often overlooked by wine lovers is the grower. Many people assume that wine makers own all their vineyards, but of course that is not the case. If there is a declining wine market then smaller and medium-sized producers use their own fruit first and cut down on bought fruit, so growers suffer disproportionately during a vinous downturn. A report in California has predicted a difficult year for growers in the Central Valley – the powerhouse of the State’s wine production.
Champagne growers, dependent on the large Houses for their market, also have specific problems. Sales, having been stagnant for around six years, have dropped dramatically this year. As a result the CIVC may well reduce the overall yield for the year; so will growers in the region be able or willing to continue. The slow but noticeable move by some houses to buy land or tie growers in to long-term contracts may accelerate, thus consolidating further the Houses power in the bipartite management of the industry.
* * *
Covid-19 is also forcing wine producers to change the way they engage with their consumers. Many have had to think about selling more wine directly in the future as distribution, and especially the hospitality sector, has collapsed. Those producers who have already been active in wine tourism have often – with temporary pauses – been able to respond with some flexibility. Others, particularly those who do little but receive clients into their house may have lost markets.
There is a cultural context to this: many (especially in Europe) practice wine tourism by receiving guests – but don’t believe it is a tourism activity; they are just farmers, after all. Thus, they just welcome customers. When those customers can’t come they don’t realise that they should react, maintain the link, and create a sense of community for past visitors. Many of these also are uncomfortable with the technology required to reinvent wine tourism. I’ll explain this with a story.
One of my colleagues at work teaches a course on Wine Tourism to MBA students. This normally includes visits to wineries and wine regions. In April, of course, that was impossible, so my colleague arranged some virtual wine tourism for the students, using Zoom. One of her regular visits, a small domaine in Beaujolais was really uncertain about this. He wasn’t sure about talking to students on his smartphone when he was used to taking them round the place he works. How could he convey what his place was like? Yet my friend persisted and so he started talking. Then, as he talked about his winery, he realised that he could in fact use the smartphone to show them the cellar. Even better, he could walk out into the vineyards and show his special terroir. He became more and more enthusiastic. By the end of the virtual visit he realised, very happily, that he could offer the same to his loyal clients with an online wine tourism service. Without being challenged, however, he would never have seen what was possible.
Other parts of the world, where wine tourism is culturally much more part of the wine experience, have responded much more proactively.
There has already been pressure to reduce intercontinental travel because of its environmental impact. Covid-19 seems likely to strengthen this change. Some in the wine industry have already seen this so that the owner of the Chateau de Pommard in Burgundy has started talking about launching a new vintage of wines with a virtual campaign, then creating a specific digital platform to allow purchasers of their wine to get full, visual wine experiences wherever they are in the world. It’s also worth pointing out that the Chateau de Pommard is owned by an American who will perhaps be more attuned to what is possible than some of his more conservative neighbours. Other countries have managed the pandemic better than the USA or some parts of Europe. By early June New Zealand was seeing resurgence of wine tourism and a chance for the industry to revive as social distancing restrictions eased a little. However, at just the same time in South Africa sales of alcohol were being resumed but there were warnings that small producers, with limited space, would struggle to meet the health and safety conditions for allowing visitors, and with restrictions on restaurant and other hospitality services. It’s important to remember that the country was much stricter towards alcohol – banning all sales as it went into lockdown.
So, what do we make of this? Successful businesses may thrive, or at least survive; less successful ones – which in our world means those which only focus on the style of wine rather than their market – will suffer; as I’ve suggested before, Covid-19 will accelerate this change in the short to medium term. Yet, as always, culture, social expectations and history all pay a major part in creating the environment and the individual approach which explains where and who is likely to be more successful.