What are the main effects of the coronavirus on the wine sector?
Like other economic areas, the wine sector has also been affected by the coronavirus crisis. Therefore, in this article we explain the main consequences of this health crisis on wine sales and also on the sector in general.
What are the main effects of the coronavirus on the wine sector?
The main problem this sector has faced is the closure of bars, restaurants and hotels, which were the places where the highest consumption of both wine in bottles and wine in bulk took place. Therefore, sales were initially affected by the closure of these businesses.
As regards prices, according to data from the Spanish Wine Market Observatory (OEMV), while in January 2019 wine was being sold at a good rate of 0.76 euros/litre, it is currently selling at a loss and prices are below 0.50 euros/litre and the market is completely paralysed.
On the other hand, imports and exports to other countries have suffered greatly as a result of the closure of borders. Especially in countries such as Spain, where we could boast of being major exporters, we have seen how this factor has significantly affected income, reflecting a fall of 25%, as our main Spanish wine importing countries such as France, Germany and Italy are in a similar situation, further aggravated by the closure of borders in the United States.
These are the two most notable negative effects. However, there have also been some changes in the behaviour of people who are good for the workers in this sector. In particular, it has been seen that during these months of confinement, wine consumed by households has increased more than food consumption. In fact, the data show that growth has been over 60%.
However, it has been seen that the effect on some wineries is greater than on others. While larger wineries have seen their Internet sales increase considerably, smaller wineries have felt the economic effects more.
In terms of production activity, most producers have significantly reduced their land holdings. This is either because some companies have sent their workers to an ERTE (Temporary Employment Regulation Scheme) and no longer have all the personnel available, or because with the individual protection measures they cannot maintain their capacity at maximum. In figures, more than 85% of the wineries are still in business (in one form or another), but almost 15% have decided to cease their activity completely on a temporary basis.
What is expected for this sector when the health crisis is over?
The consequences of the coronavirus are not yet fully known and therefore all kinds of activities are in a very uncertain stage. Nevertheless, some keys are being considered to face the future of the sector in the best possible way.
Firstly, it is necessary to seek a readjustment of the surface area of the vineyards to ensure that it can be adjusted to the demand of the population. This will help to avoid waste and not to carry out an activity that consumes excessive resources. In turn, if work is done to improve the quality of this land, this can produce benefits in the future. Improvements in the vineyards will also help to make future harvests more profitable.
Among the measures to alleviate the negative effects that the state of alarm is causing in the sector, such as the collapse of prices and the paralysis of commercial operations, the Castilla-La Mancha Agri-food Cooperatives and the ASAJA organisation have requested the authorisation of a crisis distillation and the activation of the Commercialisation regulation.
If crisis distillation is not activated, the wineries and cooperatives will not have sufficient capacity to store next season’s production. It has therefore been required to have marketing standards and sufficient measures to ensure market stability. In addition, it has been requested that the necessary controls be carried out to prevent fraudulent acts in the wine sector in the region, as products from outside the wine sector continue to be traded and these practices further aggravate the difficult situation facing the sector.
Finally, it is also worth noting how interesting it would be to improve training in a time of less work, while looking for more sustainable alternatives. Similarly, it is recommended that wineries (as well as all economic sectors) begin to set up an emergency fund to deal with crisis situations such as this one.
In short, despite the fact that the wine sector has been affected by the coronavirus crisis, the truth is that there has been a change in people’s behaviour, valuing more time with family and friends, where they can share time together, and this will also have a positive impact on the sector. In addition, the economic recovery is expected to be good in this area.