The Fine Wine Ecosystem through Covid-19

Uncertainty and change didn’t start with Covid-19. For several years now, both society as a whole – including the rules of international trade – and the Fine Wine ecosystem have been engaged in deep transformations.
But the current situation is increasing the pace of change, speeding up pivoting strategies, reinforcing burgeoning trends, straining imbalances.

We spent the last few weeks discussing with Fine Minds around the world. We identified six game-changing shifts that dominated our conversations, exploring their probable impact on the Fine Wine Ecosystem (FWE) and sharing solutions that we’ve heard along the way.

Here are the first three.

NB: As we explore the wreckage from current situation and try to harness aspects of it as a potentially positive force of change for the Fine Wine Ecosystem (FWE), we would like to extend our thoughts to individuals and companies that have been deeply affected by the virus and are still struggling to make it through these unprecedented times.

Deterioration of global trade environment

While commercial interconnections have brought stability in past decades, tightly wound systems have recently become more vulnerable. We were already evolving toward uncertain geopolitical times before the Covid-19 crisis, with fear of both trade wars and armed wars being raised in the conversations. Two possible scenarios are emerging as we watch global leaders navigating the crisis:

  • A global blame-game, resulting in a strengthening of tariffs and hostile trade measures, powered by strong-arming and tit-for-tat
  • A shift towards more international cooperation, powered by transparency and empathy and a recognition of the need for global governance to be emerge

These scenarios will deeply impact the Fine Wine ecosystem, and notably which wine will be available where. Historically, Fine Wine has been a status symbol transcending local markets. 
A probable adverse outcome, at least in the short term, would question the FWE’s capacity to rely on international markets for its financial and reputational well-being.

To face this unfavourable context, here are some solutions that we’ve heard along the way:

  • Market diversification: wineries, négociants and brokers were encouraged to review their dependence on certain (export) markets, notably the US, China and Russia.
  • Re-think local: because one might not be able to trade internationally as before, revisiting one’s local sales strategy using the whole channel spectrum (on-trade when and where possible, off-trade and BtoC).
    “We are building a partnership with local fruits, vegs, meat and dairy producers to create and deliver fresh boxes to people including our wines. Not only does it allow consumers to have a “one-stop shopping for fresh food”, it also integrates our wines into a food environment.”

Constriction of the distribution channels

With most on-trade in total lockdown, the FWE ecosystem is losing a vital distribution channel, key partners and gatekeepers.

Consequences are indeed terrible, with ripple effects to be seen in the whole supply chain. In some crucial urban centers, attendees estimated that between 30% and 50% of the restaurants might not reopen post lockdown. Corporate events, a large source of revenue for hotels and restaurants, are not expected to re-start before September at the earliest, with a probable enormous budget cut for the ones returning.

To face this unfavourable context, here are some solutions that we’ve heard along the way:

  • Donations and Charity to support re-opening
    “We are building a special auction including donated iconic wines. All the proceedings will go to selected restaurants, in cash, so that they have some money in the bank to keep their staff or pay their rent”
  • Partnerships to accelerate cash-flow
    “We are building partnership with our key restaurant accounts. When they will reopen, we will offer our wines at just over cost price, so that they can keep the extra margins for themselves and re-build cashflow quickly”
    “Because our B2C sales are working so well right now, for every private clients order of 24 bottles or more, we are donating a bottle of wine to a restaurant of their choice”
  • Staff redeployment
    “Many of the sommeliers we worked with are reinventing themselves as private wine merchants selling to their VIP clients either their own restaurant’s wine list when possible or the ones of their regular suppliers”
  • Individual listening and support
    “We have opened a help line dedicated to our on-trade partners. First of all we listen, but we also use our network to connect laid-off staff to possible financial help.  We provide training to those still in activity and we work with them on content”

Reshuffling the cards

The current crisis is unique in its globality, and on the “remote revolution” that it’s imposing on all of us. Overnight, the world had to change its ways of socialising and conducting business, opening incredible windows of creativity, redefining the fields of possibilities and applauding companies questioning their old ways of doing in order to survive.

“It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most quickly adapts to change” Darwin.

Attendees are forecasting a stratification within the FWE, with stakeholders unable to question their modus operandi probably not surviving the crisis. Most operators will react eventually, but only the most agile, once out of the “immediate survival mode”, will use this situation to deeply question the way they were operating. The right mindset will be key.

If there was ever a time to try something new, it would be now.
In this “adapt or survive” environment, here are some game changing ideas collected along the way:

  • Broaden the Fine Wine definition
    “Producers that can’t bottle their last vintage and make room for new harvest should consider making a premium non-vintage blend. It is the perfect occasion to revisit vintage necessity for Fine Wine”

    “The realm of Fine Wine usually includes mainly reds. But rosés and whites are “quicker” to make, yet can offer incredible quality. Focusing the Fine Wine conversation on them could help raise cashflow for wineries, a sort of Buy our whites now so that we can have the resources to finish the Reds later.”
  • Get numbers right, especially for small wineries
    “If I have only one advice for small wineries at the moment, it will be to work on their pricing. So many times they are incredibly cheap, simply because they’ve never [properly] run the numbers. We have to work on financial sustainability”

We are wrapping up the analysis of the remaining three game-changing shifts:
Disintermediation
Digitalisation of commerce
Digitalisation of conversation
Stay tuned! We won’t be long in collating your collective expertise.