Dear Client: 

The US wine industry (10,000 wineries and 8,000 winegrape growers) is facing up to $5.94 billion in revenue losses on an annualized basis in 2020, according to a new analysis by Jon Moramarco, managing partner of BW166 and editor of the Gomberg-Fredrikson report.

“Despite recent news of consumers increasing wine purchases from grocery stores and other outlets, the impact of on-premise and tasting room closures plus projected declines in direct-to-consumer sales will offset any short-term sales gains when taking into account all channels,” says Jon.

Off-premise sales are estimated to see an increase of 10%, up $1.3 billion. But, breaking down revenue impact by other channels, Jon projects a much greater loss. 

• On-premise revenues will decline 80%, down $2.5 billion 
• Direct-to-consumer revenues to decline 10%, down $323 million 
• Tasting room sales to decline 80%, down $3 billion 
• An excess of winegrapes, leading to an estimated loss in winegrape sales to be 25%, down $1.4 billion 

Note, those figures are assuming 50% recovery of restaurant, tasting room and other on-premise wine sales within three months of the lifting of shutdowns, which is currently estimated to be late May 2020. 

Winery size and channel mix will impact the exact revenue losses each winery will experience. Indeed, projected revenue losses increase as winery size decreases. 

About 97% of US wineries produce less than 50,000 cases annually, and are expected to lose between 36% and 66% of revenues in 2020. Wineries producing 1,000-5,000 cases annually expect to lose 47.5% of revenues and those producing under 1,000 expect to lose 66%. 

“Wineries, like all other hospitality businesses, are feeling the impact across the board,” says Wine Institute chief Robert Koch. “Our wineries rely heavily on their tasting room and restaurant sales which have been decimated. While we are confident in the long-term consumer demand for California and US wines, we anticipate a long recovery period.” 

Things are looking pretty bad for grape growers as well. “Grape prices were bad before the COVID-19 pandemic hit, but now we are confronted by the prospect of a financial disaster for growers,” says California Association of Winegrape Growers president John Aguirre. “We are grateful that winegrowers continue to operate with extra safety protocols in place, but there is a direct link between the success of tourism, hospitality, events and restaurants and the financial health of the many growers who supply grapes for wines sold in those segments of the wine market.” 

TRUMP OFFERS PHASED GUIDELINES TO REOPEN BARS AND RESTAURANTS

While the reopening of the on-premise is still largely theoretical, at least now we have a faint blueprint as to how things will shake out when the time comes, as reported by sister publication Beer Business Daily earlier this morning.

President Trump used his ongoing evening press conference stage last night to articulate a plan to reopen the country. There are no official start dates, and directives are to be considered on a local basis, by local authorities. 

The starting point: After meeting regional “gating criteria,” including a downward trajectory of cases “within a 14-day period” and hospitals’ ability to “treat all patients without crisis care,” states and/or localities could begin Phase One of a plan to reopen businesses and public life again, per a three-step approach.

In PhaseOne, “bars should remain closed.” But restaurants could be reopened, per “large venue” permissibility. That grouping includes sit-down dining, movie theaters, sporting venues, and places of worship, which “can operate under strict physical distancing protocols” in the initial phase of re-opening. 

States and regions “with no evidence of a rebound” can then move on to Phase Two. 

In this phase, bars can begin to reopen “with diminished standing-room occupancy, where applicable and appropriate.” Restaurants can continue to operate under slightly less stringent physical distancing protocols. 

Notably, Phase Two allows non-essential travel to resume, but employers should still encourage remote working where possible. 

Phase Three is, again, for regions “with no evidence of a rebound” and satisfy that original gating criteria. 

The idea is for the final phase to look something like our pre-COVID lives, though not completely. For example, here, employers can now “resume unrestricted staffing of worksites.” But even low-risk individuals are advised to “consider minimizing time spent in crowded environments.” 

Large venues can operate under “limited physical distancing protocols.” And “bars may operate with increased standing room occupancy, where applicable.” 

You may recall, earlier this week, several governors announced they’re intention to work together to coordinate regional efforts to begin to ease restrictions on COVID-19 measures, including Washington, Oregon, California on the west coast and New York, Pennsylvania, New Jersey, Delaware, Rhode Island, Connecticut and Massachusetts on the east coast [see WSD 04-15-2020]. 

RNDC REACHES “HUGE MILESTONE” IN DIGITAL TRANSFORMATION 

About a year ago, Republic National Distributing Co. announced the launch of a new digital platform, called eRNDC, developed in partnership with online distribution platform LibDib [see WSD 04-23-2019]. 

“The pandemic and its impact on our business has shown us that the pace of transformation has to shift into warp speed, and that it must offer the kind of resources that help sustain businesses in the toughest of times,” writes RNDC chief Tom Cole. 

Initially the platform rolled out with customer experience capabilities, allowing customers to access an online shopping and ordering experience as well as account information and sales team support. 

Now, eRNDC has the Supplier Portal, which provides 100% of suppliers with 24/7 online visibility into the status of requests as well as the management of their brands and distribution. 

“We will continue to accelerate the rollout of eRNDC, and we expect that by the end of July 80% of our buying customers will have access to online ordering,” he writes, adding, “This is a huge milestone in our digital transformation.”

CAMPARI ENTERS INTO EXCLUSIVE NEGOTIATIONS TO ACQUIRE CHAMPAGNE LALLIER

Campari announced today that it has entered into exclusive negotiations with French company Sarl Ficoma to acquire an 80% interest of Champagne Lallier and other group companies, with a medium-term route to total ownership, per a release. 

The deal includes the brands, related stocks, real estate assets including vineyards and production facilities. No financial details were disclosed. 

This marks the entry of the first Italian company to the Champagne category. Campari would “add a premium and historical champagne brand, Lallier, mainly sold in selected on-trade outlets and bottle shops, further extending its range of premium offerings to this key channel for brand building,” per release.

WSD BRIEFS:

MOET HENNESSY REVENUE DOWN 14% IN Q1. Moet Henessy revenues were down 14% globally in the first quarter. Champagne volumes were down 6% globally, with some resilience in the US thanks to pre-lockdown orders. Hennessy volumes were down 13% due to VSOP and XO, again with some continued growth in the US from pre-lockdown orders. The impact of COVID-19 “cannot be precisely evaluated at this stage without knowing the timetable for a return to normal business in the different areas where the group operates. We can only hope that the recovery happens gradually from May or June after a second quarter which will still be very affected by the crisis, in particular in Europe and the US,” per earnings release. 

NAKEDWINES.COM ACCELERATES HIRING TO MEET GROWING DEMAND. NakedWines.com is responding to high demand for home wine delivery by hiring over 80 new roles across the US, per a release. The positions span customer service, data science, finance and growth marketing roles based in Napa and New York City. In addition, Max Miller has been named president of the US business. Max joins the company from Bluprint, a subscription video on demand service owned by NBCUniversal.

GLENLIVET LAUNCHES CARIBBEAN RESERVE. Pernod Ricard’s Glenlivet has launched Caribbean Reserve. This non-aged expression is finished in ex-Caribbean Rum barrels and is available nationwide at a suggested retail price of $35. 

Until Monday,
Sarah

“My mission in life is not merely to survive, but to thrive; and to do so with some passion, some compassion, some humor, and some style.” – Maya Angelou

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