Allegrini 2018

Wine and viticulture are facing challenges of post-coronavirus changes. The OIV vision

Pau Roca: “The scenario leaves no room for optimism. Heavy repercussions, some irreversible, on the whole sector, from the vineyard to the market”

Even though some signs suggest that the end of the COVID-19 emergency is not too distant, at least in Italy, the global picture leaves no room for optimism. Not even for wine. Losses in Horeca, the hotel and restaurant industry, will be unsustainable for many, as they have not been offset by growth in domestic and online consumption, and it will take years to recover. And, that is only provided that truly extraordinary resources are put in place, such as those implemented after World War II. For the future, instead, it will be necessary to rethink our relationship with the environment, as well as with the market, for the wine supply chain, from the vineyard to the shelf. This is the meaning of the message from Pau Roca, secretary general of the OIV (International Organization of Vine and Wine), who presented the crucial moment of the world wine scenario yesterday in Paris, in a video conference (which WineNews also reported yesterday).
“First of all I want to express our solidarity for all the countries suffering from the impact of this pandemic. This moment has caused pain and deep concern, and our organization also mourns all the friends, the wine producers, the people who work in marketing, the farmers, and the viticulturists who have died. Their deaths are the most serious damage of all, more than the great economic damage. The economic damage will of course inflict enormous consequences on many activities related to wine. Some of these will close down, and some professional categories could be drastically reduced. I usually like to think about the data we collect and present as a guide, a roadmap with which the sector builds its path. This year, however, we are experiencing a huge change due to the pandemic, which will modify many aspects of the lives of farmers and winemakers, as well as those who work in the grape and wine trade”.
“As we have seen in the southern hemisphere, harvesting started before the outbreak of Covid-19, and although production forecasts for most countries are on the downside”, explained Roca, “the impact of the pandemic has been limited. Precautions such as social distancing, safety devices, even on machinery, have been respected, and the activity of viticulture and wine production has been recognized everywhere as essential for the economy, even if the lockdown has been implemented differently from country to country, and this must be taken into consideration”.
The impact on many aspects of the supply chain is certainly going to be enormous, though. “Part of the crisis is linked specifically to our sector, which is moving globally. For example, everyone has reported a major impact on distribution channels. At first, it was the drastic disappearance of the Horeca and on-trade in many countries. The CEEV estimated that closing this channel in Europe could lead to 35% drop in sales volumes, and a loss of over 50% in value. The effects will obviously be different in the various geographical areas. For instance, the Mediterranean countries will be hit harder than the others, for two key reasons. Mediterranean countries have the highest concentration of restaurants, bars and clubs, and totally suppressing their highly developed tourism, which will be severely limited after the lockdown, will be very damaging. The other reason is that, although there has been a significant increase in sales of domestic consumption, especially in supermarkets, the offer in this channel is much more limited than in catering, as it totally focuses on the price issue, which is consistent between the different big players. This type of offer is completely unlike that of the restaurant, for instance, where differentiating the wine offer on wine lists is also a strategy.
Further, it is easy to predict growth in sales in e-commerce and distance selling, offered by the many players in these sectors. In many cases we are told that there have been logistical issues fulfilling household orders, but once these issues have been resolved, the industry will adapt to this new demand, and direct home sales will surely increase in the future. This channel offers an unlimited choice in terms of price ranges or labels, compared to that of supermarkets. In any case, even if there is growth in these consumption channels, the prediction is a drop overall, and a reduction in average prices; consequently, in sales margins and turnover. And ultimately this will affect the profitability especially of those wineries that are linked to traditional channels; i.e., which are outside the supermarket network. This”, continued Roca, “will have a direct impact on farmers as well as wine and grape producers. And, it will definitely affect the cooperatives, where farmers' incomes are closely linked to sale results of the final product”. The scenario is evidently very complicated. “The lockdown will have a very damaging impact, probably even irreversible, unless truly extraordinary reconstruction are put in place by the Governments. The scenario now is comparable to that of the post-World War II period. European producers are looking for extraordinary measures such as distillation or something similar, so they can have the minimum resources to keep businesses and farmers alive. It is equally clear that international trade flows will be heavily conditioned. Some countries like China are reopening their ports, but for the foreseeable future, the scenario leaves no room for optimism. The economic recession is not a scenario that suggests development. Countries that have the highest levels of consumption have been most affected by the pandemic. The flows and the economy over time may resume, but there may be permanent changes. I think, for instance, that the two largest wine markets, such as the US and the EU, will reduce imports, and in the short term the instability of the currencies will be another aspect that will greatly influence international trade”. The only certainty is that the next several years will be complicated and complex. We will need to take a profoundly different approach, in all respects, to deal with them. “I have to comment on some public statements that have been circulating in this period. Nothing, in these days of pain and fear, justifies messages on links pairing alcohol consumption with health. I must stress that the messages on the benefits of wine consumption related to COVID-19 are completely unacceptable and irresponsible. And the same must be said for the ideological messages against wine consumption, which suggest abstinence. It is immoral to see certain communication campaigns while thousands of people suffer in hospitals. I would like to conclude saying that the OIV guidelines, the objectives set between now and 2024 have not changed”, added Roca. “Indeed they have been strengthened, because this crisis has emphasized further the need to give global answers to global problems such as distortion of the environment and the biosphere, and humanity will have to evolve in knowledge as well as better managing the relationship with the environment. The 7.4 million hectares of vineyards in the world represent only 0.5% of cultivatable land, but the OIV, in a multilateral dialogue between countries, will do its part, contributing in the best possible way to managing the future of the world”.

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