The coronavirus emerged in China late December 2019 and rapidly spread in most cities nationwide in the first two months of 2020. This event has taken a dramatic toll on consumption and disrupted the entire value chain of the wine industry. If the situation persists for the next few months, the wine industry will be structurally damaged. On the other hand, the current crisis also brings the wine industry an opportunity to rethink strategies. 

According to Stacy Wan from one of the leading Agro banks in the world: the Dutch Rabobank. The coronavirus outbreak will severely damage wine companies with cash-flow issues and single trading patterns. “Many wine importers mainly import low-priced products and simply wholesale them to channel dealers. Low profit per bottle makes them more dependent on sales volume to make a profit”. “Thus, the threshold of entry to the wine market will be virtually raised. The wine companies with high-quality products, diversified channels, and brand influence will gain momentum for sustainable development after the epidemic.” 

In china the normal (brick-and-mortar) stores who had to suspend sales are slowly getting back to normal. Foodservice however came to a standstill, and there are still no signs that operations will get back to normal soon. “According to Euromonitor, 68.6% of the wine sector’s revenue was generated through on-trade channels (foodservice) in 2018. Thus, foodservice losses will continue have a major effect on the wine industry.”

Stacy further describes possible consumer scenario’s for after the pandemic.

  • Consumers develop a tighter grip on unnecessary spending. Or:
  • Consumer have a rebound and start consuming as a compensation for all the hardship they endured.
  • Consumers focus more on health related products (and for some, wine will be included)

Based on these scenario’s and the impact the virus created, she believes that wine companies will pay more attention to the importance of diversified distribution channels. “During the coronavirus outbreak, most consumers were hunkering down at home, and most public consumption locations were closed. The wine companies that mainly rely on a single distribution channel were the most affected”. Rabobank believes wine companies will rethink their distribution strategy. “New retail models, including self-service wine machines, community commerce platforms, online apps or platforms, and food delivery platforms, should be integrated into current distribution channels in order to create a seamless consumption scene.” We think that the timing of Vinexion’s launch may accidentally be spot on because we provide the means to facilitate an online, easy and cheap way to search for trade partners who will be an addition to your new post Corona distribution strategy.

Read the original article by Stacy Wan on Rabobank: 
https://research.rabobank.com/far/en/sectors/beverages/coronavirus-deals-a-painful-blow-to-china-s-wine-industry.html

Recovery lessons from the Chinese wine industry
Recovery lessons from the Chinese wine industry
Source http://Rabobank