Global Wine Experts Describe Impact of Turbulence Ahead

Wine Intelligence’s global expert network on the impact of Coronavirus: ‘Christmas trading’ in Italian supermarkets amid a gloomy outlook, calm in Brazil and South Africa, fewer Chinese tourists in Australia, silver linings in South Korea, growing concern in the UK and US

How are consumers behaving in your market?

AUSTRALIA: The most noticeable element is that we have seen declining cellar door sales as the normal influx of Chinese tourists during Spring Festival failed to appear. So far the on-premise sales in Australia seem to be holding up.

BRAZIL: Compared to Europe, Brazilians seem to be less scared. Carnival was 2 weeks ago and there hasn’t been much of an impact. Regular people don’t seem to be changing habits, apart from a few people wearing masks on the streets. Some companies are taking measures to isolate employees – McKinsey, for instance, have shut down their offices in São Paulo, because their neighboring office had one suspected case.

ITALY: The first and most striking event was the assault on supermarkets by people filling their trolleys with pasta, sauces, mineral water, and other goods for fear of being out of stock. The director of an important Italian wine & spirits group, who had recently spoken to the manager of a retail chain, confirmed to me how in recent weeks the points of sale of large retailers have made a turnover close to that of Christmas. For the tourism industry, the crisis period started two weeks ago, with an average of 80% of cancellations (especially of foreign tourists), which has led many hotels to close temporarily. More generally, the on-trade channel is now beginning to suffer, both due to the reduction of customers and as a result of government measures to discourage too close socialization opportunities (in quarantined areas the on-trade premises must close the shutters at 6 pm).

SOUTH AFRICA: Probably too early to tell, but so far it doesn’t seem as if there is a major change. I am hearing that wine tourism is suffering a bit, which will obviously impact on cellar door wine sales. We are a bit behind the curve and possibly the fact that it’s summer has also helped.

SOUTH KOREA: We know the damage to consumer confidence is big. But it is not easy to say how much right now. People are avoiding seeing each other face to face, so socializing is not really happening. Similarly, face to face business meetings are not happening – salespeople are not so welcome at their clients’ bars, restaurants or shops. There are not many people on the streets – not many cars either.

SPAIN: So far, everything seems the same. Masks were bought long ago but people haven´t gone in for the “toilet paper craze” as in other places.

USA: Restaurants and bars are already feeling the impact as people are going out less. On the whole, the on-premise will take a much bigger hit. People are already eating out and going out to bars less. On the other hand, I could see this helping online ordering services like Drizly and Minibar and in food, Grubhub and Delivery.com, as people stay in more and order in more. I saw a post on Facebook recently that someone had shared about Postmates advertising a “no-touch” service or something to that degree to further allay any concerns.

We’re yet to see event cancellations, but that could be just a matter of time. The big issue in a market like Las Vegas is that in addition to both domestic and international tourists, we rely heavily on delegates who attend the many large-scale conferences here – Linda Crisman, Regional Manager Western USA, Jackson Family Wines

UK: On the surface, it feels like there isn’t much dramatic change. London’s Tube is still packed at rush hour, and hardly anyone seems to be wearing masks. We’re hearing from on-premise that bookings are down on normal for the time of year, and events businesses are getting particularly nervous as clients are deferring decisions until the last minute. The news seems to move so fast; it feels a lot easier to defer rather than decide.

What are your predictions for the wine category for the remainder of 2020?

AUSTRALIA: The effects will last long after the virus has peaked – consumers will be spending more cautiously both domestically and in key export markets. The tourism business is still dealing with the after-effects of the fires, so it will be a while before we see a return to normal. From the export point of view we are hoping that some of the excess supply in China will be sold through towards the Mid-Autumn Festival period. Vintage forecasts from ABARES (national commodity forecaster) is predicting a below-average vintage size which will help offset the fall in demand.

ITALY: It will be the most difficult period since the methanol scandal in 1985. Our inbound tourism industry has done so well in the past few years that it has reversed the long term trend of consumption decline in the domestic market – we will have to wait a while for international tourist numbers to recover. I am sure that once the emergency is resolved, perhaps with the summer season, the domestic Italian consumer will resume their love story with the aperitifs and the various socialization occasions. Until then, I foresee some difficulties for wine businesses, especially small ones, which have focused on an important part of their sales on the cellar door and have grown reliant on international tourists.

SPAIN: We´ve still to see the worst effects but the summer will approach fast and here it will help reduce conditions that favor contagion. The big question will be whether the tourists show up in their normal numbers.

SOUTH AFRICA: I think the major global grocery retail businesses will be extremely cautious in their ordering pattern against the current scenario. In the local market, we may see some sales lost from people not attending large gatherings/restaurants etc as much, and we expect the conference industry to take a hit. Wine tourism will take a while to recover because leisure trips to South Africa are often planned a long way in advance, and we may not see the full extent of the effect for a year or more.

SOUTH KOREA: Companies in the sector are planning on 20-30% declines in their sales vs their original plan for the year. People are not going to the shops – they prefer on-line shopping. In Korea, we cannot sell wine online yet, but we understand that the government will allow online sales of wine temporarily, maybe as soon as April – it will only be click-and-collect, not full delivery, at least not yet. But it is a good start. I expect that, sooner or later, maybe within the next couple of years, the online wine market will be opened up.

UK: So far the government is resisting imposing restrictions on the public, but this will change soon. We understand the medical experts are expecting the peak of infections in the UK in about 6-8 weeks’ time, at which point restrictions may start to be lifted. Supermarkets will do just fine, but it’s the on-premise, hotels and events companies which will have a hole in their revenues – somewhere around 15% of their annual sales – which won’t be made up in this calendar year.

We haven’t seen anything change yet from a retail sales perspective as yet, but we have already seen a drop off in Travel Retail (ferries, airports). Supply has been rather lumpy as shipping lines have had to adapt their schedules to China and Singapore port closures. Looking ahead I’d say that the [UK] On Trade is in for a tough time, clearly festival volumes are up in the air and in retail, I’d expect local small stores to do well – Simon Lawson, General Manager, Casella Family Brands (Europe) Ltd, UK.

USA: The big unanswered question for Americans is how bit the outbreak will get. We are losing faith in the government response – it seems very slow and complacent, and who knows how many confirmed cases we will have when the virus testing gets to a sensible number [estimated at <3,000 tests completed as of 9 March]. When events like Indian Wells [major tennis tournament in California] are canceled, it feels like we are just seeing the tip of the iceberg.

Source:  Wine Intelligence

Wine in a can is a robust trend and not a short-term fad

With the traditional wine market in the US growing at an increasingly slow pace, successful wineries 10 years from now will be those that have adapted to a different consumer with different values.  Wine in a can is no new thing; it was first seen in World War 1 when the French army had their wine rations delivered this way.

WICresearch.com has done an in-depth study of the drivers that are affecting the boom in the wine-in-can market and it is predicted that the trend will continue to grow as it has done exponentially in its infancy.  The most important factors to consumers when it comes to wine-in-can are taste, quality and value, followed by convenience, portability and fun.  From 2017-2108 the wine-in-can market grew by 43%.  It is a market that cannot be ignored as the industry needs new growth places.

There are 6 main drivers that are promoting the expansion of wine-in-can, as follows:

Convenience

This is the most obvious benefit and relates to the carrying, opening and finishing of the product.  One is able take a can where it is illegal or inconvenient to bring a bottle or any glass.  The single-serve size also allows for zero waste of the contents, and it removes the need for traditional wine paraphernalia: foil cutters, corks screws. Under the convenience banner, the wine vending machine is also a trend that is starting to gain traction, certainly opening new markets in terms of novelty and availability.

Occasion expansion

This is based on both location and event. Location involves places where taking a bottle of wine is not suitable nor practical: boats, beach, swimming pools.  Event expansion is where offering a single-serve beverage is desirable e.g.BBQ, picnic.

It is interesting that wine-in-can drivers such as these are not cannibalizing the existing market with its meagre growth of 1-4% but it is rather creating an extension of markets or even new markets and thus creating strong double-digit growth.

Sustainability and cost savings

Aluminum is 100% recyclable and so the environmental footprint is greatly reduced, and the product attracts an eco-friendly consumer who values sustainability.  Research has shown that 51% of Millennials check the packaging before purchase for sustainability claims.

 Facts:

  • Sustainable products grew 4x the rate of non-sustainable products (Nielsen)
  •  Consumers are willing to pay 15% more for sustainable packaging (McKinsey)
  • 66% of consumers will pay more for sustainable brands (Nielsen)

Packaging in aluminum cans also produces a saving of 15-20% with some manufacturers suggesting 40% due to efficiency of packing and transport, lack of breakage, and lighter weight.  Therefore, carbon emissions for transportation are also lower. Also, savings occur in establishments serving wine by the glass, as there is total accuracy over the serving size with no shrinkage.

Portion control and variety

Apart from the benefit of not having to open a whole bottle when you would like to enjoy a glass, there is also no issue of dealing with unfinished wine.  The wine-in-can movement is very popular with restaurants that have less waste and leftover wine, or the problem of customers wanting to cork their bottle to take it home which is illegal in many parts of the world.

Due to the small serving, wine drinkers can enjoy different varieties of wine with different courses, instead of a full bottle of the same wine.

Visual image and branding

An aluminum can has a 360-degree label rather than just a front and a back.  It gives the product a cooler, more photographable, Instagrammable look.

“With 64% of consumers trying a new [wine] product simply because the package catches their eye, packaging design is one of the most underappreciated marketing levers” (Freeman, 2016).

Designers can go so far as to make the packaging glow in the dark.

Quality

“You actually have a really stable environment in a can…There’s no UV penetration or oxygen exchange like there would be through a cork and glass bottle” (Drinks News, 2018).

For still and sparkling wine, the integrity of the product can easily be preserved.  The dark, oxygen-free environment for still wine is ideal while for sparkling, the effervescence is contained in a small space.

There is ongoing research for different types of cans, linings and filling systems to ensure further integrity of the product as well as preserving its future life which is, as yet, unproven.

It is interesting to note that the wine-in-can purchase is not affected by gender, education nor generational group.  There is also no difference in self-reported wine knowledge i.e. consumers with a high level of wine knowledge are just as likely to buy wine in cans.

In a 2019 a blind taste test of wine-in-can versus wine-in-bottle was conducted. The identical wine from the same winery in both packaging formats was poured.  There were 4 different varietals and the experiment was done in 2 different locations.  51.1% said they either preferred the wine-in-can or that they could tell no difference between the two.

Wine-in-can is a growing market and innovation and interesting marketing tools are emerging every day.  It will be a very interesting space to watch over the next decade.

WICresearch.com

Jenny Ratcliffe-Wright
Cape Wine Master

 

I’m excited to participate as a speaker in the “1st Annual Nova Scotia Department of Agriculture Minister’s Conference”

I am delighted and honoured to be joining a distinguished group of speakers at the 1st Annual Nova Scotia Department of Agriculture Minister’s Conference – March 3 and 4 at the Halifax Convention Centre, Nova Scotia.

The theme of this year’s conference is “Farming for the Future – Thriving in a Changing World.” There will be local, national and international speakers addressing key issues and opportunities in agriculture – from innovation to labour and climate change.

I will be a keynote speaker discussing International Wine Marketing Strategies for 2020, and will also be participating on a Climate Change Panel along with  Dr. Evan Fraser, Director Arrell Food Institute/University of Guelph, and Olivier Humbrecht MW and Winemaker/Owner Zind Humbrecht, Turckheim, France discussing “From Resilience to Opportunities” with respect to the global wine industry.

Say tuned for my follow-up report!

Conference details: https://www.perennia.ca/agriconference/

Liz Palmer

French Super Chef Alain Ducasse Reduces Wine Prices to Discourage “Dry January”

Internationally famed French Chef Alain Ducasse declares war on the “Dry January” trend.  At the beginning of January, Chef Ducasse was “horrified” to see New York diners drinking iced tea at lunch and not wine. Shortly thereafter he launched an initiative to entice patrons of his restaurants to drink wine during the first month of the year, not less.

“I’ve noted that trend, but I don’t want to see or hear of it, I am opposed to it,” states Chef Ducasse and he further adds that he wants to “rid consumers of their inhibitions” with regards to drinking wine.

In November, the French government abandoned a campaign urging people to give up alcohol in January after the wine industry pushed president Emmanuel Macron to drop it.

“Dry January” began in the UK in 2013 and has since been adopted around the world. Last year one in five Americans participated in the initiative, giving up alcohol for the first month of the year.

Alain Ducasse has runs restaurants all over the world, including the three Michelin star Alain Ducasse at The Dorchester in London and Alain Ducasse au Plaza Athenée in Paris.

What are your thoughts on this ?

Wine Trends:  What to watch for in 2020

Wine Intelligence has announced its annual Wine Trends Report for 2020, which will reflect global challenges in the industry.

Richard Halstead, COO of Wine Intelligence, states “wine is a risky business,” specifying challenges around climate change, discretionary consumer spending influences in different countries, and global trade policy changes.

Here are their five predictions for the next 12 months, assuming global consumer spending does not fall off a cliff, and the weather does not cause any more mayhem.

  1. Wine volume consumption will globally decline.

Wine Intelligence sees the developed world drinking less wine in 2020, but overall, the value of wine consumed won’t be heavily impacted.

“Those drinking less wine have compensated by spending more on the wine they do buy, with the characteristic result that prices per bottle have been rising considerably for several years now in major consumption markets,” said Halstead.

There’s a prediction that this trend could mean trouble for the producers and brands with business models dependent on selling more for smaller margins.

However, this trend also noted that consumers are looking for brands that are thoughtful, have provenance or are culturally interesting. In this way, premiumization is about not only the price and quality of the liquid but also of the brand’s story and actions.

2. Sustainability claims will be scrutinized.

Environmentally friendly buzzwords are thrown around commonly on wine packaging and marketing, and it’s predicted that 2020 will see consumers investigating these claims.

While Wine Intelligence research suggests that many consumers read the word “sustainable” and believe it, Halstead said: “we also notice a smaller but growing minority of purchasers are more fundamentally committed, typically for a combination of environmental, ethical, social or lifestyle reasons.

“Next year I expect this latter group to be more zealous in their scrutiny of winemaking or viticultural claims, and more willing to call out what they see as transgressions or unacceptable standards,” states Halstead.

3. CBD wine will be explored further.

Cannabis-based drinks have been on the radar of predictions for a while now, however, considering an array of different international laws, they have yet to take off.

“As with many things in our industry, cannabis drinks products remain at the mercy of regulators in most jurisdictions, not to mention some serious product development and taste optimization challenges,” said Halstead.

While Wine Intelligence is not anticipating mainstream acceptance or popularity of cannabis wine drinks in 2020, they do predict more companies will start to explore it.

4. Products from less high-profile wine countries will become more popular.

Wine Intelligence predicts countries like Germany, South Africa, Portugal, and Greece, will see great growth in the popularity of their wine products.

“We believe 2020 will be a year where some old styles become new again to the next generation of consumers,” said Halstead.

Halstead points to specific examples including German Riesling, refreshing whites and red blends from South Africa and Portugal, and lighter white styles coming from Greece.

Halstead also describes the common thread of these products and states: “All will be meeting the growing consumer needs for more aromatic, fresh, lower alcohol whites, and lower tannin but interesting reds.”

5. Greater investment into creative packaging and serve formats.

“Our prediction is that we will see far more innovation in packaging coming to market next year than we have in the past few years, driven by the needs of business to reduce carbon footprint, to offer more recyclable containers, and to offer serve sizes that fit an age devoted to lowering volumes but increasing values,” Halstead said.

Brands will be focused on labeling and designs that stand out to busy and more visually oriented consumers, while also being classic enough to reassure shoppers of their quality. Look out for different bottle shapes, icons and coloring that go against the grain of what else is on the shelf.

Wine Intelligence’s 2019 trends and predictions were over 80% accurate.