European wine v covid-19: Problems and solutions

Jacopo Mazzeo

Jacopo Mazzeo

20 April 2020

Covid-19 has put the British and global hospitality industry on its knees, and in turn, has had a knock-on effect on the entire supply chain

Although online and retail wine sales have experienced a promising spike, winegrowers across Europe are flooded with unsold stock.

The pandemic is just the cherry on a sour cake that started baking in late 2019. Its ingredients: Trump’s import tariffs (which hit mainly French wine), the trade deal between Australia and China (to the disadvantage of most European wine countries), and last but not least, the cancellation of all wine fairs, which has left large and small wineries begging for business.

The 2020 wine grape harvest may still be a long way ahead, but with their cellars full of unsold stock, European producers fear that the coronavirus crisis might have a serious long term impact on the viability of the entire industry.

Missing the on-trade

‘At the moment, the main issue is that the on-trade channel is basically non-existent, and so are direct sales at the winery,’ says Lorenzo Cesconi, vice-president of the Italian Independent Winegrowers Federation (FIVI). ‘Our members have to cover all production costs, but aren’t making any revenue. And if at first our export seemed to be doing well, now the pandemic is a global issue so even this route to market [export] has become problematic.’

The on-trade accounts for about half of all wine sold on the Italian domestic market, a staggering figure that can’t be compensated by sales in the retail sector, says Cesconi.

And if predictions are true that a covid-19 vaccine won't be ready for another 12 to 18 months, on-trade sales are unlikely to flourish again any time soon.

Fly the workers in

Meanwhile, the arrival of spring led vines to bud-break across Europe, which means work in the vineyard must carry on as usual. Growers are in most part managing to keep up by adapting to the circumstances.

‘I have asked everyone to use their personal vehicle to get around,’ says Nicolas Rossignol, vigneron in Burgundy’s Gevrey-Chambertin. ‘In the vines, it is one [person] to a plot, or else we leave two or three rows between us (2m to 3m) if we have to work in the same place. In addition to tying up and fixing trellising, we are also starting to plough. I have two tractors, so each driver has their own.’

If social distancing and travel restrictions were to be extended until or beyond the summer, a potential lack of workforce in the vineyard might have a devastating effect on the 2020 vintage

Work in the vineyard, however, isn’t as labour intensive now as it is during harvest. If social distancing and travel restrictions were to be extended until or beyond the summer, a potential lack of workforce in the vineyard might have a devastating effect on the 2020 vintage.

‘It’s very difficult to hire seasonal staff to work in the vineyard for all the jobs that need to be done up until the harvest,’ explains FIVI’s Cesconi. ‘And as picking weeks approach, the issue is going to get a lot more serious.’

Diplomacy is proving a successful strategy to tackle the issue, as last week Romanian ambassador to Italy George Bologan assured the Italian Ministry of Agriculture that 15,000 Romanian seasonal workers are ready to work Veneto’s vineyards once harvest time approaches. It’s a small step, yet one that creates a precedent for more talks, allowing the Italian wine industry to take a breath of fresh air, with Veneto being responsible for the country’s leading wine export, Prosecco.

Avoiding the surplus

A successful harvest is of little help if there’s no available storage space for the new wine; an increasingly realistic scenario as sales show no sign of recovery.

‘It will be necessary to either invest more capital to increase storage capacity, or simply alienate good wine through unprofitable and demeaning means,’ says Cesconi. ‘These options bring added costs and still no revenue.’

A large surplus would pull prices down, eventually devaluing all PDOs and IGTs affected. A potentially devastating outcome that would take the European wine industry years to recover

Cesconi claims that wineries must avoid ‘at all costs’ being left with surplus wine when the new vintage arrives in the cellar. Why? A large surplus would pull prices down, eventually devaluing all PDOs and IGTs affected. A potentially devastating outcome that would take the European wine industry years to recover.

A number of regulatory bodies across the continent have proposed lowering minimum yields below what’s currently allowed by PDO and IGP regulations. Limiting production would bring offer and demand into balance, and vignerons would be saving on costs and workload too.

The Consorzio Vino Chianti Docg (CVC) has already implemented the suggestion, lowering production by 20%. ‘We’ve taken drastic decisions,’ commented president Giovanni Busi. ‘The reduction by 20% of our annual output presents a serious economical damage for the wineries. [However], it was a necessary decision to maintain the right balance between production and market demand.’

[Distillation of surplus wine] would bring some much needed cash flow to wineries... free up vital cellar or tank space for the upcoming vintage, and provide base alcohol for the production of sanitising gel to help the fight against coronavirus

French MEP Eric Andrieu however, believes that a large surplus is unavoidable, so he asked the European Commission to allow the distillation of 10m hectolitres of EU wine.

If implemented immediately, this measure would bring some much needed cash flow to wineries and at the same time free up vital cellar or tank space for the upcoming vintage, and provide base alcohol for the production of sanitising gel to help the fight against coronavirus.

‘With containment, a billion liters of European wine could be lost,’ Andrieu told Reuters last week, ‘mainly in France, Spain, Italy, Austria and Portugal and with them the income of thousands of players in the wine sector'.

Turing PDO wine into clean spirit might not be the ideal use of good-quality alcohol, yet with the uncertainties of the pandemic on top of added difficulties such as the US’ import tariffs and Brexit all looming in the background, distillation of surplus wine would ensure a viable future for the entire European industry.

And if you are among those who believed that vodka was bound to make a comeback, the coming months will prove you right.

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