Since the start of the current week, the UK wine trade has been experiencing some the most challenging days in modern history. Despite the set of new measures the government has taken to help hospitality businesses survive the coronavirus outbreak, doubts remain as to whether more should be done to help wine importers.
To help unravel the doubts and assess how the supply chain is dealing with the crisis, we caught up with Nik Darlington, director and co-founder of Graft Wine Company.
How are your customers coping with the difficulties caused by the outbreak?
We know that a number of restaurants have closed, some had even taken the decision before the prime minister made the announcement on Monday. But we also know that a lot of our customers have stayed open, mainly with reduced hours or adapted services.
Have you put in place any measures to help your customers keep operating?
It is very difficult for an importer to help customers because this is not a crisis of demand, like it was in 2008. Unless you are someone like Diageo, who can afford to help businesses with something like £1m, small importers like us, we can’t do that. Instead, what we’re trying to do is help people to continue running their business.
We have been trying to help them by reducing our minimum order requirements, because the main difficulty for our customers who are staying open is knowing how much supply they need in these very uncertain times, particularly if they’re still trying to serve customers on site. [Mainly] because they don’t know how many guests are actually going to come in, but also because they’re changing how they’re doing things, like prioritising take away (a lot of our customers do offer this option). We'd rather have people ordering something, even if, quite frankly, we aren’t making any money on it.
The main difficulty for our customers who are staying open is knowing how much supply they need
[Also], I’ve been doing a series of videos to essentially try to keep positivity up. I’ve been visiting our clients and showing [them] best practice, ways that [other] people are adapting, because there might be customers who just don’t know what to do. There are a lot of innovative ideas and I’m really trying to spread the word about that, almost as if I'm a consultant to these businesses. Like many other importers, I’m sure, I’ve got plenty of time, my diary is free. I’ve got very few meetings, no events to go to and I’m not commuting, so I’m giving my time to our customers.
To what extent have closures been affecting your business?
We don’t quite know how closures translate into sales yet. Up to the week leading up to the announcement, we were seeing sales down by about 25%; that might just be because it’s difficult out there anyway, and it has been for the past 18 months. My guess is that in the next few weeks we’re going to see revenues dropping by about 50%, maybe more? But we’re flying in the dark at the moment.
That being said, we have got orders coming through, people have been placing orders all week and they’re still placing orders now. I think on 1 April we’re going to have a very good idea what this is [going to] look like in terms of revenue coming in and what we should expect in the coming three to four months.
Are lockdowns across Europe and beyond affecting stock levels?
We have good stock and a lot on the way from the southern hemisphere. If trading declines at the rate we’re expecting it to, stocks will be even more than OK. I wouldn’t worry for now about stock from Europe, even if it's where the pandemic is at its peak and there are a lot of restrictions on people’s movement.
We could get to a point when deliveries stop for a period of time or are reduced
We did have some Italian shipments paused in the last few weeks, but those are now on the move. We were concerned when France shut movement of people but we just had notification today that that does not affect the transport of goods, so shipping companies are still operating.
[However, we must take into account that] we can’t just order a very small amount of wine, based on the fact that we have a small demand; there’s a minimum you have to order so we’re always carrying that stock risk. In a country like France it’s probably a bit easier to manage stock because the wineries are your neighbours, but in the UK 99% of our wine is imported.
What we don’t know however is the effect that a wider outbreak would have on staffing levels, and that’s something we really have to bear in mind. If suddenly one third of the workforce at London City Bond gets coronavirus or has to isolate at home, then deliveries cannot carry on as normal. This means that we could get to a point when deliveries stop for a period of time or are reduced, so you can’t expect next day delivery. Same goes for wines coming in from Europe.
Is the government doing enough to support the supply chain?
A lot of support has been quite rightly targeted towards hospitality businesses themselves, but there’s very little mention of the supply chain. A lot of measures are relevant to small businesses, which is great, but I feel the government should extend their offering to the people that supply pubs and restaurants.
What would you expect from the government then?
I think the government needs to recognise that a loan, for a lot of businesses that work on a cash basis, is just like pouring water in a bucket with holes in it.
There are a lot of innovative ideas and I’m really trying to spread the word about that
In an ideal world [the coronavirus crisis] will last a couple of months, the summer months will start to slow the spread because [coronavirus] behaves like a normal flu virus, but with the expectation that it will come back in the autumn or in winter, and we might have more restrictions then.
With a loan, even if we return to normality for a few months [over the summer], it means we’re going straight into the winter with the same problems but with loan repayments hanging over our head and still no revenue coming in. I think the government should balance the loan offering with a significant increase in grants to small businesses who are going to experience cash-flow problems.
Importers like us are the people that bear significant risks in terms of inventory capital in order to keep hospitality businesses going, so I hope we won’t be forgotten in the midst of all of this.