Wine exports threatened by US COVID-19 lockdown

The closure of restaurants and bars across the US threatens to impact Australian wine exports.

2/8/2019 Winemaker Vanya Cullen in her vineyard, Wilyabrup pic Colin Murty The Australian

Australian wine exporters could suffer from the COVID-19 pandemic, with shutdowns across the US shattering restaurant and bar wine sales in what is the industry’s second-largest export destination.

In 2019 Australia exported 152.5 megalitres of wine worth $436 million, to the US, but the latest Rabobank wine quarterly report shows that volumes for the year ending March 2020 were already down 11 per cent - before the coronavirus pandemic forced widespread lockdowns across the country.

Rabobank senior wine analyst Hayden Higgins said that barring the introduction of a vaccine, Australian premium wine exports sold through restaurants and bars could impacted for a number of years.

“Between government enforcement of social distancing measures, consumer reluctance to return on premise due to fears of contagion, and reduced business and tourism travel, many bars and restaurants may be forced to permanently shut their doors unless a vaccine is made available sooner than most experts expect,” Mr Higgins said.

“Given these, and other, challenges, it’s anticipated the US food service industry will likely not return to 2019 levels until after 2021, and that the recovery would be led by limited- service restaurants and take-out/delivery, where there is less consumption of premium wines.

“The on-premise channel typically accounts for less than 20 per cent of annual wine sales in the United States, but it’s extremely important, particularly for small, premium wine brands which sell a greater proportion of their product into restaurants and bars.”

The full extent of the shutdown on Australian wine producers has been mitigated by wine prices reaching a decade high – but producers exposed to the US market should look to future proof themselves by increasing retail distribution of their product, with a particular focus on digital distribution channels, Mr Higgins said.

“While the on-premise sales are currently facing monumental challenges, the growth in e-commerce has been well-documented, and will provide an important opportunity for wineries seeking alternative growth strategies – both in the US, Australia and other markets,” Mr Higgins said.

“We’re already seeing this process well underway … as wineries try to offset the decline in tasting room sales with e-commerce.”

In the last year, US winery sales in tasting rooms declined from $US23 million to just under $US5 million, while online sales increased from $US8 million to $US23 million.

Mr Higgins said Australian winemakers should begin canvassing their options for digital sales, including examining whether to establish an in-house e-commerce team or pursuing innovative digital sales tactics, pointing to Chinese beer company Tsingtao as an example.

“Tsingtao used lockdown measures in China as an opportunity to further create a network of ‘community distributors’ – essentially social media influencers working on commission – that has been extremely successful by a number of measures,” Mr Higgins said.