19 Opportunities & Challenges for Wine in the COVID Climate

19 Opportunities & Challenges for Wine in the COVID Climate

With a largely unprecedented slowdown in economic activity and the recent declaration of a national emergency by President Trump, it's worth stepping back to evaluate how the production, distribution and sale of wine might be affected. Below are 19 thoughts on how the world of wine might change in response:

The Good

1. Delivery

While we've questioned the legality of Drizly and other "Doordash-for-wine"-type services, I'd hedge my bets that many people will still want to buy wine, albeit in proportion to their decline in disposal income. That said, the most obvious short-term shift in how people will want to consume is the transition to in-home drinking. Whether you have access to premium wines or work with two-buck Chuck, try and get on these apps (or build one of your own) to meet customers where they are.

2. Getting High on Wine

If people are bored and locked in their rooms, they'll quickly start to look for ways to differentiate their "quarantine experience". The potential to pair wines and highs (e.g. edibles, MJ-infused drinks) strikes me as compelling. It's hard to "size a market" for this truly since we don't understand customers' fundamental willingness to buy in the context of a pandemic, but despite declining stocks in the marijuana world, they might be in for a rebound.

3. Emerging Regions

As basically every large urban center gets hit by COVID-19, there is no better time than now to perform that long-overdue diligence on "the next hit wine region". Maybe it's Michigan, maybe it's somewhere in Scandinavia, but the time is now to build a strategy for tackling your highest-priority countries/state that are hopefully less affected than primary wine-consumption regions.

4. Going Digital

In addition to delivery and other in-home mechanisms, the (unfortunately?) simplest way to reach people nowadays is through a screen. Now's the time to build that beautiful Instagram page and do what Maker Wines did in creating a brand from the ground up. Particularly if you're a business that's not quite going under, but still taking a substantial shortfall, the opportunity cost of allocating your time to web development and digital advertising has never been lower.

5. Monetary Easing

On March 3rd, we already saw the Fed slice rates by .5% (likely heartbreaking to all those within 3 degrees of separation from Yellen and Bernanke) in an attempt to mitigate the economic panic which ultimately ensued anyway. Unfortunately, this approach hasn't quite cut it either, but the long-shot hope would be that if this crisis is resolved earlier than individuals expect, the lower rates (including the possibility of further cuts to reignite the economy) could yield long-term commercial benefits. This need not happen, and rate expectations may simply be baked into all subsequent economic forecasts from here on out, but it remains to be seen.

6.  Getting Lean

For long-standing organizations and start-ups alike, sometimes major change only happens when the envelope's pushed. Through the lens of a crisis, some can now only begin to see changes that should have happened, loose ends that should have been tied up, and all the unnecessary elements that don't really have bottom-line value to your business. Taking a cold hard look at what you truly need could lead to longer-term gains that otherwise might not have been noticed without this global prompting.

7. Buy Low

If you're an incumbent in position to weather the storm, everything from companies to physical land could exhibit massive fluctuations in value. Be on the lookout for start-ups with superior technology and other high-leverage assets whose value is naturally premised on a company's capacity to stay afloat. Sweep them up and turn what would have been a market disruption into your next business line. If you're one of those companies, getting acquired for a halfway-decent price might be a small concession to pay when the cost to non-acquisition could be your business.

8. Turnaround Specialists

Positioning your firm / consultancy to capitalize on the fear that a number of businesses will feel could yield some serious cash, as callous as that sounds. If you're already a firm that does this, hire a few wine experts who can help channel your turnaround expertise into the wine space.

9. A Time to Lobby?

Could immediately post-crisis be the most opportune time to lobby for a repeal of the semi-archaic 21st amendment here in the U.S.? The argument that D2C is the future -- and at times like this a necessity -- could be much more tangible following this global moment. Is it a public health liability to not offer direct-to-home delivery for a number of businesses? Could someone at least find a bottle to settle our President after his pre-address prop-sensitivities?

10. This Might All Be Way Overblown

If the virus peaks in three weeks, these types of fears might seem wholly out of proportion. That, in part, would fly in the face of much of what the WHO and CDC are reporting, but it's entirely possible that the peak of this virus and it's economic impact are truly short-term in nature. If you're truly long on wine, bob and weave.

The Bad

11. Restaurants Closing

If restaurants begin closing and "medium-scale" human interactions come to a halt, wine will take a hit as people fear the simple occasion of going out to eat with their friends.

12. Data-Driven Decisions

The notion that an industry already beleaguered by piece-meal data may dramatically chalk an entire quarter or two of information up to COVID-19 could markedly hold this industry back from its already slow climb to analytical sophistication. Extrapolating outwards, it's hard to say when forecasts will return to reliability (especially if this becomes an annual phenomenon). Thirdly, the incentive for an individual wine player to invest in analytical capabilities is likely just going to be pushed to the back of the back burner. 

13. Public Gathering Bans

If Trump and other world leaders march in line with Italy, Rwanda and a few other nations who have put public bans in place, this could limit not only restaurants, but wineries, festivals and other events where wine is commonplace.

14. Delivery in Action

While I think delivery-based mechanisms could be a huge option and something worth investing in for every time-course, if the supply of delivery agents dries up due to fears of interacting with dozens of customers/day, there won't be anyone to actually bring food anywhere. Watching what DoorDash and UberEats do over the next few weeks will be very revealing.

The Ugly

15. Manufacturing Centers Shut Down

If major wine-producing regions forecast low demand, they might decide to shut operations for the foreseeable future, drying up the supply chain in lieu of their grapes.

16. Inventory Players Collapsing

The possibility that middlemen (i.e. anyone who takes wine from A-to-B) go under could seriously undermine both global and local supply-chains. If cash flow is an issue, and warehouses pile up with wine that's no longer in demand, these entities could be overwhelmed.

17. Public Travel Bans

The halt of trade and general travel could bring us into a recessions/depression scenario that is of such magnitude that every industry is markedly affected, including wine.

18. Distributing/Importing from China 

No one knows exactly where the distribution and import of wine is going per se, but I'd be hard-pressed to believe it's going up. At the epicenter of this crisis, the delays and fears around Chinese manufacturing are warranted, and will significantly slow any business--especially those that are inventory-sensitive--from keeping the cash on hand they need to maintain operations. If people can't use or produce materials that go into the production, shipping and packaging of wine -- let alone execute on that production, shipping and all other operations due to China's limitations -- this could ripple out to affect the entire global supply chain.

19. Basic Selling in Highest-Consumption Regions

Basic problems of people being sick and not physically able or wanting to drink -- combined with inventory crunches from local producers in France, Italy, China, Japan, the U.S. and all other large markets -- could seriously limit fundamental business functions in the short-term.

Summary

Sure, the risks trivialize the wins in times of pandemic. And yet, as we continue to react the best we can to prevailing market dynamics that largely escape our control, the organizations that will emerge with something to show for it are those that find a way of doing the following:

(a) Relentlessly finding means of limiting their downside,
(b) Proactively putting their remaining time and energy into efforts that would normally have been low-priority, but which now have the lowest opportunity cost to date, and
(c) Getting creative and exploring new-wave business models that, due to COVID-19, may now become industry-standard much more quickly than initially thought.