Wine post Covid-19; Earning the Right

Tuesday, 21 April, 2020
Dave March CWM
There has been much speculation lately about what will happen to wine sales and consumption once national, and international lockdowns end. Most agree that ‘things will never be the same’ and that the wine industry, as well as consumer habits and practises will be different, at least in the short term.

Particular trends have been identified as being most likely:

Wine exports, once they resume, will face difficulties, from a damaged exchange rate, worldwide over production of wine and greater supermarket pressure for wine in bulk at minimal cost. The estimated R175m per week losses for South African wine producers will be difficult to recover from. Premium wines will continue to have a niche market, but with economic constraints may see fewer new customers.

People will fly less (there will be fewer airlines and fewer flights) – for business or holiday – and will leave their own shores less and will more often visit, buy and consume locally. Overseas wine tourism will take a big hit, and probably not just for months.

The enforced at-home consumption will see an increase in on-trade business for a while post lockdown, but this might be short termed, especially as some restaurant and bar businesses might not survive the lockdown and many people are experiencing severe economic hardship. Eventually people will look to drink less but better and domestic consumption might be the new norm for many after lockdown.

The increase in on-line, home delivery, e-commerce wine sales in markets which still permit delivery (and in SA once lockdown is ended) has introduced a new consumer to this often easier, social-isolation encouraging and price preferential method, this habit might continue after lockdown.

So what does this mean for the South African wine producer?

There will be fewer visitors to wineries from overseas. Either local visitor numbers may fall, after an initial surge once restrictions are lifted, as people have become used to distance purchasing and consumption at home, or the urge to support local may see more local visitors to wine farms. SA’s ‘café culture’ will no doubt eventually bounce back.

During bad times people stick with the familiar, this may not be the time to launch a new premium brand. UK merchants Farr Vintners say there have been ‘soaring sales’ of everyday wines during lockdown (deliveries have continued there under strict regulations).

More producers might opt to let an e-commerce retailer deal with myriad customer orders rather than delivering to the consumer direct from the farm. After exports (for some) and on-trade,more might make this their main sales outlet.

It makes sense to rekindle the wine producer’s connection to the domestic consumer, especially those new to wine drinking. Wine producers need to renew efforts to woo the local consumer. Social media is already reflecting a surge in posts from producers hoping to stay in the hearts and minds of the consumer.

And for this, pricing strategies will be key. Producers may naturally seek to recoup loses, repay debt and investors, but during a worldwide recession this will be difficult.

Wine pricing and wine tasting fees are a moot point. A recent article by Michael Fridjhon (, 27/02/20)about icon wine pricing (and might be applicable also to wine tasting fees) reflected perhaps what was happening pre-lockdown. Michael said, ‘once a producer has recovered the actual production cost of a bottle of wine, the determination of its selling price is purely arbitrary’. This is cost plus ‘aspiration’, and it occurs in tasting rooms as well. For most, pricing is already paired to the bone, there is nowhere else to cut costs and little fat to enjoy,

For some wineries, though, wine prices and tasting fees appear to be based on the winery’s estimate of what they can get, how they want themselves and their wine to be perceived and of the value they(not necessarily the market) place on their wines. Even before the crisis Michael wrote, ‘this doesn't mean that every producer in the world is free to set prices in flagrant disregard of what is going on in the market place’. How relevant that is now.

Buying wine may include buying the story behind the wine and with on-site wine tasting you may be buying the experience and ambiance as well. This is a difficult concept to price. Undoubtedly the history and importance of the winery counts for something, and the social and vinous relevance cannot be denied. You pay to be part of that culture, the experience, that history.  However, too often high tasting fees occurred at newer wineries with deluxe facilities and expensive attached restaurants. I was told at one winery that the fee “includes paying for the pianist”.

This is perhaps the key to going forward post Covid-19.  As a winemaker told me, it is about ‘earning the right’.

This is the principle that the winery has earned the right to charge, for its wines and tastings, at cost plus aspiration, and to charge differently than others.

The calculation includes wine costs, the importance, history and success of the winery, the scarcity and success of the wines, and the customer experience. Trying to recoup your investment or make up losses by inflating bottle prices or tasting fees may be counter-productive.

Yes, many high charging wineries may succeed in raising their profile post lockdown and of pitching themselves as icon wine producers of world standard, but, as Michael says with spooky foresight, ‘it won't be a quick fix, and it won't come with the unquestioning acceptance of those who have to buy what they are trying to sell at ever-inflated prices’ (my italics).

In the future more than ever, pricing needs to encourage a relationship with the local customer, producers need to think local is lekker, think long-term, think commitment. Think earning the right.This may be an amount based (once costs are met) less on the maximum you believe the consumer/visitor is willing to pay or how you would like your wine to be perceived, or even recouping the lockdown losses, and more on building that customer relationship. Losses hurt and many belts are as tight as they can be. Perhaps the consumer will come to the rescue.

One thing is sure, though, what was already a difficult financial tightrope balancing act for many wine producers has just seen the rope given a mighty shake. Some may fall off, others be teetering, but all will feel the vibration.