For more than two weeks, we have all been locked up in our houses, trembling at the thought that COVID 19 would knock on our door at any moment and will look for its toll. We read news that is full of negativity. In every one of these articles, reports and videos on health and economical topics we spot exact the same sentence. “The pandemic will lead to a deep and unknown economic crisis so far.”
By repeating this sentence, we slowly and surely immerse ourselves in a world of fear controlled by the survival instinct, and forget to analyze the situation, reading the information from articles written after past crises. The information there will be coming from sources that impartially share facts from events that have already happened. That is why, as a passionate wine lover, I decided to do a study of how things went in the wine world over the past recession.
There have been and will always be economic crises. As a rule, every 10 to 15 years there is a recession, a decrease in consumption, which, in addition to the devastating effects on the economy (including the wine industry), has a corrective, purifying, cathartic nature and gives birth to new models of development. Yes, it clears the market from oversaturation, low-quality products, and unnecessary consumption.
How does this affect the wine industry? Here are some of the trends we could see in the coming months and years, and some of us may have already observed:
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1 The wine industry will increasingly focus on the production of wines without maturing in oak barrels.Or at least not new ones. With prices over € 1,000 for a brand new good quality oak barrel, very few producers would be able to buy one for the next few harvests. And what does that mean – a possible boom in terroir wines with all their associated definitions – the expressiveness of varietal character, less human factor, organic and biodynamic wines, or in a nutshell – closer to nature. (https://winesvinesanalytics.com/features/article/64854/Whats-Good-About-The-Recession)
2.Lack of market glut.If certain brands, which are not particularly distinctive, could break through during an economic boom, they would certainly not succeed in a shrinking demand. It will eliminate the quality and so-called craft wines from the mass producers. It should be mentioned here that this will only happen if these manufacturers have already established their sales channels. The prominent players in the market have long-established their trading networks and will only maintain the already paved roads.
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- Automatically creates a higher value in the lower price segment.Luxury or premium customers will always exist, and many will not be affected at all by the economic crisis. By contrast, middle-class consumers who tend to shop for luxury goods during a boom and bust will limit the amount of shopping and move to at least one level down the ladder. Namely – in the middle price range, where the price/quality ratio is difficult to beat. It will also happen to the average grower who has his own vineyards. Instead of producing bottles that cost more than 30 euros, it will target 10-15 euros, and grapes used for high-end will be used in the middle. Thus the winner will be His Majesty, the ultimate consumer. And this same manufacturer will create a sales channel in this segment that will continue to grow beyond the end of the crisis. During a boom, this is a much slower and more complicated process, requiring more marketing and advertising investment in a more competitive environment. Or, in other words, smaller volumes but less competition.
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4. Victory over the established trend for insufficient bottle aging of wines. The habit, especially of the Bulgarian consumer, not to wait enough for the vintages with potential for aging, but to finish them young and green, will be limited. Due to the fact that it will reduce purchasing power, certainly a large number of higher class bottles from the last few successful vintages will remain in the cellars. They will be given a chance to reveal their true self. Here again, in the context of Bulgarian wine, the underestimated Bulgarian varieties will be given the opportunity to show their potential and also to a wider audience.
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5. The discovery of a fine wine asset as a shelter for the savings. Viewed as commodity indices, the world’s top wines (Bordeaux, Burgundy, Champagne, Italy, California) prove that during all previous recessions they do not record as sharp declines as stock market, for example. Of course, as with any asset, they decrease in value initially, but over time they return to pre-crisis levels and even surpass them. Therefore, many investors around the world include in their portfolio wine in the form of buying units in indices or physical wines. For a period of 10 years it has been confirmed that the portfolio containing ” fine wines ” has the highest value compared to other investments in stocks and bonds. (https://www.wineinvestment.com/wine-blog/2020/03/market-turmoil-cult-wines-perspective/
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6. Some will still benefit from the diversity of the market. During a recession, the conservative approach to wine selection is usually reinforced – buying what is known without unnecessary risk and adventure. This is not true of the millennial generation or those who like to experiment. They certainly spend more time online and tend to compare prices, search, and take advantage of great deals. Adding to this the fact that many of them spend their day at the computer and work from home, the development of online wine sales will be a real boon for them. On the other hand, many customers with no online shopping habits will rediscover the online space. It will also be reviewed by winemakers, distributors and retailers. This will lead to higher computer education of the employees, development of new advertising and marketing approaches, and from there – bold steps towards the inevitable digitization of the Bulgarian society. And it will certainly close many jobs, but will also allow new jobs to be created. Of course, it will only be for those who want to study and requalify.
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7. Return to Mother Earth or in other words to the roots. We will face the closure of hundreds of restaurants, hotels and physical retail outlets. In practice, this means that between 50,000 and up to the worse forecasts, as many as 500,000 people in Bulgaria are at risk of losing their jobs. Bulgarian agriculture has long complained of depopulation of small villages, the outflow of workers from the industry to large cities and the services sector, and the increasing difficulty of finding people willing to work despite rising wages. And if so far this was a chance for retirees to add income to their pensions by doing seasonal work, then many people of working age, faced with the dilemma of survival, would consider returning to work on the farm and in the field. Some would do it for the season, while others may rediscover the coziness of the villages and the proximity to nature for longer. And if wine growers have been struggling to find grape growers so far, it is likely that this year may turn in opposite way.
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8. Improvement of service in hotels and restaurants and higher level of education. The hotel and restaurant business is inevitably linked to the wine industry and is one of the driving centers of sales. And when, after the long-awaited opening of the sites, some of them are half empty, the level of service will inevitably be increased, and with it the wine culture. The few business customers will be treated as pleasure and honor, not as given. Staff and owners will think about how to impress them to spend more, and to come back. The people who remain will accept their job not only as a job, but as a profession in which wine knowledge is of the utmost importance.
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9. Return of Bulgarians from abroad and partial increase of consumption. A considerable number of Bulgarians have already returned from abroad, facing greater risk of facing the virus in countries such as Italy and Spain. Many more may return in the coming months and years. This may increase the unemployment rate, but it will also increase the consumption in the country, albeit to a minimum. And although overall consumption will decline, things can turn pink to some extent thanks to this wave. Will this affect the consumption of wine? At a time when alcohol is recommended as a safeguard – why not. When it comes to alcohol, Bulgarians are capable of miracles.
The trends described above, and some of them that are my own thoughts, may not happen, or at least not exactly in their form, but one thing is for sure. The perfect storm is here and will change the whole world and together with it the wine industry. It is up to us to look positively at what is happening and to be flexible and adaptable in the times ahead. Let us look back and learn from history from time to time so that we do not make the same mistakes as before. Let’s build a new wine world together!
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