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Coronavirus is Disrupting Wine Trade and Major Events

This weekend, the organizers of ProWein, the annual wine trade fair in Düsseldorf, announced the conference would be postponed in light of health concerns surrounding the coronavirus that causes Covid-19. While hardly the first trade show to be cancelled or postponed due to the virus—the news came a few weeks after the 102nd China Food & Drinks Fair in Chengdu was delayed for the same reason, as was ITB Berlin, Geneva International Motor Show and many others—it is the first major international beverage event to reschedule programming.

Combined with concerns over production and export logistics, the potential long-term effects of this epidemic on the industry at large remain to be seen.

“It’s a disruption in the marketplace,” says Rob Tobiassen, president of the National Association of Beverage Importers. “These are major events where importers and foreign producers get together to talk business.”

Many members of the wine industry now wonder if Vinitaly, the trade show scheduled for April in Verona, will proceed as planned, or might also be delayed as a result of the rapidly spreading virus.

With almost 90,000 confirmed cases in at least 67 countries recorded at press time, health authorities are worried Covid-19 is becoming a pandemic. In addition to growing health concerns, it presents an array of economic implications. Cargo ships are being quarantined in port, and factories are anticipating slowdowns in the production of everything from Bratz dolls to Diet Coke.

How will the growing outbreak affect the wine business? It’s complicated—and largely still up in the air. People who grow grapes, make wine, bottle wine, ship wine, sell wine and serve wine are all nervously watching the coronavirus news as it breaks.

“First and foremost, if you look at wine as incoming cargo, there’s no indication that any cargo poses a risk of coronavirus,” says Tobiassen. “It is really no different than any other commodity being imported into the U.S.”

In other words, a bottle of wine itself cannot infect anyone with coronavirus, no matter where it was made. But the larger effects of a global pandemic will impact the wine business in other ways.

“The main areas of concern for importers are logistics and labor,” says Tobiassen. His organization’s 25 members include many of the largest importers of beer, wine and spirits into the U.S. “Cargo ships really have global itineraries. You have a situation where you might have a crew exposed to the virus, and if so they might have difficulties getting the ship docked in a port.”

And wine stuck on a cargo ship isn’t on store and bar shelves.

On the production side, widespread quarantines could interfere with the 2020 vintage and harvest by making workers harder to find. While the 2020 harvest is already well underway in the Southern Hemisphere, the vintage is still in the making throughout the Northern Hemisphere, with vineyard work and maintenance key from now through fall.

If you ask anybody in the wine business about coronavirus right now, they’ll probably mention Italy. It’s the major wine-exporting nation most affected so far, with nearly 1,700 confirmed cases and 34 deaths at the time of this writing. U.S. carrier Delta recently canceled all flights to Milan, and the country’s quarantine “red zones” keep tens of thousands in their homes.

“We’ve seen cargo ships stuck in port, we’ve seen huge delays, nothing going out, and then everybody trying to get their stuff out at the same time,” says Marian Leitner, co-founder and CEO of Archer Roose, which imports wines from Argentina, Chile, France and Italy for packaging in eco-friendly cans, boxes and kegs.

“What’s interesting is how this is going to impact particularly rosé and Prosecco heading into the summer season. Everybody’s going to be bringing in their exports over the next couple months, and now that it’s hit Italy, what does that mean? We’ve only just begun to see disruption.”

Before starting her wine company, Leitner worked in public health, including at the Global Alliance for Vaccines & Immunization and with the World Bank during a major Ebola outbreak, so she has a unique perspective on coronavirus.

“The medical community keeps saying, ‘This is not SARS, not the Spanish flu. This has a lower death rate than the normal flu—what are you talking about?’ But through a business lens, the level of disruption has been so high.”

Covid-19 was first detected in Wuhan, China, and the country is of course at the center of the outbreak. And although China doesn’t export very much wine (with exceptions), it is very important to the wine business. Its factories make bottles, labels, caps and other packaging materials, and if factories and exports are shut down for a significant length of time, desperate producers will have to find other solutions.

“We have some tap handles that were manufactured in China,” says Leitner. “That’s $40,000 sitting on a factory floor in Wuhan that nobody will put on a boat.” Archer Roose’s kegs, boxes and cans are not made in China, but about a fifth of the world’s glass is.

The other side of the China coin is that the country is a major consumer of wine. In 2018, the country imported about 750 million liters.

“When the SARS outbreak happened in 2002, China represented about 2% of global trade—now it represents 20%,” says Leitner. “The world’s second-largest wine market is essentially closed for business,” thanks to widespread school closings, quarantines and “social distancing” measures.

What about the wider economic downturn the virus seems to be causing? Stock markets around the world dove last week, with all three major U.S. stock indices dropping more than 10% in five days. In some ways, wine may be able to weather that storm better than other industries.

“You have wine at all price points,” says Tobiassen. “Generally what people do is trade down or trade up [rather than stop buying wine entirely]. If the economy is going well, we see a trend in premiumization: People are moving up. But if times become harder, you can see people going in the opposite direction.”

Two months into the worldwide Covid-19 outbreak, the world still isn’t totally sure what’s in store or how to prepare. And the same is true for wine.

“It really is truly a moving target. We just don’t know, but that also makes people more concerned,” says Tobiassen.

He sees wine importers in the U.S. as especially vulnerable economically right now, thanks to new tariffs as well as other recent bureaucratic barriers that domestic producers don’t have to deal with. “Importers are suffering on several fronts,” he says. “Now how’s the coronavirus going to hit them?”

Leitner has a slightly rosier outlook. “My belief is that production and harvest are not going to be disrupted because of coronavirus,” she says. “I don’t think this is actually going to affect people’s ability to pick grapes and make wine. This is a political crisis, not a health crisis, and it’s all about how governments are going to react. We can’t predict what’s going to happen and how global wine will be disrupted, but at this point in time I’m not revising down our growth projections.”