Wine: A Very Difficult Restart

 The Covid-19 pandemic – the acute respiratory disease caused by the now sadly known coronavirus SARS-CoV-2 – is causing profound and serious effects in every social activity as well as in economic and productive ones. It is known, in fact, and here I specifically refer to what is happening in Italy, most of the production activities are being locked down for two months now, with consequences that – unfortunately – are both tangible and devastating. This decision, clearly imposed by the social and health conditions of these times, has had a huge impact on almost all the productive and economic sectors of the country, of course agro-food and wine business have not been spared from it. Even wine, therefore, has undergone a substantial and decidedly worrying decay, on which it is not possible – at this moment – to make any estimate or forecast for the future. However, everyone agrees the impact caused by this pandemic is frighteningly huge with considerable economic and entrepreneurial loss.

 The current situation, with regard to the viticultural and wine sectors, is extremely critical, so much so that many Italian wineries will be forced to quit their business, by the end of 2020, due to economic difficulties. This is mainly due to the lost profits of these months and, consequently, to the lack of liquidity such as to guarantee the continuation of the business. To this, not least, must be added the high quantity of unsold bottles and which, unfortunately, are locked inside the wineries, therefore contributing to increase the passivity. At the current condition – assuming it will not be further compromised – it is expected that one winery out of four will not be in the condition to resume operations because of the lack of liquidity. A decidedly devastating forecast and that would see – literally – the decimation of the Italian wine scene with very heavy consequences for the economy of the whole sector.

 It is not difficult to predict, in fact, in case this unfortunate scenario should happen, wineries forced to quit their business will find themselves in an extremely unfavorable economic situation. Firstly, the problem of unsold bottles that will be difficult to sell in the future, especially wines that are destined to the immediate consumption. Too easy to predict, for example, wines destined for immediate consumption will simply be rejected from the market in favor of those of the new vintage. These wines will remain “ simply “unsold” and, very likely, with a single possible destiny capable of guaranteeing a very small profit: distillation, a practice which is however regulated by specific laws and with limits on the maximum quantities intended for this purpose. Wineries that will decide to not resume the business will also find themselves in a position to recover the lost profits – not least, to cover any pending debts – and, of course, they will do so by selling facilities and equipment, vineyards included.

 Too easy to think it will not be a profitable sale, indeed it will be a below-cost sale aimed at making a profit in the short term. The situation for wineries is objectively very difficult and complex. With the locking down of catering and beverage business – in particular, restaurants – in addition to the consequent blocking of exports, wine sales have been practically canceled for more than two months now. This condition constitutes an enormous difficulty for any commercial activity, in particular for the fact costs, even if reduced to the bare minimum, still have an impact on the company budget. Of course, most of the country's production activities are in the very same conditions, including those which represent the main market of wineries: restaurants. In fact, it is believed, also in this sector, there will be business closing down due to lack of liquidity and lost profits.

 However, the recovery of the wine economy does not seem easy because – it is so evident – the condition will not be magically restored, as if nothing has ever happened, when restaurants will finally reopen. In fact, it seems unlikely the recovery of productive and social activities could immediately return to the “normality” of a few months ago because – too easy to predict – preventive measures will be implemented and with severe limitations. Of course will be taken measures to ensure the new health safety conditions – with spacing of tables and prevention devices – with a consequent reduction in customers compared to the period preceding the pandemic. Of course, this is better than nothing and somehow we must restart business, obviously with caution, even if it will take a long time before recovering the losses. In all likelihood this will not be enough to guarantee an effective recovery for wineries which, not least, in few months will also be involved with 2020 harvesting.

 Yes, harvesting. That is to start producing the new wine, therefore incurring in more costs, with the warehouses probably full of unsold bottles. Many hypotheses have been made about the use of unsold wine and the most recurring one – and perhaps even the most obvious – is distillation and which needs, in any case, specific legislative authorizations. Furthermore, many speculate the radical change in the wine trade and are ready to bet the “salvation” is represented by on-line sale, that is, through e-commerce websites. This solution, in truth, is already adopted by many wineries and which, in this period, is used – directly or indirectly – to ensure a minimum profit. Sector estimates indicate, in fact, significant increases in on-line wine sales, also a sign that Italians, despite the forced isolation, fortunately do not give up a good glass of wine. In any case, it is difficult to make predictions both on the immediate and on the future, even the near one, as the situation imposed by this pandemic allows only, so to speak, a visual navigation. On the other hand, what is very clear is that it has caused significant damage both socially and economically. It will take a lot of determination to get out of this, with the will and strength to recover the loss and continue to go ahead. The availability of liquidity will also be necessary to support the restart, certainly by adopting new business and marketing ways and strategies: it will not be easy at all. Provided you have, in some way, liquidity. This too will not be easy at all.