The Wine Industry’s Vision For A Post Covid-19 World

Last Thursday, April 30^th, a fascinating webinar discussion was held among some of the key players in the wine industry which was part of the Larkmead Vineyards Salon series, led by Larkmead’s winemaker, Dan Petroski, as well as Virginie Boone, Editor at Wine Enthusiast Magazine, to discuss the future of wine considering Covid-19 severely altering how people conduct their business. The discussion was filled with some tough facts yet surprisingly had an optimistic outlook down the line.

Roaring Twenties

Michael Skurnik, founder of Skurnik Wines and Spirits that was started in 1987 in New York, addressed the staggering amount of pain caused by this crisis, and he acknowledged that there will be a second wave of Covid-19 and that it will take a while for the restaurant business to come back yet he was very optimistic for the future. As a wholesaler of wines and spirits that sells to restaurants and retail stores, his concerns were heavily rooted with the restaurants that have been hit hard but his words expressed a glimmer of hope. “We are all going to be going to restaurants at some point but the unknowns and the uncertainties are the things that are killing us, that are eating at us. This is bad but it is not the worst thing that has ever happened… if you think back to the 20^th century and all the terrible things that have happened, World War I, World War II, the Great Depression and Prohibition of course, the stock market crash of ‘87, 9/11, 2008 financial crisis, what happened after every one of those incidences? We came back, and we didn’t only come back by the way, but we came back with vengeance, the stock market went past its previous high every single time.”

Michael even discussed that he could see a time when every night in restaurants, located in cities such as New York City, San Francisco and Los Angeles, will become like a wedding every night. “Provided that [people still] have jobs and money they will want to go out and party like the Roaring Twenties, and this is the 20s by the way and history repeats itself”, Michael stated with conviction. It makes it even that much more interesting to consider a Roaring Twenties scenario as not only did that period take place after World War I but it also took place after the 1918 influenza pandemic. After two devastating world events there was not only a huge amount of prosperity in the United States among a certain part of the population but there was a strong desire to live a life of decadence after living through such sorrow. And in Michael’s vision a Roaring Twenties version taking place in the 2020s will include people wanting to spend money on wine while gathering in restaurants that create that great vibe of celebration.

Selling Wine Before Vs. During Covid-19

Michael Skurnik was joined by fellow colleagues Suzanne Chambers, president of Chambers & Chambers Wine Merchants founded in 1973 (based in CA), John Ragan, MS, director of wine and restaurant operations, Union Square Hospitality Group (based in NY) and Kristen Reitzell, VP of public relations, Jackson Family Wines (based in CA), and their discussion was centered around what business was like before Covid-19, what are the challenges and opportunities during the crisis and what do they see for the future of the business in the U.S..

It was surprising in some ways to hear Michael have such a bright view of a post-Covid-19 wine world as his company has made some major investments over the past few years. Skurnik expanded into four other states: California, Ohio, Kentucky and Indiana, giving them a presence in a total of eight states (New York, New Jersey, Connecticut and Pennsylvania are the others) as well as hiring 45 more people over the past two years bringing their employee total up to 180. But to add insult to injury, last October 18^th the first round of European wine tariffs went through affecting wines from certain areas that were 14% alcohol or below. Michael said they scrambled to import 21 containers of Champagne from France in January fearing that 100% tariffs would possibly go through for all European wines and although those 100% tariffs did not go through from the last round, they still loom as a big threat for the wine industry. The aforementioned details combined with Skurnik losing 50% of their customer base with the shutdown of restaurants, places them in a tough situation that is challenging in ways that could not have been imagined before this time. But perhaps it should not be that surprising that although his company is going through some pretty rough waters right now, he believes it will change for the better as the pendulum always seems to swing to the polar opposite side eventually in New York City; considering he started his business in 1987 and there have been many catastrophic events since that time that NYC has come back from stronger than ever every time.

Also, the “Shelter in Place” or “New York State on Pause” had an interesting side effect of people hoarding wine, especially in the New York City market. Michael noted, “We experienced from day one with on-premise [restaurants and bars] shutting down that our off-premise accounts [wine stores] were having sales as if it was New Year’s Eve every day which lasted the first ten days; business was double in some of our retail accounts, it wasn’t all of them, it was the savvy retailers who were able to pivot quickly and take advantage of the opportunity and there was a lot of opportunity.” But he was still cautious for the immediate future as he questions whether this significant increase in wine buying would be sustained as they have to make projections for the next six, eight, 12 weeks and the next six to 12 months. Looking at the leap of sales in retail stores, he imagines that people, especially in Manhattan, were hoarding wine like toilet paper, and as they were isolated in their small apartments they would go out and walk the dog or run an errand, come back and when they opened the door there were the cases of wine in their foyer and so they would just grab a bottle – it seems people are drinking a bottle every day. During the first week of isolation it seemed a wine store could sell anything and everything. Then the following week saw an increase of bottles in the $20 to $30 range and the third week saw a return to high-end wines. “Some people are suffering and some people are doing really well”, Michael stated.

Suzanne Chambers is another wholesaler with her company Chambers & Chambers which was started by her father in 1973 and has a focus on working with premium wineries around the world, like Skurnik, yet she has kept her business only in two states: California and Hawaii. She has around 130 employees and she is trying to take it week by week to find all the opportunities that will keep her business going until the market stabilizes. When she was asked about what was business like before Covid-19 she exclaimed that she had an amazing couple of years, until March 15^th of this year, that were mainly centered on the sales of California wines. But within a couple of months she said that the amount of receivables (debts owed to a company by its customers) took her “breath away”. Happily she was approved for a Paycheck Protection Program loan by the government so she is able to continue to pay her employees.

But Suzanne said that under these stressful times her wineries have shifted really quickly to find new opportunities, “I’m really impressed with the amount of opportunity that there is but again we are not a company that has huge weight within the chain world. That’s certainly part of our business but it does not drive the company and so a lot of the wineries that we represent have not been available within those chains yet there is definitely an interest from the market”, Suzanne explained indicating a possibility of chain retailers wanting to diversify their wine offerings. Also, allowing restaurants to sell wine as part of a food delivery package will open more avenues for wineries and restaurants to partner with each other. She even noted California wineries with mailing lists that have wines around $30 to $40 seem to be doing fine.

John Ragan, director of wine and restaurant operations at Union Square Hospitality Group, has felt the most painful effects out of the group by having to lay off 2,500 people throughout their various restaurants. Union Square Hospitality Group was started by Danny Meyer, initially with a single restaurant – Union Square Cafe in 1985 in New York City, and he helped to not only shape hospitality in New York but influence the rest of the United States with books such as Setting the Table: The Transforming Power of Hospitality in Business yet they closed their restaurants down due to the Covid-19 crisis. John expressed the weight of such a decision, “We didn’t want to force [employees] to make that choice [risk their lives commuting on the subway to come to work] we wanted to make that choice for them although it was certainly the hardest day… you never imagine having to lay off 2,500 people in one day and you really never realized how proud you were to employ that many people until you don’t.” John said that they were hoping to get some of their places opened by the end of May for takeout and delivery and it is worth pointing out that Danny Meyer is one of the members of the New York Forward Re-opening Advisory Board which is a group of leaders in various industries that will help to set forth plans to open New York in different phases. But on a recent interview with The Daily Show host Trevor Noah, Danny Meyer said, “I have been asked to be on the committee but I have not yet been asked for my advice and one thing I have been doing is asking people from our industry because I don’t have all the answers. I don’t think any of us do.” It is no surprise that restaurants will be in one of the later phases of reopening New York and hence part of the reason why Meyer’s advice hasn’t been courted at this time as there are a multitude of challenges that restaurants will face before a vaccine is released.

But John noted that 2019 and the first couple of months of 2020 were relatively good for the Union Square Hospitality Group as well but there have been all kinds of challenges as John pointed out, “the tariffs for restaurants have been really scary and how to do business in that type of environment is something we were wrestling with… obviously it depends on what people like to drink and where those habits are and those are waves we have surfed before. I think when you look back at it and you would think of all of those things that seemed like big challenges but in reality they weren’t” as Covid-19 has eclipsed all other issues previously dealt with in the restaurant world.

Kristen Reitzell, VP of public relations for Jackson Family Wines was already frustrated with the bleak picture the media in the alcohol space was presenting for wine before the coronavirus pandemic. “For a while the only time you would see some news about the wine industry is when it was somewhat negative and it wasn’t a lot of positives; almost painting this doomsday scenario at the start of the year which wasn’t painting an accurate picture of the industry as a whole and I think it misled the average consumer a little bit”, Kristen noted. But since Covid-19 she has seen the sales of trusted brands such as La Crema and Kendall Jackson do very well. She also noted that she thinks consumers were a little trepidatious about having a lot of wine shipped to their homes at first but now it seems using services like Drizly (alcohol E-commerce platform) are becoming a more commonplace practice.

Kristin sees more opportunities as people are drinking more often at home and with food as spirits may not be the consistent ideal choice. Also, the more convenient packaging of wine in a can or hard seltzer does not have the same advantage when it comes to drinking a bottle of wine with dinner that creates an experience that transports drinkers in these difficult times. She talked about looking at various tasting rooms at their array of wineries to see where social distancing parameters could still be kept but until then they are trying to connect with consumers via social media tastings and virtual winery experiences as she knows winery visits creates loyal customers for life. Kristin is looking at this as an opportunity for them to get out of the traditional marketing box where wine has stayed for decades and to explore how they can “take back the narrative of wine” that has been hijacked by other alcohol products. As they have been doing more of these “virtual tours and tastings” she has thought to herself, “why have we not been doing this before?!” because there seems to be a real thirst to learn about wine as Kristin has experienced already over the past couple of months. These new explorations of transporting consumers through the internet is something Kristin plans to keep in her communication strategy beyond the Covid-19 crisis and she is going to expand this idea beyond their bigger brands to their more boutique wineries as well, as Jackson Family has 40 wineries in California, Oregon, Italy, France, Australia, South Africa and Chile, and this could be a big opportunity to push the boundaries of social media communications to renew wine’s place in America’s drinking culture.

After Covid-19

Despite all the good that is coming out of this crisis, there are still major concerns as the uncertainly of what each week will bring may be exciting to some but it is bringing out anxiety in others. And there are hardcore realities that validate those fears such as John Ragan talking about the data that showed it took 20 months for the restaurant business to even break even after the 2008 recession as during that time there were a lot of vacant seats as well as less spending per customer, especially when it came to wine. He noted that he didn’t think it will be like a “wedding every night” once they get past this crisis but he also admitted that they are living in “unprecedented” times and they don’t have “anything to mirror.” Suzanne Chambers mentioned the overwhelming idea of 26 million people being out of work as of last Thursday which has now been reported as 30 million people since that time.

John hoped New York and other states would keep allowing alcohol sales with food takeout and deliveries, as not only does it give people a small modicum of an elevated dining experience at home, but it could help many restaurants to survive even in post-Covid-19 times as there will be a large amount of business debt and income loss that will need to be recouped. But John sees the Union Square Hospitality Group charging significantly less for to-go wine orders that could be around 50% less than what a normal restaurant price list looks like in New York City. It still won’t be as low as retail wine prices so he is confident that it will not compete with retailers yet it will be much lower than typical restaurant prices.

Michael Skurnik brought back the idea of a Roaring Twenties where people will be celebrating in luxury every night and he understood that the current unemployment rate is staggering but he is optimistic that although many restaurants may not come back, there will be “smart people” who will start new business models and that there is plenty of “capital available” from investors looking to take financial advantage of this pandemic, as this is not a banking or liquidity crisis.

As many in the wine and overall hospitality world try to wrap their minds around what the future will bring while also surviving day-to-day, there are many scenarios that could play out. The idea that a small fraction of the population still has large amounts of wealth combined with low interest rates could create a situation of investing in businesses and ideas that will seem to work in the new normal of the future – simultaneously creating more jobs. There will certainly be deals to be had by those who have the money and those investors will partner with innovative, clever people who can invent business models that will be profitable in a post-Covid-19 world.

In regards to 2008, part of the problem when it came to spending, even among the people who still had money, was during that time conspicuous consumption of luxury products was demonized as anyone who had that kind of money was seen as the monsters who collapsed the economy; not only was that idea misleading but ironically it kept people from spending money for a time which slowed the increase of jobs and wages. But this time it is a different world as people with money are encouraged to spend, to donate and to pay top dollar for those businesses and products that give quality in a safe environment. A Roaring Twenties attitude three, four or fives years from now will be welcomed after so much fear, pain and uncertainty of employment had been painfully felt during the years that preceded it.

Broken World Presents a Rare Opportunity

For those who still remain in New York City there is an obligation to keep it going and to find a way to be better and smarter in the future. Yes, many people will leave, and have already, to find a life somewhere else and ideally things will work out for them, yet there will not only be some people and businesses that will be able to survive in NYC but a new flood of energy from the richest to the poorest will descend on the city after a vaccine is released – or even before that time as some will want to be on the ground floor of opportunity. New York City, especially Manhattan, was becoming stagnant in some ways before coronavirus with extremely creative people looking to other cities other than New York as it had reached a point, even in the toughest and grittiest neighborhoods, where it was impossible to survive. The New York City of the future, as well as other cities that have seen prices soar in recent times, may not only witness an enormous amount of investment from those who can wait for the major payoff down the line but it may also see the lowering of living costs and business operating costs in artistic neighborhoods as there is a mass exodus of people; creating further opportunity for those opening cutting-edge businesses that lack investment.

The combination of all the emotions that such a crisis invokes as well as NYC being a place that is always its most vibrant and experimental after its darkest times could bring back everything that was good about the old New York but in a landscape that could never be fathomed. When it comes from all the good that was gained from 9/11 in New York City there is still not one person who lived through that event who wouldn’t give it all back to save those lives, and the same can be said with the coronavirus… but unfortunately, that is something that cannot be changed.

There will be a rare opportunity to find a better balance within such a diverse city which has been lacking balance for many years. And part of that balance, hopefully, will be a renewed interest in wine and getting back to a lifestyle that involves opening bottles that have stories, culture and a connection to a community. Sometimes the world needs to fall apart to truly appreciate those things in one’s life that brings joy and a sense of grounding, those things that are often overlooked and that were no longer seen as being shiny and new yet they are the things that keep the fabric of connection and community alive that are being so desperately missed during the times of Covid-19, and there is no other beverage that brings people together like wine.