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Drinks+ covering the events of the largest online beverage trade show.
During London Wine Fair (17-19 May), Miles Beale, Chief Executive of the Wine and Spirit Trade Association, looked back at the last 12 months on how the wine industry had been affected; and looked forward at what was coming over the horizon. In particular, what are the challenges the UK wine sector facing thanks to the permanent changes wrought by COVID-19 and the UK leaving the European Union.
The UK has been the center of the world wine trade for 900 years and it is the second biggest exporter of wine regarding volume and value (volume after Germany, value after the USA). Passionately trying to reunite wine industry working with the government, the UK aims to keep this trajectory and its leading position further on. Looking back, Covid storm almost pasted. Return to normality in the UK is expected: it is possible to eat inside; you can hug; vaccination is working. According to the phased reopening plan announced by Boris Johnson, the country expects having parts of the hospitality industry, including shops, bars, and restaurants opened in July.
At the same time, the WSTA claims things will not return to the way they were used to be, the wine industry will not stay the same. One of the trends Covid pandemic brought is the increase in the online sales. European Association of Wine Economists provided the statistics of 2020 on this issue indicating that online sales have increased on 180% for some EU members and 30% across the EU. At the same time, online sale represents only 1,5% of wine companies turnover. In the UK, the last figures of online sales increase are more likely to be around 10%. However, 2021 online sales are volumed back comparing to the pick of 2020.
Rachelle Rush from Treasury Wine Estates shares the company’s experience: “The team had to deal with significant challenges trying to maintain inventory, supply to our customers combined with shipping delays from all major countries of origin due to lockdowns, restrictions. We have seen a remarkable ability within the organization and our partners to quickly give it to a new online way of working and collaborating out of kitchens and bedrooms across the world.”
Another innovation after Covid besides acceleration of online sales is omni-channels and wine baskets as advertisement strategy. Miles Beale emphasizes currently, consumer behavior is different because of Covid, but trading is different because of Brexit.
Hal Wilson notes that Cambridge Wine Merchants managed to get almost the same turnover and not to lose much trade due to having embraced the current trends of online retail channels and building strong business identity as a part of a community. “It was important to cooperate with companies, educators, winemakers and engage with customers to let them know the reality. This helped to get the solidarity within our trade. We tried to facilitate the education side by helping educators get bottles of wine, some samples of wine on time and in an interactive and cost-efficient way”, indicate Hal.
However, the conditions were less favorable for businesses focusing on HoReCa trading as they received the least support from the government. Miles Maclnnes shares experience of Jascots Wine Merchants: “We were the business turning over in excessive 9 million. Until the end of March 2020 we had about 55% of our normal sales. But after the announcement regarding the lockdown on 17 March, we received minus 90 000 of sales because our customers were canceling orders and sending stock back. Our pre-Coronavirus customers managed to contribute 3% of normal sales. However, we had about 4 months on cash-on-hand with no revenue. It was likely that businesses like us would just close.” The team of Jascots Wine Merchants had to quickly come up with a new solution which was, not surprisingly, to create an e-commerce website. Human and digital business model combination helps wine industry to sustain in new circumstances.
The biggest change trading over years is Brexit. Transition period finished in December 2020. Changes are inevitable and systematic: enforcement police, the custom union leave, changing rules. The WSTA works closely with the government to evolve new business models and help wine industry to sustain.
The UK government announced it would leave the custom union with or without a deal. So, Brexit provided the UK wine producers with difficulties in transporting and explosion of paperwork. But there is no further recommendations or predictions what can be done to avoid additional red tape. Finding the solutions for the post-Covid situation lies completely at the door of the UK government.
The UK’s departure from the European Union brought with it the prospect of new importing certifications known as VI-1 forms if no were reached. The Wine and Spirits Trade Association (WSTA) warned that it could cost the industry as much as £70 million a year in lost revenue, raise the price of wine and potentially exclude many smaller producers from the UK market. There is no sense for keeping the existing wine certificate and to create a new one for EU trading. From 1 July 2021 to 1 January 2022, the WSTA works closely with the government on the issue.
In fact, 33 million wine consumers of the UK will feel difference. Trading with the EU will get harder while with the other part of the world might be easier. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CTPTP) withdrew by Trump is one of the world’s largest free-trade areas by GDP.
Another challenge concerns mandatory labeling of wine and other alcoholic drinks. The difficulty is the EU and UK markets stand for two different names and require two sets of labels what is confusing for consumers. Combination of own labeling and online information represents a lower cost approach. This allows to mention social responsibility credentials on brands labeling while using smartphones for reaching further information.
Rachelle Rush notes Brexit has introduced additional complexity for servicing at EU customers. The regulatory environment upped until the 11 hours particularly with the labelling and documentation. “It would be good if we as an industry would be given sufficient clarity in good time, so that we can manage those changes in an orderly fashion. We should necessitate the setup of the European warehouse capability at speed to minimize any red tape or delays at servicing to our European partners.
Regarding environmental and social sustainability agenda, the UK has been a leader for a long time. Environmental sustainability requires reducing agricultural impact, reducing water pollution. Industry is responsible for providing meaningful approach and satisfy customer choice, for example, by taking care of wine packaging to avoid microplastic.
“Covid and Brexit are not the only challenges we had. We cannot forget the natural disasters that have brought climate crisis such as the Australian bushfires, the US wildfires, and the recent severe frost in France which are placing an additional pressure on wineries and the international wine market as a whole”, emphasizes Rachelle Rush.
Governmental agenda with diversity and inclusion should be deepened more as well. Considering the issue how we can have more diversity in the executive board in WSTA, Miles Beale notes the WSTA reviewed recruitment policy based on the skills and what the candidates can bring in.
All in all, Brexit and Covid storms in wine trading of the UK impose an inevitable need for suppliers to adapt and for organizations and businesses to be agile, responsive, to be in power to make decisions quickly while maintaining focus on delivering quality products to customers and partners.