What's the Economic Impact of Covid-19 on U.S. Wineries?
March 27, 2020
In difficult times such as during Prohibition or severe economic recessions, Americans have continued to drink alcoholic beverages. Our current situation with the Covid-19 pandemic, however, is somewhat different. Not only are wineries, breweries, distilleries and liquor stores closed, but people in a large part of the country are either self-isolating or under government mandate to stay in place to avoid spreading the virus. The result? Tasting rooms are closed and special wine events have been cancelled.
How are wineries coping? Some are relying on online orders; others are offering front-door or curbside pick-up services at their wineries. Virtual wine tastings are becoming an important marketing tool that allows winemakers and tasting room managers to interact with individual wine customers, couples, small and larger groups of their winery’s customers. The concept of local wine nights encourages wine lovers to drink a favorite winery’s wine and then thank the winemaker.
Most of the wineries in the U.S. are small, family-owned businesses with limited resources, and while these activities may help them to some degree, the Covid-19 crisis is real and growing. Wineries are suffering economically but, as of March 26, there are some answers concerning the impact of the situation. WineAmerica, the national association of American wineries based in Washington, D.C., released the results of a survey that was sent to every winery in the country on Thursday, March 19. A deadline of Monday, March 23 was set.
A total of 1,085 wineries in 49 states responded, or approximately 10% of the 10,491 wineries in the country (according to Wines Vines Analytics). The survey questions looked at ”the overall effects on employment, production, tourism, sales, expenses, and total financial loss.” The results were as follows:
Normal Employment: 11,043
March Layoffs: 4,496
Normal Annual Visitors: 26,096,279
Events Canceled: 4,582
Unanticipated Expenses: $840,487
Total Financial Loss in March due to Coronavirus: $40,439,764
Jim Trezise, president of WineAmerica, told Wine Business Monthly that they are not certain that the survey was a representative sample of the wine industry. If it is, those totals could be multiplied by 10 to get a nationwide estimate of the Covid-19 impact, and the total financial loss in March (and March isn’t over) would be $404,397,640.
He also noted that because the size of the wineries varied, the survey reported both the mean (or average) and the median (or midpoint) of the responses to arrive at a nationwide estimate. The survey included the following data:
Employment: The average winery reported 10 employees in normal times, with 4 as the median. Layoffs due to the crisis averaged 4, with 2 the median.
Production: 80% of wineries have continued production, but 67% at a slower rate than normal.
Tourism: In a year, the average winery welcomes 24,111 visitors, with 5,500 the median. The average winery expected a 75% decrease in visitors in March, and the median an 80% decrease, compared with previous years or 2020 projections. The average winery cancelled 4 special events, and the median 3, in March due to the crisis.
Official Restrictions: Virtually all responding wineries were recommended or required to reduce or cease operations by one or more levels of government, including state (1,030), federal (311), county (305), and city (19).
Lost Sales: The average respondent anticipated a 63% decrease in sales during March, with the median at 70%. For April, the average winery expected a 75% decrease, with the median at 80%.
New Expenses: The average winery incurred unanticipated expenses of $776, and the median $200, for supplies such as hand sanitizers, cleaning services, and other products and services not part of their normal business.
Combined Loss: Counting both lost sales and unanticipated expenses, the average winery will lose $37,376, and the median $15,000, in March.
Recovery Time: If wineries are able to resume operations on April 30, the average winery said it would require 12 weeks (3 months), and median 8 weeks (2 months), to return to normal business in terms of employees, visitors, sales, and other factors.
According to Trezise, WineAmerica is currently working on a state by state breakdown of the statistical data so that wineries and their state associations can use it with their legislators. They are also planning to do more surveys in the near future. “We’ll keep some questions so that we can compare the data, modify some, and insert new ones about what wineries have done to cope,” Trezise said. “We may include some questions about taking advantage of SBA loans, and what you need to do to get a loan.”
WineAmerica has decided, for the time being, to suspend contacting only members with notices and information. “We sent the survey to the whole industry,” Trezise stated, “the results went to the whole industry, we want any advice to go to the whole industry. We want to share everything with everybody until further notice.”
The full report of the Covid-19 Economic Impact Survey is available at https://wineamerica.org/wp-content/uploads/2020/03/COVID-19-Economic-Impact-Survey.pdf