2020 Fires Caused $3.7 billion in losses for Wine Industry
January 20, 2021
The fires of 2020 appear to have cost the wine industry $3.7 billion in losses that will be felt by wineries well into 2023.
That is the estimate of former wine industry executive Jon Moramarco who owns the market research firm bw166 and is the editor of the Gomberg, Fredrikson & Associates reports.
Moramarco presented his findings on the fire impacts, total market data and other analysis as part of the North Bay Business Journal’s online Wine Industry Conference held Jan. 19. The estimate on the fire impacts is based on direct fire damage, rejected fruit and lost sales that Moramarco expects will peak in 2023.
The scars of the 2020 fires are part of the reason why Moramarco is advising the wine industry not to anticipate the start of a new “Roaring ‘20s” or celebrate arriving at herd immunity like “VE Day” on May 8, 1945. The coming year will be a challenging one, he said, but a recovery will begin and gain momentum in the second half.
“Hope is something to relish but it’s not a strategy,” Moramarco said. “As an industry, we need to hope for the best but plan on something less.”
After leading national wine companies through the recoveries following 9/11, the Great Recession and other disasters, Moramorco said getting back to normal after 2020 could be different. “To be honest with you, looking at the pandemic it will probably have longer term repercussions than previous crises,” he said.
As the year progresses, he said he’s going to be watching a few key markets such as San Francisco, New York and Las Vegas to see how consumers will return to travel and the on-premise sector. He said it’s possible the total number of on-premise accounts in the United States may decline by 25% and those accounts that close will mostly be full-service restaurants. “It is real tough to say how they come back and where they come back,” he said.
The restaurants that do stay open will stick to shorter menus and wine lists to reduce overhead and boost margins. Off-premise sales at the large retail chains and grocery will likely decline compared to the previous year starting in March and this may come with reduced shelf placements. “That means people will have to fight for placements even harder than they ever have,” he said.
E-commerce and increased direct-to-consumer shipments will continue and Moramarco highlighted wine.com as one of the biggest success stories of the year. He said e-commerce now accounts for about 10% of all U.S. grocery buying.
Moramarco’s comments on the wine industry were preceded by a presentation by Wells Fargo senior economist Sarah House who said the next couple of months are going to be pretty rough, followed by what could be a strong second half of the year.
She said if COVID-19 can be brought under control by spring that should help the rebound begin and the economy should approach pre-pandemic levels by the end of the year. “The virus is in control of the economy,” she said.
Unique to this downturn has been a strong recovery for durable goods, which includes the items people purchased to make stay-at-home orders more bearable (such as a new Peloton) or take full advantage of limited travel options (a new truck and RV). The service sector is still reeling, however, and House said durable goods sales will likely decline as this part of the economy begins its recovery.
It remains to be seen if on-premise will come roaring or limping back, but U.S. consumers have the cash to support a recovery. House said based on skyrocketing savings rates, it’s estimated there is about $1.5 trillion in excess savings. “That’s a lot of firepower in terms of consumer spending once we get a better handle on the virus,” she said.