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Empty restaurants are impacting on wine sales in China as the coronavirus crisis bites

wine-searcher.com by Jim Boyce02/03/2020  

Empty restaurants are impacting on wine sales in China as the coronavirus crisis bites.

As China struggles to cope with the coronavirus crisis, Jim Boyce reveals the impact on the wine trade there.

Nine wine aficionados joked, laughed and talked over one other while sipping Malbec last week.

That might sound like a typical get-together but in this case everyone was self-quarantined at home in China due to the coronavirus crisis. Their only link was a video-conference function on social media platform WeChat.

The virtual tasting, known as "cloud wine" in China, was one of several organized by CHEERS, a 60-shop chain, to keep connected to customers and bring some normality to those who had spent the past two weeks holed up at home.

Unfortunately, it will take far more for the trade to rebound from a crisis many hoped would measure in weeks but is now dragging into months. Wine dinners, tastings and trade fairs, including the mammoth China Food & Drinks Fair (CFDF) in Chengdu, have been postponed. Incoming visits by wine trade people are canceled – many airlines have slashed flights to China anyway – while outgoing ones by wine tourists, buyers, sellers and viticultural students are difficult if not impossible.

And restrictions on consumers – from quarantines to bans on company, wedding and birthday banquets to a rule of three people per table maximum at the few Beijing restaurants still open – are devastating sales in a market where entertainment is still the major driver.

"Most of my wine is consumed by people going for a business dinner at a restaurant and bringing along a few boxes, and I'm pretty sure that's not happening at all right now," says Helene Ponty, who sells her family's Bordeaux brand in more than 50 cities in China.

The restaurant business has been crushed. The China Culinary Association reported that 78 percent of enterprises saw a 100-plus percent drop in operating income: venues have zero revenue but are still burning cash on rent, labor, insurance and other costs.

Restaurateur Ignace Lecleir, whose four-venue group includes TRB Forbidden City and TRB Hutong, among Beijing’s top destinations for wine fans, says revenue has dropped 95 percent. He currently has one only restaurant operating, Hulu in central Beijing, and, like many others, is turning to delivery to boost revenue.

Wine importers, distributors and retailers are also feeling pain. Alberto Fernandez, managing partner of major importer/distributor Torres China, expects sales to drop 80 percent this month, and at least 50 percent next month, and is shifting more focus to delivery. Claudia Masueger of CHEERS also says sales are down 80 percent.

"As long as our stores are closed, we can't sell," she says. E-commerces provide some relief but, she says, it depends on employees returning to work – many have been stuck in distant hometowns since the Chinese New Year and will require two-week quarantines when they eventually return.

"Everyone will see a drop. Quarter one is gone, and things can only come back gradually," says Richard Li, president of Canaan and Domaine Franco-Chinois, two Hebei province wineries that started selling their wines last fall after over a decade of preparation,

"The ones who have cashflow will win at the end. Companies need to map out quickly a new business plan and budget," says Li, who trained as an accountant and was with major importer ASC for nearly 20 years.

Canaan and DFC are fortunate to have an owner with deep pockets, thus Li plans to use this this for marketing plans, label redesign and recruitment. (He'll have to work from abroad: he’s been stranded in Paris since Air France cut its China routes.) But not everyone has that luxury. The past two years have been tough for China's wine trade. In the first 11 months of 2019 alone, wine imports dropped 12 percent by volume and nearly 17 percent by value, according to the China Association of Wine and Spirits. And local production has also fallen despite Chinese wines earning plenty of medals and critical praise.

Time simply is not on most people's sides. Simone Incontro, China representative for Veronafiere, says he talked to many trade associations and importers, especially from Australia, Chile, China and France, and the consensus is normality won't resume until the second half of the year.

"I hope there will be an important restart from June, from July," he says.

For Incontro, the CFDF cancellation was a big blow, and things have steadily gone from bad to worse.

"The Shangri-La Hotel exhibition [at CFDF] is really important," he says. "The majority of our exhibitors sign contract.