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Wine and the Pandemic – Chastity Valdes

In 2019, the wine sector was already very concerned. While Brexit was materializing with its constant extensions, Trump anticipated the increase in tariffs on European products. In the midst of the international political turmoil, the wineries were preparing their first measures against climate change, their other great front. The world was changing, wine was struggling to adapt to it … and the pandemic arrived, and with it, confined spring. The closure of restaurants, hotels and cafes, the blackout of the April fairs in Andalusia and all the other popular festivities have left a significant wound in the accounts of the wineries, which has partially healed in recent months of opening. Now that infections are on the rise again, how does wine see its future?

In Spain, more than half of wine consumption is produced through the so-called HoReCa channel (acronym for Hotels, Restaurants and Cafeterias). With the general closure of this channel between March and May, 94% of producers have been seriously harmed, according to figures from the Spanish Wine Federation (FEV). “For many wineries, in fact, it is the only channel,” says José Luis Benítez, general director of FEV. Production has fallen by 38%, especially in micro-enterprises (businesses with less than 10 workers), where it has fallen by 54%.

Part of the wineries have saved their furniture thanks to exports: in other countries, more wine is bought in the supermarket than in the bar. Between January and May, the latest data available, Spain has exported 990 million euros in wine (9.8% less than in the same period in 2019). “It has not compensated, but it has allowed the collapse not to be total,” says the general director of the Spanish Wine Federation.

But not everything is negative. The pandemic leaves two lessons for wine producers. The first is that we must give importance to online sales, which since March have grown 161%. It is considered a strategic trend in the sector that may influence future sales (currently they account for only about 1% of total sales). The second is a personal opinion of Benítez, spokesman for the wine association: “Many Spanish clients will have become used to doing something that was not used to do before: buying wine in food stores. It is something more common than in other countries ”, he admits.

Wine, in the face of “climatic changes”

“The pandemic will pass, the big problem in the sector continues to be the structural problems we are facing,” says the general director of the Spanish Wine Federation. To define these problems, he resorts to a phrase that has been appropriated by the Minister of Agriculture, Luis Planas: wine must adapt to climate change and “commercial climate change”.

1.86% of the surface of Spain is covered by grapevines. There are 941,000 hectares, of which more than a quarter is especially exposed to the desertification that is advancing in the Iberian Peninsula. Of that extension, seven million tons of grapes were harvested in 2019. 98% became wine. The sector has taken the first steps to face dry springs, extreme summers and scarce but heavy rains: “These changes affect the quality of the grapes, it is time to develop bold policies,” says Benítez.

On the other hand, “commercial climate change”. First of all, Brexit. The United Kingdom is the number one market for Spanish bottled wine, especially Rioja and Sherry. “Is the British going to stop drinking Rioja, a well-known and consolidated product, because there is Brexit? I would say no, ”says Benítez. If Brexit finally occurs without a trade agreement, something that should materialize by the end of 2020, the wine sector expects an increase of 10 cents per liter sold. They consider it a “stone on the road”, but acceptable, since “it would affect everyone equally”.

Worse is what awaits on the other side of the Atlantic: Trump’s tax on European products. It was applied after the WTO gave the US reason for the historic subsidies to the British Airbus – to the detriment of the American Boeing – and that enabled the North Americans to collect 7.5 billion euros in tariffs from Europe. This has fully impacted Spanish wine, which the United States now taxes with 25%: “This percentage is assumed by the wineries. In some cases it is shared with importers, but in most cases, no ”, laments the director general of the FEV.

Meanwhile, in Spain cases of coronavirus are on the rise again, precisely because of the social encounters in which wine consumption flourishes. The sector calls for calm, believes that everything can be overcome “to the extent that we can live with the virus in a normal situation.” Another thing would be a new economic crisis, like the one that occurred 10 years ago: “A crisis would affect consumption and wine is not a staple good,” admits José Luis Benítez, although he adds that now the sector is more prepared: ” In the crisis we learned to export, to diversify ”.

Chastity Valdes 

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