Australia’s $1.3 billion-a-year wine exports to China, about 20% of the national crop, is facing a massive hit from the the COVID-19 virus (coronavirus). Exporters say sales are down by as much as 90% in the first two months of this year. If the crisis continues, millions could be lost by year’s end.
The sales drop comes on the back of the disastrous bushfire season that has seen tracts of vines burnt out and a substantial amount of other grapes affected by smoke taint.
The virus has hit at least 30 countries around the world including Australia, infecting more than 68,000 people and resulting in more than 1700 deaths.
Bars and restaurants across China have been shuttered, hotels are running at occupancies below 10% and the hospitality sector is laying off staff and forcing both paid and unpaid leave.
“It’s a disaster,” a representative from one of Australia’s biggest wine producers, who asked not to be named, told Crikey. “Sales are off 90% for the first two months and there is no relief in sight.”
Alexandre Ricard, chief executive of global drinks giant Pernod Ricard, has said: “Nightclubs and night bars are all closed in China and those bars and restaurants that are not closed are empty.”
Trade events are being cancelled or postponed, including the biggest: Chengdu’s annual China Food and Drinks Fair. It attracts 3000 exhibitors and 300,000 buyers.
People are being confined to their homes in cities right across China including the capital Beijing and financial hub Shanghai.
Local authorities are restricting movement of people. In most places people are not allowed out of their homes without protective face masks.
The restriction has been a boom for China’s home-delivery industry, but authorities are regulating what can be delivered: essentials rather than alcohol.
The COVID-19 outbreak has coincided with the Chinese New Year, the biggest selling time for Australian wine. “Now they are sitting on that stock, which will not really move until the Mid-Autumn Festival in October”, one concerned China wine executive said.
Cellar door sales in Australia have also been smashed, with wineries gearing up for an influx of Chinese tourists during Spring Festival who simply “did not show up”, according to a Barossa Valley insider.
The sales downturn is expected to have a long tail after the virus has peaked. Consumers are expected to continue to be very cautious, especially when it comes to discretionary spending.
“We are also expecting a lag effect,” the wine executive said. “It is most likely that sales will take some time to come back on line — even when things appear to be back to normal there will be a backlog of stock in China to work through and we are not expecting any significant sales action until the Mid-Autumn Festival.”