China Wine

Sommeliers and importers expect business to return to pre-Covid level in Q4

With coronavirus brutalizing China’s wine sales in the first few months of the year, much-anticipated recovery to pre-Covid level will likely arrive in the last quarter of the year, according to sommeliers and importers interviewed for the article.

With coronavirus brutalizing China’s wine sales in the first few months of the year, much-anticipated recovery to pre-Covid level will likely arrive in the last quarter of the year, according to sommeliers and importers interviewed for the article.

What followed the Covid-19 months after China successfully contained the virus in late April was a slow and measured re-opening of the country’s economy. Restaurants and bars cautiously resumed business in major cities but months of lockdown had weighed heavily on the country’s economy particularly on hospitality and dining sector.

For the country’s wine business, which traditionally leaned heavily on on-trade sales through hotels and restaurants, the knock-on effects of the austere measures reverberated from supply to end-consumption.

A lone diner eating in China

Cliff-like drop

China Wine & Spirits (CWS), a wine company that operates in both mainland China and Hong Kong, is among the many companies that bore the brunt of the outbreak.

“Our business is mainly focused on on-premise channels (restaurants, bars and five-star hotels). Our sales have been greatly impacted by the pandemic. If we say that the country’s dining business has returned to normal more or less, hotel business has yet to bounce back,” says Vincent Simon, marketing director of CWS.

In April, things were gradually returning to normal in Shanghai and in May business resumed in Beijing, Guangzhou and Chengdu, he observed. However, the recent outbreak in China’s captial Beijing derailed a rosy track, he lamented.

“Overall, we are still far behind our expected sales target, and we hope starting from September, everything will go back to normal again,” he says in anticipation.

Founded in 2006, the company carries a wide range of imported wines, with Italian wines being one of its competitive categories in its portfolio.

During the pandemic, Simon noticed interest for online sales is increasing but price is dropping for more competitiveness.

For Steve Li, area manager of Shanghai Yuemei wine importing company, the first two months of the pandemic, a period when the whole country was placed under strict lockdown, saw the company’s wine sales experiencing what he described as “cliff-like drop”.

“Because our company is based in Shanghai and our main sales channels are hotels, followed by restaurants. Impacts are quite significant,” he admitted.” International flights have also been reduced. As a result there’s no business travelers or tourists. Our sales in the first two months [of the outbreak] suffered cliff-like drops.”

International flights have also been reduced. As a result there’s no business travelers or tourists. Our sales in the first two months [of the outbreak] suffered cliff-like drops.”

Steve Li of Shanghai Yuemei

To batten down hatches, Li scaled back company spending and focused on developing private clients and online sales, a similar strategy that was also adopted by CWS. The latter revamped its WeChat shop during the pandemic to improve its functionality and user interaction, Simon of CWS added.

Entering in May, things were starting to look up, says the merchant, but he admits candidly that sales are far behind the level achieved for the same period last year. “If the virus situation stabilizes, it should return to previous level around October and November”, he estimates, pointing to the recovery of business travel and hotel occupancy as key parameters.

Despite challenges of 2020, the merchant saw an opportunity for Italian wines leveraging on the two countries’ friendly relationship. “In the year end of 2019, president Xi Jinping visited Italy, which means our two countries’ relations are verey warm and friendly. I hope the government can introduce more policies to benefit our Italian wine imports,” he appealed.

Delivery services

Restaurant take-out services

At restaurants, wine sales during the months of lockdown from late January to late April, completely stalled. “With lockdown, the impacts are severe. Residents are trapped at home, hence there’s no other scenario for consumption,” says Walter Liu, sommelier at Shanghai’s Dot x Little Universe, a swanky wine bar located in the plush Xuhui district in Shanghai. “Besides, most companies are trying to cut costs and save money, so when clients have less disposable income, naturally they aren’t in a hurry to drink wine, something that’s still considered a luxury in today in China.”

“Besides, most companies are trying to cut costs and save money, so when clients have less disposable income, naturally they aren’t in a hurry to drink wine, something that’s still considered a luxury in today in China.”

Walter Liu, Dot x Little Universe

At Dot x Little Universe, Liu said he had cut down wine orders from his suppliers and expanded its delivery services to mitigate outbreak’s impacts on his business. As normalcy in Shanghai returns in May, locals followed but he confessed that business will truly go back to normal when international businesses resumed.

At Rina, a steak restaurant in Shanghai, which used to see steady stream of revenues from business meals and family dinners, the whole month of February was “wiped out,” says its owner and sommelier William Liu.

New World wines popped

William Liu of Rina, a steakhouse in Shanghai

From March to May, more diners returned but Liu observed less wine consumption among family dinners, with most opting for more affordable New World wines. The restaurant’s wine list dedicated 40% of its wines to Italy, a favorite among business diners, he says.

“Consumption of Italian wines dropped a bit at our restaurant mainly due to lack of business meals. Most of them would pick Italian wines and Old World wines, while diners with family groups tend to seek New World wines at lower price points,” he explains in detail, adding that for BYO dinners, diners are trading down too on wine prices.

Liu was however quick on his feet to adapt to new challenges, using popular Chinese social media platforms including WeChat and video app Douyin to promote food delivery services.

“We started to use WeChat and Douyin for promotions. We launched deliveries of ready-to-cook steak, and a package deal of steak and wine. In this way, customers can cook and enjoy the same quality of beef and wine like we did at restaurant,” he explains.

At the beginning, delivery services by logistics companies were disrupted by the outbreak, Liu and his wife were unfazed. They drove around Shanghai to hand deliver orders, he recalled before logistics resumed. His landlord also halved rent for the three virus-affected months, “a tremendous help”, he says feeling indebted.

As we enter July, diners by now have gradually converged in his restaurant again. “Even though there’s still the threat of a second wave and it could threaten our restaurant business, we are confident that our business will return to pre-crisis level by the end of the year,” he states.

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