China’s intense lockdown and curbs have shown immediate effects on the country’s lucrative wine market, especially in three of the affluent cities in Shanghai, Shenzhen and Dongguan that are engines for the country’s wine consumption, as the country holds on tight to its ‘zero-Covid policy’.
Faced with the highest cases since Wuhun in 2020, northern China’s Langfang city, Changchun city and the Jilin province are placed under knockdown.
What’s more worrying is that China’s tech hub Shenzhen and Dongguan across Hong Kong have subsequently followed suit, and the country’s commercial center Shanghai is pushing through with a citywide mass testing and a rolling-basis, 48-hour lockdown.
Empty restaurants and bars, as well as temporary disruptions in warehouses and logistics, have added financial burden to wine merchants and distributors who were already hit hard by previous pandemic loss.
Among the three cities, Shanghai has recorded the most infection cases with 57 local confirmed new cases and 203 asymptomatic infections on 17 March.
Although a citywide lockdown has not been implemented, the spike of infections since the beginning of March has promoted mass testing and 48-hour lockdowns in several areas.
As many restaurants and pubs are forced to close down with no end in sight, wine merchants were hit the hardest by the partial lockdown due to reduction in on-trade sales.
Although dining out is allowed in some areas of the city, fear of being infected has halted people’s desire for social gatherings and dining out.
Wine distributors found that the lack of confidence towards on-trade sales has caused a decline in stocking orders. They are also crippled by sudden disruptions in wine supply chains and low transport efficiency.
The Spanish wine brand DAVIDWINE told Chinese media WBO that their warehouse in Shanghai was required to shut down for two days as all workers need to undergo COVID-19 testing, meaning their wines cannot be delivered to any sales points of the country during the closure.
Perhaps the only channel less affected is the e-commerce merchants. Wine companies who took a foothold in streaming platforms such as douyin or e-commerce reported that wine sales in these platforms remained unaffected, suggesting home consumption may have increased amid the new wave of pandemic.
Shenzhen & Dongguan
As a major wine importing hub and fast growing tech hub in China, Shenzhen is known for having the highest percentage of consumers enjoying mid-price and upscale wine inside Guangdong province.
As of 17 March, Shenzhen has recorded 69 confirmed cases and 36 asymptomatic infections. It is one of the most infected cities in Guangdong province beside Dongguan.
Since Monday, Shenzhen has entered a one-week lockdown, in which citizens are subjected to movement restrictions and three rounds of mass testing.
According to Wu Yunping, Head of Shenzhen Wine Industry Association, wine sales and consumption in the city has since been greatly affected.
“Currently, everyone is working from home and restaurants don’t allow dine-in. Chinese are not like Westerners who purchase wines for personal and home consumption. Wines are mostly drunk at social gatherings. Therefore, wine sales at the moment are insignificant, ”he said when being interviewed by WBO.
Additionally, wine is hardly considered a necessity so sales in off-trade channels such as supermarkets are also limited, he adds.
What’s adding to the pain for the city’s retailers and merchants is that sales have been tepid since last year’s Mid-Autumn Festival and subsequent Chinese New Year. The current lockdown will deter sales further and worsen their financial situation.
“For some of the wine merchants I contacted who are in the local market of Shenzhen, the wine sales were not satisfactory from last year’s Mid-Autumn Festival to this year’s Spring Festival,” Cong Riguang, founder of Great Eagle Wine Cellar in Shenzhen, told WBO.
“In the past half month of March, sales are estimated to have dropped by more than 90% compared with the previous half month,” he continued.
On the other hand, it is hard to tell whether Shenzhen’s wine supply chain is fully operational due to inconsistent regulations imposed on different warehouses.
“Some warehouses have stopped operating according to requirements, and some are still delivering goods normally. It depends on whether the local authorities are enforcing it,” Shen Zelin, General Manager of a Shenzhen-based supply chain company Shenzhen Longyi Supply Chain Co Ltd (深圳龙一供应链有限公司) told WBO.
Apart from being a manufacturing center of China’s Greater Bay Area, Dongguan is famous for its well-developed retail chains powered by several commercial districts.
As of March 17, the city has recorded 4 confirmed cases and 25 asymptomatic infections. Similar to Shenzhen, the city has to endure a weeklong lockdown starting from Tuesday.
“Some wine cellars are closed, and some are not, but I felt that wine sales were relatively weak after the Spring Festival, and the current wave of pandemic will bring a greater impact,” Huang Xiongfei from Dongguan Pinnuo wine company (东莞品诺酒业) told WBO.
Yang Jingzhi from Guangdong Outeng International Trading Company (广东欧腾国际贸易) acknowledged the adverse impacts, but assured that wine supply and logistics outside of Shenzhen and Dongguan are still working as usual.
“We currently supply wines to different supermarket chains inside Guangdong. Although impacts on Dongguan and Shenzhen are huge, for the rest, damages are not too significant.”
Writing by Ning Sang Lawati; editing by Natalie Wang