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Business “Resiliency” Critical to Economic Success for Wine Industry During COVID-Era Challenges and Beyond

Elizabeth Hans McCrone.

Business “Resiliency” Critical to Economic Success for Wine Industry During COVID-Era Challenges and Beyond We’ve all heard the saying that when it goes wrong, it goes wrong, but for an industry that has been shaken by Covid-19 plagues over the past year, a better saying might be to adapt or die.

That is what Stephen Runnekleiv, global beaverage strategist at RaboResearch, in the food and agribusiness division of Rabobank, a Dutch multinational banking and financial institution headquartered in Utrecht.

Mr. Runneclay, who has been in the wine industry for 15 years, studied market trends and performance at the unprecedented events of 2020.

He notes that the shocking fall in sales of local wines and other spirits has been a disaster for some companies, but others have seen their figures explode and report one of the best years in their history.

He has certainly put the power in the hands of the big distributors, Rannekleev notes, but it’s not just about big and small, it’s also about speed and slowness.

Rannekleev not only talks about the dominance of large companies that can easily compensate the loss of turnover in bars, restaurants and tasting rooms by increasing online sales, but also about the ability of each company to build what he calls resilience into its corporate culture.

Some have said: We sit and wait for things to return to normal, Runeclay notes, while others come up with creative ideas, send emails, make phone calls, approach customers….. Companies need to act faster. Those who did it.

Runneclay’s starting point is well illustrated in the October 2020 issue of Rabobank’s wine newsletter, which focuses on the renewal of Chilean wine distributor Vina Concha y Toro (VCT).

According to the article, VCT has always done well with its portfolio of value wines, but the company’s strategists have acknowledged that it could soon see its market share decline if it does not reposition its offering in a premium market.

In order to adapt to change, VCT has focused on two main areas of change: Reducing costs and reviewing commercial strategy.

It appears that the economic component has enabled the VDC to improve its profitability and free up resources to strengthen its business strategy.

The article states that the commercial revision of the premiumisation has completely changed the course of their brands and their marketing strategy. The result is a more compact and focused portfolio and an updated sales and marketing structure that appears to be more focused on stimulating profitable growth.

Apparently it worked. VDC reported sales growth of 16.5% in the second quarter of 2020, a quarantine peak in many markets. More importantly, the report shows that their major premium brands are developing ahead of schedule.

The marketing of premium wines has a completely different perspective, says Rannekleev. Some people are able to adapt and learn new directions. Others who don’t can be a distraction…. Het kan moeilijk zijn om mensen die niet willen of kunnen veranderen, los te laten.

But despite these challenges, he said, companies must be willing to make difficult decisions, understand the market and constantly challenge themselves: What do I have to offer? What are my skills? What do I have to do to survive and flourish?

Rannekleev believes that one of the greatest opportunities for wine retailers in 2021 lies in the foodservice industry, where the growth of the Covid era has been driven by delivery and off-take sales.

As Runneclay notes, no one orders wine with their cheeseburger, but people may still want something to drink with the meal if there are enough legal and practical ways to do so.

We need to think about the fact that we are local, that we take a smaller share of the total market and that we benefit from delivery and collection opportunities. The market is changing. How does wine play a role in this? How to adapt? Where do we lose this thing?

Rannekleev admits that the loss of local activities in 2020 has hit the wine industry hard. When consumers buy products in brick and mortar stores, alcohol traditionally represents about 5 percent of their basket, he said. As soon as we switch to online shopping, the percentage of alcohol drops to 0.7%.

He sees the beginning of a change of strategy in the market, as many restaurant owners are making more and more efforts to integrate alcohol sales into their offerings.

That’s where the problem lies, Ranekleev insists. They need to make restaurants understand how much they fail in their job by not offering alcohol. How do you make sense for a takeaway? What’s the place of the wine? That’s exactly the problem. That’s what we have to do to adapt.

Rannekleev advises all companies, large and small, to listen to the market. He stressed that market conditions are constantly changing and that there is no room for complacency in the reaction.

If you can’t adapt, you won’t survive, he warns. No one must succeed. If you don’t want to belong, you’re in the margins. It always has been.

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Business “Resiliency” Critical to Economic Success for Wine Industry During COVID-Era Challenges and Beyond

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