Coronovirus hits wine trade, with spending down and quarantine restrictions impeding travel

As the coronavirus epidemic continues to spread through China, the wine trade is being hit hard by the slump in consumer spending in shops and restaurants, while quarantine restrictions threaten to hit international wine exhibitions.

Last year, spending during the Chinese New Year festival topped 1 trillion yuan ($143 billion), an 8.5% increase from 2018.   While it’s too early to determine the full impact of the outbreak as the number of cases of the virus increases beyond 17,000 nationwide, it’s clear that companies relying on boosts from Chinese New Year spending will suffer badly.  

"I think it will heavily impact us and many other restaurants and bars. I think in general people will be afraid to go out,"Isabella Ko, owner of wine bar The Merchants in Beijing told Meiningers.

Real private consumption will grow just 1.1% in the first quarter from a year earlier, according to Oxford Economics, down from a previous estimate of 6.8% growth.  

“Most retailers will be under financial pressure as the sector generally has thin profitability and tight cash-flow conditions,” said Jason Yu, Shanghai-based general manager of Kantar Worldpanel.  

However, the outlook isn’t uniformly bleak for consumer-facing companies. As millions of Chinese quarantine themselves at home, e-commerce companies like Alibaba Group  and JD.com are set to profit, according to AllianceBernstein.    

“The current situation is perfect for e-commerce growth,” AllianceBernstein analysts said in a report. Retailers and other companies suffering from lost New Year sales may also bounce back quickly from pent-up demand once the outbreak eases.  

This is confirmed by co-owner of importer The Wine Republic, Campbell Thompson. "The key change is we will put more effort into home delivery services," he said, adding that the hard part is actually getting the wine to consumers from the company’s warehouses in Beijing, Shanghai, Shenzhen and Chengdu.    

During the worst of the SARS epidemic in 2003, sales fell but bounced back within a few months, according to a report by DBS Group economist Ma Tieying.  

International wine exhibitions may also be affected by the virus. Wine Australia CEO Andreas Clarke said:   “At this stage, it is too early to make a decision about Chengdu in March, Vinexpo Hong Kong in May and the China Roadshow in June,” noting that the Chinese government has cancelled events in February where there would have been large gatherings of people but to date no action has been taken about events in March or later.    

And Torres China managing partner Alberto Fernandez is not taking any chances. "All events such as wine dinners are cancelled. All supplier visits in February are also cancelled," he said.  

Foreign nationals coming to Australia from mainland China, ranging from tourists who planned to visit wineries to trade people focused on anything from sales to viticulture to investment to internships, now face a mandatory 14 day quarantine period.