How the pandemic has affected fine wine’s middle tier




The Covid-19 pandemic has affected wine business for 1.5 year now. The luxury wine led by the French market is however posting strong off-trade sales and presenting high value trading up. The bulk wine relies on a low-price advantage, showing high-volume sales. However, the pandemic has had a negative impact on the middle price fine wine which is exactly what is the Australian offering dominent.


Peter Mitchell MW, Jeroboam’s wine director, said that although the on-trade market has dried up, lockdowns have weakened business and consumer confidence, and altered consumption patterns, an uplift in private clients buying luxury labels that more than make up the profit loss lead by covid-19.


The luxury wine purchase quantity had been raised, essentially thanks to both wine collectors and investors in the high-net-worth space in the latter half of 2020. Buying interest have been most concentrated on Bordeaux especially in the first quarter of 2021, said Matthew O’Connell, head of investment at Bordeaux Index.


The rise of uncertainty and unemployment during the past two years has pushed many consumers to choose cheaper wine. Given that Covid-19 has inhibited people's willingness to drink, the wine consumption trend has shifted from bulk wine to premium and even super-premium wine.


Clemens Riedl, owner of a leading wine distributor in Austria, said that the social restrictions during the Austria pandemic prevented people to drink in bars and wine was mainly sold via supermarkets with an increase in the low end of the market. The market of middle range wine has struggled the most as the middle classes became more prudent with their spending and agregation of disposal income.


Dispite of any pandemic, middle ranking wine has always been the hardest sales. It suffers from a lack of famous brand reputation, and its price is not cheap enough to make you feel it's a bargain.


“The outbreak of COVID-19 in 2020 triggered the largest global recession in over 100 years, with global economic growth contracting by 3.7% in 2020. In February 2021, mass vaccination programs were already underway in many economies and it is likely they will continue for much of 2021. Global economic growth is assumed to be 5.3% in 2021 and 4.1% in 2022. Between 2023 and 2026, global growth is assumed to moderate to an average 3.4%.”


In the post-pandemic period, the middle price fine wine is expected to developfurther thanks to online sales channels. In the case of Australia, during the pandemic, the main sources of domestic wine purchase were supermarkets and liquor stores. The closure and lockdown of trading venues have led to an unprecedented leap in online wine sales. A growing number of wine brands have joined or created e-commerce stores to increase consumer sales directly. The e-commerce channel is best for exporting wine to the USA. While it is hard to predict what consumer behaviors will look like in the medium term, it is expected that the desire to shop online and engage with brands more through social media will develop. Wine companies are ready to incorporate a sound digital strategy into their future business plans. E-commerce is conducive to the future development of mid-range and middle price fine wine.



References


Bayside group. (2021). CHALLENGES AND CHANGE: HOW THE PANDEMIC IS RESHAPING THE WINE INDUSTRY. Retrieved from https://www.baysidegroup.com.au/blog/challenges-and-change-how-the-pandemic-is-reshaping-the-wine-industry/


Department of Agriculture, Water and the Environment. (2021). Economic overview: March quarter 2021. Retrieved from https://www.agriculture.gov.au/abares/research-topics/agricultural-outlook/economic-overview


The drinks business. (2021). In focus: How the pandemic has affected fine wine’s middle tier. Retrieved from https://www.thedrinksbusiness.com/2021/03/in-focus-how-the-pandemic-has-affected-fine-wines-middle-tier/