The latest news of companies struggling financially during the global pandemic has come from the United States wineries. With the reduction in purchases and forced closures of facilities, wineries have been feeling the intense pressure of trying to stay afloat during this crisis.
The Wine Loss Situation
Wineries make much of their revenue by on-site customers and tasting rooms. These have all been shut down since mid-March. As well, direct-to-consumer sales have significantly decreased in recent times. This is expected to continue to some degree after the pandemic, as consumers are not likely to be spending much of their extra money on unnecessary items such as wine.
Wineries have also been faced with paying for extra expenses that were not planned. These include hand sanitizers, extra cleaning products, and face masks for their employees. Many wineries could not afford to keep their employees on during the pandemic. So far, thousands of winery employees have been temporarily laid off.
The tourism industry has been severely affected by Covid19 as well. The number of visitors to wineries decreased by 75% in March alone. Wineries had to cancel an average of four events that month that would have been bringing in revenue. These included weddings, dinners, and tastings. The average winery lost almost $40,000 in March; a number that is not sustainable for business to continue for very long.
Wine Industry Revenue Loss
The United States has over 10,000 wineries and more than 8,000 wine grape growers. By the end of 2020, this industry could lose up to $5.94 billion in revenue. The average winery lost an estimated 64% of its sales in March alone. This number increased to about 75% of their sales in April.
The smaller wineries are expected to be hit harder by the pandemic. Wineries that produce 1,000 cases of wine annually are estimated to lose 66% of their total revenue for this year. There are over 6,000 wineries in the United States that fall under this category. Larger wineries that produce between 1,000 to 5,000 cases annually are expected to lose 47.5% of their revenue this year. This accounts for almost 4,000 wineries around the country.
Will The Wine Industry Recover?
Responding to a survey sent out by WineAmerica in March, the average winery indicated that they will require three months of normal business in order to return to their previous financial stability. This includes restoring all their customers, visitors, sales, and promotional events. In reality, if the state of emergency were to be lifted, there will still be restrictions in place regarding social distancing. Customers would not be permitted to indulge in wine tasting, and group tours would be strictly limited.
Many wineries are family-owned, with a small number of employees. These types of companies do not have sufficient resources to sustain the business after such heavy losses. Luckily, the wine business can be assisted with the recently approved Coronavirus Air, Relief, and Economic Security Act. This act will provide loans for small businesses, such as wineries, as well as allow for tax credits and payroll tax deferral.
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