Spain without good restaurants and bars was once unimaginable. But for several months, that was the reality as the nation locked down during the COVID-19 pandemic, upending life and taking away close to two-thirds of wine sales by value for domestic wineries.
To date, the country has experienced one of the highest death counts—more than 28,000—from the virus and more than 250,000 confirmed cases. The impact on Spain's economy, especially the hospitality sector, has been devastating. As the country slowly begins to unwind its months-long lockdown, wineries and grapegrowers across all regions are strategizing both short-term and long-term plans in an effort to keep their businesses alive.
"All our wineries are open from a production point of view," said Miguel Torres Maczassek, director general of Familia Torres, which makes wine in nine appellations including Penedès, Rioja, Ribera del Duero, Priorat and Rueda. "We did not stop production during the peak of COVID-19 because the Spanish government considered wine business an 'essential' sector, like the rest of drinks and food, and also because [of] the direct link with agriculture."
Wineries kept their cellars open and focused on keeping staff safe. "From the very beginning, we took measures to reduce the risk of contagion," said Victor Urrutia, CEO of Cune in Rioja, which has been open, operationally, throughout the pandemic. "Anyone at risk was sent home or told to stay at home. We provided masks and gloves to all employees; gel dispensers everywhere."
Sales slowdown and a threat of glut
While wineries have been able to maintain their operations, sales suffered as a result of the mandatory shutdown of bars and restaurants. According to Torres Maczassek, 62 percent of sales of Spanish wine by value come from consumption in bars and restaurants. It's 48 percent by volume.
"For us, April and May were the worst months," said Torres Maczassek. "In general, all sales related to restaurants or touristic areas experienced a major drop while the retail and specialized store [sales have been] maintained. But during the past weeks some restaurants have started to re-open, and we can see a lot of people on the terraces."
The loss of on-premise sales has left wineries with a surplus of wine. That's leaving many with little appetite for grapegrowers' 2020 harvest. Many Denominacións de Origin (DO) have already begun addressing the issue.
"DOs are taking measures in order to reduce yields of next harvest to mitigate the risk of oversupply and minimize potential downward pressures on prices as much as possible," explained Miguel Gil, general manager of Bodegas Juan Gil in Jumilla. "For example, many DOs have reduced the maximum official yield per hectare that wineries and farmers have allowed in order to be classified within the DO. Additionally, for the first time in Spain, the government and the DOs are promoting the 'vendimia en verde' (green harvest), that allows winegrowers to discard part of their [crop] in advance to avoid oversupply in the harvest season."
"In many areas the wineries, small and large, will be buying less grapes from local growers," said Torres Maczassek. "It is something that affects all DOs."
Until now, wine tourism in Spain has been at a standstill since the shutdown. Wineries aren't expecting to receive anywhere near their typical number of visitors.
"We get about 30,000 guests in a normal year. That's about as much as we're able to take care of properly," said Urrutia. "We're reopening as we speak, after being shut for three months. But of course it won't be the same. It will be an underwhelming year, and we will miss very much our guests from abroad."
Enrique Abiega, CEO of LAN in Rioja, believes wineries can adapt by emphasizing outdoor activities. "The idea is to bring people close to nature, getting back to the roots and promoting experiences in the vineyards," he said.
Other wineries are finding creative ways to bring the winery experience to people's homes. "Since we cannot [host] all the visitors that we would like, we have been very active in digital platforms and social media. There is even a video of me guiding people through a virtual visit of the winery," said Torres Maczassek, whose wineries receive about 60,000 visitors in a typical year.
There is optimism, however. "Long term, I have to think we'll be fine," said Urrutia. "What we offer is precisely what people want nowadays: an escape from the city, from the masses … and I am not just talking about Cune. I believe this applies to much of our wine scene across quality appellations in Spain."
Wineries are also looking toward increased digital efforts for online wine sales. "Sales of wine through the Internet have grown in the double-digits, but this segment only accounts for about 1 percent of the Spanish wineries' income," said Torres Maczassek. "The next years ahead of us, there will be a greater effort in order to run every business better to overcome the damage made by COVID. We all have been forced to learn faster about digitalization of online wine sales."
Several vintners echoed that sentiment. "This crisis has highlighted the importance of diversification in terms of markets and channels," said Gil. "Wineries with a diversified presence worldwide have proved more resilient to the shock originated by COVID-19, while wineries whose business is strongly concentrated in one market suffered much more."
Despite all the business-related turbulence over the past few months, Torres Maczassek and his team have been committed to helping their local communities, "We started a production of facial screen protection devices printed in our 3D printers. They were mainly used by doctors and nurses in the local hospitals. We also participated in a campaign called Comer Contigo with chefs from Barcelona to provide food to those in need."
Still, through it all, Spanish wineries continue to focus on what they do best.
"At Cune, we've been through tough moments over the past 140 years," Urrutia reflected. "We have the resilience to get past this, at least I think we do. But we have to make sure we continue to deliver extraordinary quality."
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