"As I reflect on the last six weeks, it has been a sprint," Sokol Blosser CEO Alison Sokol Blosser told Wine Spectator. "But a sprint is a tough pace to sustain, so I hope everyone has the chance to catch their breath before the next big sprint."
Since winery tasting rooms in California, Oregon and Washington began closing their doors starting March 16, they've been in a mad dash to connect with their customers and drum up sales via promotions, virtual tastings and other channels. The next sprint may come when they are finally allowed to reopen, as managers will have to rethink how they conduct tastings and train employees on safety protocols.
For now, it's hard enough surviving the current shutdown without imagining the next step. Though some restrictions have eased, shelter orders as a result of COVID-19 have not been lifted. In some cases, local authorities have already extended them through May.
Online sales up, restaurant sales gone
Those that rely heavily on tasting room sales have felt the pinch, but many have been resilient and generated new revenue streams. "We were really worried, as we have three tasting rooms, each in high-rent areas with several salaried staff," said Stacy Bellew, director of public relations for Milbrandt in Washington's Columbia Valley. But a month later, she reports that their online sales have already surpassed what they typically see during the holiday season. "The combination of customer calls and progressive e-marketing campaigns resulted in a record sales month for us in April and possibly for May," said Bellew. "We've generated enough revenue through customer calls and online campaigns to sustain our salaried employees."
How wineries are adapting is not a one-size-fits-all solution, however. Perhaps the most anxious are those whose business model is dependent on restaurant sales.
Jasmine Hirsch, general manager of Sonoma's Hirsch Vineyards, said their sales are split almost evenly between direct-to-consumer and wholesale. "The wholesale side is a black box," said Hirsch, noting that 75 percent of those wines go to restaurants and that Hirsch's success is contingent upon the uncertain future for restaurants. "A lot of my friends in the restaurant industry say they can't operate profitably at 50 percent capacity, so what does it mean for the restaurants that carry our wine?"
Hirsch believes it will vary from market to market but will be challenging to anticipate, and expects the demand for premium wine with dinner may decline. "When we are back, we have a lot of wine to sell in an already distressed market."
Impossible to predict
Wine America, a national lobbying group for vintners, continues to conduct surveys of its members to gauge the mounting impact of closures. The latest responses from 727 wineries in 45 states found that tasting room sales declined 74.5 percent between March 15 to April 15. Wholesale sales were down an average of nearly 30 percent during that time.
Some are already planning how to survive for as long as shutdowns last. Stephanie Honig, public relations director for Honig in Napa Valley, said they have a plan in place to get them through the end of the year, regardless of when the shutdown is lifted, taking into account everything from paying staff to purchasing grapes to bottling costs. "It's tight, but you have to look beyond today," she said.
Honig's neighbor, Shannon Staglin, president for Staglin Family Vineyard, said she immediately began re-forecasting budgets, including significantly reducing expenses and adjusting sales forecasts. "All non-essential expenses were cut, and we made reductions in other areas where we felt we could maintain our quality standards," she said. "I wanted to quickly plan and prepare to position ourselves to be in the best place possible to weather what we anticipated to be a long-term scenario."
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Hirsch, whose winery uses exclusively estate-grown grapes, said there is no quick and easy pivot to make. "We own land and farm grapes for a production cycle that is long, and our cost crunch is coming at the worst time of the year," she said. Now is when they need to turn inventory into cash to invest in bottling the wines from 2019 and to make wines in 2020. "Even with additional direct-to-consumer sales, I don't see a robust pipeline to make up for the lost money from distributors not being able to sell our wine."
Hirsch adds that if they choose to make fewer wines, due to the slowing economy, that means finding customers for grapes. But results from the Wine America survey showed that wineries are already forecasting cutting production, with grape purchases anticipated to decrease by 22 percent.
In the interim, many vintners report that they've received aid in the form of an Economic Injury Disaster Loan (EIDL) or the Paycheck Protection Program (PPP) for small businesses. Blosser said they received a PPP loan, which enabled them to rehire many of the staff they had laid off. Staglin said they were approved for a loan, but have yet to receive funds. "We're not counting our chickens before they hatch!"
What does reopening look like? Spacious tasting rooms
In Santa Barbara, John Dragonette, co-founder of Dragonette, believes his PPP funding should help bridge the financial gap until he can reopen his tasting room, and is optimistic that visitors will be returning to Santa Barbara as soon as they are able. "We are preparing plans to open with social distancing and other protective practices, and look forward to seeing old and new friends alike soon," he said, noting that it's essential to envision what might be around the corner. "If we are forced to have social distancing, it will mean fewer visitors but perhaps a better-quality experience."
Honig, too, has begun to prepare for opening with guidelines. "Our current permit allows for 100 visitors per day, and we plan to limit to 20," she said, adding that she expects she'll have to turn a lot of people away. "Maybe we're overly cautious, but we truly need to control how many people come in and when, and make sure everyone feels safe and comfortable."
When that may happen is still up in the air. California, Oregon and Washington, home to the country's most significant concentration of wineries, have agreed to coordinate a phased reopening together. The average winery that participated in the Wine America survey said it would require approximately 18 weeks to return to regular business.
Encouraging news remains scarce, but optimism is high. Several report learning lessons that they will use even after the pandemic. Sokol Blosser was already looking to a better 2021. "We fully intend to be celebrating our 50th anniversary in 2021. We may look a little different, but we will still be here!"
