Visit a wine shop these days, either virtually or in person, and things seem pretty calm. You’re likely to see labels you recognize, price points that are fairly stable and a supply that’s consistent and expected. Behind the scenes and underneath the screw caps, however, is a microcosm of global turbulence.
Today starts a special mini-series on the topic, as we consider some of the forces influencing the selection and availability of wines in our shops and on our tables at home. The rough seas of 2020 continue to exert their vertigo on the otherwise placid-looking lifestyle of the wine industry, from tariffs at the beginning of the year threatening global (and especially trans-Atlantic) wine shipments, to the COVID-era lockdown impacting the viability of restaurants and tasting rooms around the world, to the latest wildfires up and down the western US either destroying or compromising grape harvest, yield and supply.
The 2020 circumstances are not for the feint of heart.
That much was clear even as last year drew to a close and, as I wrote in December about the looming tariffs’ impact on trade and consumers alike, the viability of the businesses of some of our favorite importers would be threatened. Boston-based Latitude Beverage Co., founded by Kevin Mehra in 2007, was one of them. I checked in with Latitude’s Brett Vankoski for an update.
Here are three themes worth keeping in mind as you shop the deceptively calm waters of the wine aisles as 2020 comes to a close.
Unexpected Upside: Increased Inventory
The tariff situation at the beginning of the year expedited the shipment of wines from Europe to the US, which meant that Latitude Beverage Co. actually had more inventory to place in their accounts. That came at a fortuitous moment, as consumers started to shelter in place (SIP) and work from home (WFH). Vankoski said that Latitude’s independent retailer business has grown substantially over the last few months, particularly for them in states where a significant number of independents (or “mom and pop” shops) exist, such as Connecticut, New York, New Jersey and Massachusetts.
“Comfort Zones,” from Wine to Relocation
Latitude saw the biggest lift in sales where their wines were already seen as an “established brand.” Consumers gravitated toward what’s been comfortable and familiar to them, Vankoski said, especially in the months from March to June as the SIP and WFH realities of COVID settled in.
At the end-of-summer / early fall point in the cycle, sales have evened out, not necessarily because people are buying less but because they have relocated to markets and states outside of Latitude’s distribution area. “People moved from, say, New York to Vermont where they can work virtually,” Vankoski said as an example. “That affects their purchasing habits and that changes our landscape a bit.”
The Bulk Market: From Surplus to Limiting Inventory
An uncomfortable reality of the wine market at the beginning of 2020, and for some time before that, was excess supply of grapes and juice. There was too much wine and not enough consumption. Vankoski noted that COVID has been tipping the scales on that equation, as larger national brands (those that consumers find comfortable and familiar — see above) have sucked up excess supply in the bulk market.
The business strategy for Latitude Beverage Co. and others like them is to transform market inefficiencies (like an excess supply of juice from high-end producers) into reasonably priced wines by bottling the juice under a different label.
When tasting room and restaurant sales slowed earlier this year because of COVID, Vankoski and his team bought premium wine that, by July, high-end producers feared they wouldn’t be able to sell. Then the wildfires hit in California and either destroyed or compromised a significant amount of yield from the harvest. Within a few days, the pendulum swung from producers fearing an oversupply this year due to COVID, to those same producers fearing they wouldn’t have enough wine to sell next year due to the wildfires. In the first case, they looked to sell their grapes or juice; in the second, they looked to pull their inventory back in.
“Everything came off the market because producers didn’t know if they’d have anything to sell” next year, Vankoski said. “They’re holding on to more inventory, at least until they can determine how much of the 2020 vintage they can actually use. They’re figuring out what volume do they need to sell, at what price, in order to maintain their balance sheet.”
They’re tricky questions, with no hard-and-fast answers. We’ll continue the discussion with our next post in Part Two of this mini-series.