Final WFS AC Report
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Final Report on the sixth annual Wines From Spain Advisory Council Meeting October 7, 2020 Trade Commission of Spain in New York INTRODUCTION The sixth annual Wines from Spain USA, Advisory Council discussion took place on October 7, 2020. Ten leaders in the U.S. food and wine market gathered virtually with ICEX and the Trade Commission of Spain in New York for a moderated discussion on Spain’s position in the American wine market. The discussion group included buyers, sellers, media and educators from different segments of the U.S. food and beverage industry. The goal of the Advisory Council meetings is to conduct a discussion among an interdisciplinary team of American leaders from wine importation and distribution, independent and chain foodservice, chain retail and supermarkets, chain hotels, and wine educators, along with senior representatives from Spain’s export promotion authority. Wine producers and exporters are not included in order to keep the discussion focused on the needs and perceptions of the American market. The daylong discussion was managed and moderated by Jon Stamell of Futureshift, a consultant who has worked with ICEX and Spanish wine regions since 2005. COUNCIL PARTICIPANTS • Importer: Diego Lo Prete, Senior VP, Winebow, GM MundoVino • Importer: Patrick Mata, CEO, Olé & Obrigado • Supermarket Chain: Doug Bell, Global Beverage Buyer, Whole Foods • Online Retail: Wendy Stanford, Senior Wine Buyer, Wine.com • Chain Retail: Brian Gelb, Director of Category Management, Total Wine & More • Chain Retail: Gary Fisch, CEO, Gary’s • Restaurant Chain: Gretchen Thomas, VP of Food & Beverage Innovations, Barcelona Wine Bar Group • Restaurant Chain: Andy Myers, M.S., Wine Director, Think Food Group • Corporate & Wine Educator: Andrea Robinson, M.S. Delta Airlines • Media: Ray Isle, Executive Wine Editor, Food & Wine magazine 1 ICEX MADRID • Javier Serra Guevara, Director General, ICEX • Maria Naranjo Crespo, Director, Spanish Food, Wine and Gastronomy, ICEX • Alfonso Janeiro, Department Head, Wines from Spain, ICEX TRADE COMMISSION IN NEW YORK • Bruno Fernández Scrimieri, Senior Trade Commissioner, Trade Commission of Spain • Katrin Naelapaa, Director, Wines from Spain USA MODERATOR • Jon Stamell, CEO, Futureshift Recruitment for the meetings strives for a sales channel or category mix of participants. This year’s participants represented a range of industry verticals with the addition of Andrea Robinson, who is both an educator and wine director for a global airline and cruise line and Ray Isle from Food & Wine Magazine. The extended reach of the group’s combined store/restaurant and online presence gives them direct contact with a majority of American consumer wine buyers and much of the wine trade. Category 2014 2015 2017 2018 2019 2020 Importer/Distributor 2 2 2 2 3 2 Chain Foodservice 2 3 5 2 2 2 Chain Hotels 2 1 0 0 0 0 Supermarket 1 1 1 1 1 1 Wine Retail 1 2 1 1 1 2 Online Retail 0 0 0 1 1 1 Culinary/Wine Educator 2 1 1 1 1 1 Wine Data Analysis 0 0 0 1 0 0 Entertainment/Event 0 0 0 0 1 0 F&B Media 0 0 1 1 0 1 TOTAL 10 10 11 10 10 10 This report and the group’s recommendations focused around six major areas: 1. Impact of Covid-19 2. Reliance on comfort wines 3. Time to address Millennials and Gen Z 4. Growing appeal of organic wines 5. Experiential initiatives 6. Recommendations for Spanish Wineries 7. ICEX/Wines From Spain initiatives 2 1. IMPACT OF COVID-19 The global coronavirus pandemic posed an enormous challenge to the wine industry in 2020. Additionally, Spanish wines, like other EU producers suffered the impact of 25% tariffs that were imposed by the now outgoing Trump administration. The greatest impact has been on the on- premise market as hundreds of thousands of restaurants have been forced to limit their wine sales to curbside pickup, delivery or have closed entirely. Additionally, most of their sales were to reduce inventories so very few new purchases were made from suppliers. The off-premise market including online has seen dramatic increases as in-home consumer drinking Is up. U.S. Bottled Table Wine Imports from All Countries Through September 2020, packaged table wine imports were down 22% in value and 9% in volume. This decline was almost entirely driven by the tariffs on wines from France, Spain and Germany. Spanish wines, overall, were down -12% in value and -8% in case volume. If there is a bright spot for Spain, it is the performance of still wines over 14% alcohol, which were up 275% in value and 202% in volume. This is due to the reclassification of many wines to 14+% alcohol where tariffs are not being charged. U.S. Bottled Table Wine Imports from Spain The way that consumers select and buy their wines has changed dramatically over the last year because of the COVID-19 pandemic. While consumers may not be going out or hosting like they used to, they are still drinking as much as ever while at home. Whether they’re bored or coping with stress, consumers have been stocking up on wines to drink in the comfort of their own homes. Ecommerce sales for wine retailers have skyrocketed, as customers have turned to buying wine online for delivery or curbside pickup. 3 The pandemic has heightened stress levels and wine has become a refuge for many consumers. As people have been cooking and drinking more at home, online engagement has reportedly increased for food and wine magazines and blogs as people seek to learn how to cook more meals and pair them with complementary wines in their own safe haven. The pandemic has undeniably accelerated the rate of innovation in terms of digital and ecommerce capabilities in the wine industry. Wine, beer and spirit retail businesses have been slower to adopt technology than other consumer packaged goods retailers. Now it is rapidly evolving to fit the needs of online consumers. Whether it be partnering with third party marketplace delivery, establishing their own delivery mechanisms, or providing curbside pickup, the wine business is adapting for survival. The sudden changes brought on by the pandemic this year have not been without logistical challenges to retailers. Some of the country’s most successful retailers closed their stores during the height of the pandemic and adapted to shift from between one hundred percent to ninety-five percent in-store business to one hundred percent mobile. Retailers could further benefit from new enhancements in how technology can facilitate delivery and pickup. At high- volume stores an application that could help would enable the input of license plate numbers for a convenient curbside pickup. The pandemic has Retailers have also been adding extensive undeniably accelerated the descriptions of wines on ecommerce sites to encourage consumers to branch out and purchase rate of innovation in terms more premium and artisanal wines. As an example of of digital and ecommerce how quickly consumer behaviour changed this year, Gary’s Wine with four stores in New Jersey and one in capabilities in the wine California saw usage of its mobile application jump from two thousand to thirty thousand users in just two industry. weeks. Similarly, online only retailers have seen their sales go through the roof. The increase in ecommerce sales offers an opportunity to provide more information on details of the wine. Retailers are adding descriptions of flavors, sustainable practices and winery stories to their websites and orders have risen as a result. By investing in consumer education, retailers are able to diversify orders. Throughout the pandemic, consumers have continued to buy in bulk increasing orders of three- liter boxes. However, many retailers have found that the average selling price has decreased. As consumers are drinking more, they’re ordering lower-priced brands that they’re familiar with rather than exploring stores for lesser-known wines, a shopping behavior common when walking through stores. More expensive brands that built equity before the pandemic are continuing to grow. Companies that have invested in promoting awareness in their brands have shown that building brand equity pays off in difficult times. The restaurant industry has suffered from lockdowns and reduced capacity, so wine sales have dropped precipitously. After reopening and following safety protocols, restaurants are favoring paperless menus and going digital. This poses a threat to speciality wines as it is difficult for consumers to read hundreds of wines on a digital menu. A major restaurant chain with 400-500 wines on their list has had to reduce their listings because the pandemic has made it difficult to retain staff who, in other times, would explain the wines to diners. The travel industry has understandably suffered as a result of the pandemic, with air travel struggling the most. This has resulted in a limited wine selection on planes, for both cost and 4 safety reasons. Delta is currently serving just one white and one red; another example of how limited choices and popular brands are dominating. Based on these trends and recommendations, Spanish wine producers should invest in digital communications and partner with different digital providers to extend their marketing reach. Spanish wine producers will need to build on their brand awareness to encourage consumers to purchase beyond the well-known, national brands. 2. RELIANCE ON COMFORT WINES Due to the impact of Covid-19, consumers are understandably spending less time in stores. Doug Bell of Whole Foods refers to this phenomenon as “kamikaze shopping”, whereby consumers are quickly in and out of the store to buy and not browse. As a result, consumers have been buying large, national wine brands, such as Kim Crawford, Kendall Jackson, La Marca Prosecco in bulk.