How is the HK wine industry overcoming Covid-19?

February, an important month on the calendar for wine merchants in Hong Kong and China, is usually when sales volumes reach a peak, driven by Chinese new year. This February, however, was possibly the most devastating ever due to the massive outbreak of coronavirus (COVID-19). db Asia talked to few insiders in the HK wine industry to see how they are pulling through.

2020 was supposed to start optimistically, with an uptick in business after the six months of intense social upheaval in Hong Kong.

Jason Ginsberg, co-owner of Ginsberg+Chan Wine Merchants, revealed that: “Since June 2019, we have seen a marked slowdown in customers visiting us in Hong Kong from abroad; particularly acute were the slowing numbers from China. We were probably down 80% in terms of physical visits from our customers in China.

“Our online and internet orders were also impacted by the overall sentiment in the city. Sales were off about 20% at year end after a strong first half which meant the second half of the year was down sharply. We have also pulled back our purchasing to trim our portfolio size by around 20%.”

Equally affected by the traffic chaos brought by the social unrest, Kanas Lau, senior sales manager of Royce Cellar, told us its plunging retail sales have dropped by 60%-80%, not helped by the fact that the new flagship store was located in Tsim Sha Tsui, one of the prime locations where protests took place.

Gregory Bielot, co-owner of East Meets West Fine Wines (EMW Fine Wines), however, ended 2019 on a positive note despite the slowdown in on-trade business in June 2019. It grew sales in Hong Kong and Macau by around 10% year-on-year largely due to the new additions to its portfolio, strong focus on e-channel sales and particularly strong sales in Macau.

Thanks to CNY sales, in general the industry started to have a better outlook as 2020 began and as sales started to pick up. Ginsberg added, “we had a very strong bump in January, which made us become optimistic about the stabilisation of the market after a long while.

“However, since the announcement of the coronavirus the market has almost stalled with very little activity. All of our events in HK and planned events in Shanghai, Manila and Kuala Lumpur have been postponed indefinitely. “

The dreadful influence of coronavirus has brought something that has not been seen in decades. Bielot explained: “Over the past 16 years we have seen many crises but no doubt this is one of the biggest challenges we have ever faced. The coronavirus had impacted our business a lot, even worse than protests. Many tasting and corporate events were cancelled, casinos in Macau are closed and hotels are empty. People are really worried about going out and are not in the mood for socialising and drinking wines.

“The same has happened in China’s major cities as well. Most businesses are closed, streets are vacant, subways and buses running empty, and most people are homebound. One could hardly imagine how devastated the cities looked in the weeks following Chinese New Year.”

During this sensitive period, the buying behaviour of people has changed accordingly as well. Lau said: “Since the protests began, our major customer group became local drinkers who mainly concentrated on purchasing daily drinking wine priced from HK$200 to HK$600 per bottle. Recently, our private clients are more reluctant to place orders because of the decreasing need to attend social gatherings. Even if they place orders, they tend to buy various items but less quantity of each SKU.”

She also pointed out that with the drop of Chinese tourists visiting Hong Kong, the fine wine market will shrink significantly, as will the total value of the Hong Kong wine market.

On the other hand, Hong Kong is notorious for its high rent, which creates one of the most challenging hurdles for business operations. Stepping into February, apart from the fact that locals were refraining from going out, the tourist numbers in Hong Kong had drastically reduced and foot traffic in retail nosedived. Meanwhile, not many developers have been willing to offer rent cuts to ease the pressure and some shops have chosen to shut temporarily in order to save costs.

Proactively, businesses have also come up with an array of strategic ideas to turn the tide. Royce Cellar is enthusiastic to work with Deliveroo to try reaching out to a larger crowd of local drinkers who are now at home most of the time. It has also lowered the minimum order amount for free delivery and worked on promotion on half bottles. At the same time, it has shifted its focus to build up its e-commerce site and strengthen its social media campaigns.

EMW Fine Wines, meanwhile, has switched its focus towards online promotions and private club events. During the course of the protests and now coronavirus, it has continued to carry out a number of seasonal promotions, including a recent Valentine’s Day promotion with Duval-Leroy Champagne.

Ginsberg tried to maintain a positive outlook. He said: “The virus is so hard to predict and we have no idea how this is going to unfold. We are bracing for a very challenging first half of the year but we are cautiously optimistic that the market will bounce back once the virus situation normalises sometime in the next three to four months. There will be pent up demand throughout the region and with our strong portfolio of hard to find wines we will be well positioned.”

Bielot added: “We are very sensitive to the negative impact the crisis will have on our clients across different disciplines, namely hotels, restaurants and retailers. With many businesses closed, and many employees laid off, it is a challenge for the whole industry indeed. Moreover EMW continues to support our clients, for example we are now offering delivery service to them, and we are endeavour to protect our employees, clients and supplier partners.”