Coronavirus – The Impact on SA Wine Export Market to China

The consequential commercial impact on South Africa’s wine exports in reaction to the Coronavirus outbreak can be extreme as China is one of our leading (and possibly most dynamic) export markets at present. The number of Chinese visitors to our country have noticeably declined, and outgoing business travels have also grinded to a halt. There is undoubtedly a big decline in wine sales and exports to China, given influential factors such as emptier restaurants, a decline in consumption and a dramatic drop in retail visitors.

China Situation

It’s important to understand the timing of the Coronavirus (COVID-19) outbreak and together with the subsequent impact it is having on the practicalities of life, business and the economy in China. The crisis broke at a time when more than 50% of the population was on the move, since the tradition of families reconnecting over the Chinese New Year is very strong. When the crisis began to unfold, and travel restrictions and local quarantines were applied, a huge portion of the workforce was already away from their place of work and or places of residence.

The government then added an additional week to the national holidays in China, so activity was again suspended. Now, as the cities and workforces try to get back to work many of their workers are not in their hometowns, and when they do return to their place of work, they are required to self-quarantine for 14 days before joining the workforce. All businesses are suffering from the logistical issues of the travel and quarantine regulations.

To give you an impression of the impact on daily life, see the graphic below, clearly identifying the dramatic drop in daily passenger traffic. https://www.capitaleconomics.com/the-economic-effects-of-the-coronavirus/

daily passenger traffic

Consumption

The Chinese New Year period is traditionally over the time that families and businesses celebrate together – over feasts and banquets and large gatherings. The virus situation means that such gatherings are either entirely banned or simply impossible. In major cities like Shanghai and Beijing the local authorities have stopped restaurants and bars from opening altogether and even when they are permitted to open, groups are restricted in size and all customers are recorded and temperature checked on arrival.

This is clearly having a massive impact on the on-trade sector across the country. The impact thus far is short term but the hospitality industry in China has essentially already lost more than a month of trading, but will still be incurring the fixed costs of running their businesses. 

Daily-cinema-ticket-sales

From the perspective of wine business, this is will have a severe impact on the first quarter of 2020, what remains to be seen is how quickly demand picks up again once normality returns, and whether or not inventories in China were balanced before the crisis. These are at present unknown and it is very difficult to forecast.

It is still too early to say what the impacts will be over the course of the year, the optimistic view is that 100’s of millions of Chinese consumers will emerge from quarantines with a renewed appetite to consume en masse, but it is still too early to suggest when this might happen.

Status Quo

There have certainly been short term impacts on exports but it’s too early to quantify these in volume, statistics or rand value.

One of the key challenges moving forward is that it’s very difficult to plan promotions or in-market activities whilst wine shows and events are being postponed or cancelled for the next couple of months.

Our thoughts and prayers are with all those affected both in China and worldwide. We hope and trust that the virus will be contained and that things will begin to return to normal very soon. (ICWM)

Information supplied by: Marcus Ford (WOSA), Asia Market Manager, Shanghai, China and De Bruyn Steenkamp (CWM), South Africa.

This article was first published by The Institute of Cape Wine Masters. www.icwm.co.za

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