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Virus impact on California wine business reaches $4B, report says

Analysis just released by the Sonoma State University Wine Business Institute puts a grim cast on the cost of the coronavirus pandemic, the subsequent lockdown plus an expected decline in grape price to the state’s wine estimating total losses.

“California’s wine industry is projected to lose $4.22 billion in revenues in 2020, based on significant decreases in on-premise, tasting room, and direct sales,” the institute stated. Its report is based in part on work done released in April by Jon Moramarco of BW166.

In addition to forecasting a contraction of $9.6 billion in the California economy, the Sonoma State report projects a loss of 42,376 jobs and $586 million in state and local taxes in 2020 from COVID-19 related losses to wineries and growers.

“While headwinds were in the air for the wine industry prior to March, there were no headwinds as dramatic as a pandemic,” the authors stated. “The impact of COVID-19 on the wine industry will ripple through all parts of the economy. Beyond lost jobs and business revenues, state and local governments will see impacts to their budgets and the services that they can provide to citizens.”

Estimated contractions in the winery and vineyard aspect of the business alone is more than 14,000 direct and approximately 3,000 indirect. In losses in "indirect" categories — supporting business such as trucking, warehousing and employment services — could total more than 14,000, the report concludes.

Analysis by Moramarco of BW166 and the institute contained in the report estimated revenue declines hit the wine business in several key categories: On-premise (-$2.5 billion); direct-to-consumers sales (-0.3 billion); tasting room (-$3 billion) ;and wine graps (-$1.4 billion).

The good news was during the lockdown from the virus starting in March, the sales of "off-premise" beverages rose by $1.3 billion.

The institute gave a sobering assessment of the impact of the pandemic on the state’s wine industry. Among its conclusions:

• The job losses are 16,369 for the $4.219 billion directly, and there are additional job losses of 26,007 based on the indirect and induced job losses.

“This is a total loss of over 42,376 jobs in California throughout hundreds of industries,” the report said.

• “For every dollar of direct loss there is 122.8% additional loss to California economy otherwise;

“The $4.219 billion loss leads to a total loss to the California economy of approximately $9.607 billion in business revenues.”

California winegrape growers could suffer at least $437 million in lost sales from this year’s grape harvest due to coronavirus-related economic disruptions, according to a new report by a top industry analyst.

On June 26, Moramarco reported the surge in sales of wine at retailers of beverage alcohol for off-premises consumption in the weeks following the mid-March lockdown will not offset lost wine sales via on-premise channels and direct from wineries to consumers through wine clubs and tasting rooms

The projected hit to growers from the virus would be on top of $395 million in reduced sales revenue expected to occur as a result of excess wine inventory following the record winegrape crop in 2018 and slowing consumer demand for wine. Together with the virus-related situation, growers’ losses from March 2020 to February 2021 could total $832 million.

Read the report:

wine-business-institute-economic-impact-report-covid-19-wine-and-the-california-economy-200630.pdf

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