I have found myself frustrated many times over the past number of months when the wines I am hoping to purchase from the liquor store are not available. The reason I have been told is a result of the pandemic. COVID-19 has affected shipping companies and dock workers hard, resulting in huge backlogs and skyrocketing shipping costs.
The global wine supply chain generally starts with the grape grower -> producer -> packer -> exporter -> shipper -> importer -> trucker -> wholesale distributor -> retailer/restaurant/bar. The time to complete this process has increased from 30 days to 3 months or more.
Wine importers are having trouble bringing wine not just from Europe but also from Chile, Argentina and South Africa. Wineries are also experiencing a shortage of bottles, many of which are imported from China.
Many distributors historically operated on a just-in-time basis whereby goods were received as close as possible to when they are actually needed, to keep costs low. However, today just-in-time processing is not working because of all the delays.
Shipping costs have increased by over 50% during the past year. Along with a lack of shipping containers available to ship the wine, the containers get delayed at the dock resulting in additional charges, and there is a lack of truck drivers available to deliver the wine to its final destination. In preparation for the upcoming holidays wine merchants have planned their shipments at least 3 months in advance. However, there is no guarantee that the wines will reach their intended destination in time for the holidays.
It is expected that volume-driven wines will most likely bear the brunt of the skyrocketing costs. Chilean and Argentinian wines will most likely suffer the most from the soaring freight costs. It is felt that these less expensive wines will lose their competitive advantage with the extensive increase in freight cost.
However, there is optimism that the situation will eventually improve, though probably not until mid-2022, as countries come out of lockdown and more truckers are hired. It is now feared that inflationary pressures will take quite a while longer to come back into proper alignment.
It’s hard to imagine an upside for anyone for the foreseeable future, from producers to importers to distributors to retail and hospitality outlets to customers. The impact will soon become apparent on wine store shelves and restaurant tables as we end-consumers will eventually bear the added costs. Isn’t that always the way?