Coronavirus and SA wine: Anthony Hamilton Russell of Hamilton Russell Vineyards
By Christian Eedes, 26 May 2020
The current conversation around Coronavirus and its effect on the South African wine industry is perhaps inevitably very emotionally charged.
We put the same set of questions to a variety of industry stakeholders with a view to obtaining a better understanding of what’s happening on the ground and also plotting a way forward. Here is how Anthony Hamilton Russell of Hamilton Russell Vineyards replied:
How badly has Coronavirus crisis impacted your business?
Its certainly hurt, but the patient is alive and kicking. In fact, things have not been nearly as bad as we initially expected, but that of course depends on how much longer local sales are prohibited [wine may be sold for home consumption from 1 June under Level 3 of the government alert system] and for how much longer international travel is disrupted. We had fortunately shipped much of our export allocations of our 2019s before lockdown, so we have had reasonable income. The big surprise has been how strong export demand has been during this period. We had expected this to be greatly reduced, but some of our main markets have requested additional stock over and above their allocations. With no local sales at present, we have been able to supply this. It is now widely known that wine consumption has gone up during this period internationally. The weak Rand and lower interest rates have helped things as well. After the 2008 “crash” the particularly strong Rand, very tight credit and high local interest rates really hurt.
We made an early decision that this was not a situation to cost cut our way through. It was a situation to finance our way through – and bank finance has been forthcoming. We don’t want to cut off a limb now and limp our way into a brighter future. So we will be planting new vineyards on Ashbourne and replanting new vineyards on Hamilton Russell Vineyards as planned. We have also committed (as far as possible) not to reduce any salaries or lay anybody off. So far so good. We have also managed reasonably significant contributions to feeding schemes.
The people I really feel for are our colleagues in the restaurant and hospitality industry. If we loose a sale today because of lockdown, we still have the wine which we can sell later. If a restaurant or hotel looses a sale today, that sale is gone forever. Our issue is one of financing the delayed revenue. Theirs is different – and worse.
How many wineries do you foresee closing as a result of the pandemic? What future for growers?
Wineries have a strange way of staying open, despite not making money – or in some cases never making money. They don’t close, they find a new set of people to shoulder the financial burden. It is actually quite rare to see a winery shut down completely and auction off their equipment. The full force of the free market doesn’t always apply to the wine industry. People fail to take account of the non-financial (psychic) income which drives a lot of the investment. So perhaps a few, but not many.
Wineries that built their businesses around a significant percentage of high-margin direct sales to local visitors and tourists – and those that relied on sales of their wine through their own restaurants, will be particularly hard hit. This often, but not always, means wineries with underdeveloped and/or neglected export markets. By design, we have not often sold more than 7% directly to visitors. We encourage visitors to rather purchase wine in their home markets or from their retailer of choice. We see ourselves as wine producers for the world, not local wine retailers or restaurateurs. And we are not, other than indirectly, in the tourism industry.
Grape growers operate on tight margins at the best of times – inexcusably tight in many cases I believe. More of the value of a fine wine should be attributed to the grower, and they should get it. There may be quite a few bad debts for grape growers – or at least significantly delayed payments. The best growers will continue of course, but there may be an accelerated removal of marginal vineyards. Not necessarily a bad thing for the industry in the longer-term.
What plans do you have in place to get going again once restrictions are eased? How will doing business be different?
We have given a lot of thought to that – and we have certainly had the time to think! Initially the local sales will be almost entirely retail focused and we have prepared for this with as regular contact with our local retail customers as possible. We also have our limited stock ready. We have opened up certain multiples for our wines, that never previously got much or any. This will, with luck, compensate for a slow stop/start for the on-trade. We have decided not to push on-line retail directly from the property to boost sales – and we are not discounting. Again, we are producers, not retailers. There are more and more specialist on-line retailers who deserve a “cut” for their effort and investment.
We will of course be generous to restaurants that owe us money (and there are quite a few). The situation is not their fault. In short, we will continue to supply wine to restaurants re-opening up even if they have unpaid debt to us.
Eventually I believe business will re-establish normality – or a kind of normality. I would caution against an excessive reliance on on-line contact, which has proved so useful and comfortable from our home “offices”. It is way over-traded and as we all either suspect – or know – it is no substitute for personal contact. So as soon as we can travel more freely, we will visit our customers.
We have all had time to think. Perhaps a little more deeply and strategically than before. This should result in a little more focus in the industry and with luck several better designed businesses. Everyone credits Churchill with all great quotes, but I believe he said “never waste a good crisis”. And we won’t.
What will the South African wine landscape look like after the pandemic? Will the industry recover quickly or will it be changed forever?
Our team has a fine balance of optimists and realists (no pessimist ever accepts any title other than realist). But I would say we would come out on the side of a recovery faster than expected. People are amazingly resourceful in troubled times. Restaurants have become such a cherished experience – and almost a way of life for so many – that there will be a drive towards their proper re-opening and regular patronage. If anything, wine has become a more cherished “small luxury”. And there are more people who know a little more about it with their additional time for on-line activity during lockdown. Travel is also increasingly hardwired into so many people – particularly the more affluent, of whom there is still an ample supply. And South Africa remains an extremely attractive destination – often for the more courageous and less conventional traveller. When the flights open, the people will come.
What I find strange, is that the lockdowns worldwide and the social distancing regulations were put in place to flatten the curve and avoid hospital overload – not to hide from infection forever. But people have become panicked enough with all the constant reporting of cases (massively under-recorded) and Corvid 19 deaths (not road deaths, not malaria deaths, not aids deaths, not deaths from malnutrition or economic destitution, not even flu deaths) that they believe they need to hide from possible infection forever. That simply can’t happen. If lifestyles need to alter to “hide forever” then it should be the lifestyles of the most vulnerable, not the young, fit and the economically active healthy. Someone has to earn the money and keep economies functioning. I believe we are about to realise this and move back to normality, albeit cautiously.
Read other interviews:
Chris Alheit of Alheit Vineyards
Tertius Boshoff of Stellenrust
Paul Clüver of Paul Cluver Wine Estate
Boela Gerber of Groot Constantia
Gerard Holden of Holden Manz
Johan Kruger of Kruger Family Wines
Bruwer Raats of Raats Family Wines
Donovan Rall of Rall Wines
Mike Ratcliffe of Vilafonté
Johan Reyneke of Reyneke Wines
David Sadie of David & Nadia
Eben Sadie of Sadie Family Wines
Lukas van Loggerenberg of Van Loggerenberg Wines
Michael White of Highlands Road