ADVERTISING: Advertorial — Perspective
Skylark Owner and Winemaker John Lancaster was in town over the weekend, and as brothers-in-law who work in the same field will do, we talked much about the wine industry. With a year like 2020 that saw so many uncontrollable influences on the business of wine, John and I sat down to a formal interview to cover the impacts and big changes wrought by such a tumultuous year. John has a unique perspective to lend, working both as a sommelier at a hugely popular San Francisco restaurant and running a winery since its opening in 2002.
We’ve talked much since March about COVID-19 and the impacts on the world of wine, it is the dominating factor in any discussion of 2020. I specifically asked John what he thought the long-term implications would be for restaurants around the country and the impact on wineries? John said, “At best, you won’t see restaurants return to even close to normal until the fourth quarter of 2021, and that is a best-case scenario.”
It is a multi-faceted problem controlled by how long it will take to get the vaccine rolled out, the continuance of government restrictions on restaurants in many states, and perhaps the most far-reaching factor, when diners will be comfortable going back to “big busy restaurants.” During John’s visit he commented frequently how different things feel here in Idaho versus California. That in the Bay Area most are just not comfortable venturing out.
John believes many of the changes to dining behavior among consumers will be permanent. “People have discovered how to stay at home more, and that they don’t need to go out to eat as much. Further business travel will be forever changed, companies are unlikely to return to having workers on the road as much, and conventions will need time to recover.”
This specific comment is striking: “at some point restaurants in areas other than North Idaho will be allowed to open, but what will they open to? If consumers aren’t comfortable going out the challenges will continue and intensify.”
John feels that restaurants will have to be more creative to make up this gap on diners in the restaurants by continuing to-go programs, incorporating outside venues since folks seem more comfortable being outside than in, and creating other options.
The impact on wineries who sell more to restaurants is significant and with the chance of demand not returning to pre-COVID-19 levels until at least the fourth quarter of 2021, there will be wineries that can’t make it. Direct-to-consumer business is the most profitable bottle sold from any winery. John commented, “DTC business is strong but not strong enough to make up for the shortfall in restaurant sales, making a business that was tough to make a profit on even tougher.”
We then turned to recent mergers and acquisition activity in the wine industry. Over the last couple of years, M&A has been robust but is now slowing sharply due to the fires that have scorched much of the west in both 2017 and 2020 and COVID-19 buyers of both wineries and vineyards are being far more careful about pulling out their checkbooks to buy a wine business on the production side. While the biggest buyers still have plenty of capital to do deals, they are looking much deeper before committing to a purchase. Also, with winery and grape growing facing major challenges, those willing to sell or actively pursuing a sale are rising sharply. “There are many more people who are just ready to be done,” John said.
Finally, we took some time to discuss the frequency of crop-impacting fires. While we have covered the short term effects on wine production, John and I focused more on long term challenges of fires. John said, “Things are changing. Forest management is on everyone’s mind right now. It is one of the only things you can control.”
He also commented, “The general trend is for harvest to be earlier,” avoiding the main part of the fire season in California. The problem is harvest dates, and many other factors are beyond the control of winemakers and grape growers alike. I asked John specifically if he was aware of any mitigation that can be done in the vineyards once fires start and he said simply, “there is not.” He said, “the worst part about the fires in 2020 is, prior to the fires starting, it looked like a great year. The crop looked good and tasted good, then the fires started early and didn’t stop and it was over.”
We thank John for taking time to talk at length about this very challenging year of 2020, we will continue to bring the perspective of winemakers and grape growers whenever we can.
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George Balling is co-owner with his wife, Mary Lancaster, of the dinner party, a wine and gift shop in Coeur d’Alene by Costco. The dinner party has won the award for best wine shop in North Idaho twice, including for 2018. George is also published in several other publications around the country. After working in wineries in California and judging many wine competitions, he moved to Coeur d’Alene with Mary more than 10 years ago to open the shop. You can also follow us on Facebook at facebook.com/#!/dinnerpartyshop.