Zamora Company explains how brand owners can help the on-trade recover

Spanish producer Zamora Company has reported that wine and spirits sales in China have recovered as the country emerges from a sweeping coronavirus lockdown.

The Licor 43, Martin Miller’s gin and Ramon Bilbao wine supplier purchased a majority stake in Shanghai-based drinks distributor Tintafina back in 2018. It enjoyed surging sales of its key brands in China until January 2020, when the market collapsed as a result of the coronavirus lockdown.

However, sales increased steadily throughout March, as restrictions were lifted, bars began to reopen and life returned to a semblance of normality. By the start of April, volume sales had made an 80% recovery, and trading is now at a similar level to that seen before the COVID-19 outbreak.

“The recovery seems to be somehow faster than we anticipated,” says Emilio Restoy, managing director at the family-owned company. “The market as a whole takes between three and four months to start recuperating.”

That Chinese recovery provides the firm with some optimism as the drinks industry struggles in various key markets across the world. The global on-trade has taken a battering due to lockdown measures. Thousands of bars have been forced to shut their doors while authorities battle to contain the virus, and off-trade gains have not fully mitigated the blow.

Zamora has seen a 1,200% sales increase through its direct to consumer wine business in Spain, while off-trade sales of Martin Miller’s are flying in countries like the UK. However, it is heavily exposed to the on-trade, so the COVID-19 pandemic has had a significant impact upon its business.

“Perhaps due to our Spanish origins, we are very much an on-trade driven company,” says Restoy. “We believe brands are built in the on-trade. You interact with consumers in the on-trade.”

The impact of COVID-19 on the wine and spirits industry varies in each country, depending on how heavily reliant it is on the on-trade. The coronavirus has hit Italy and Spain harder than any other any other countries in Europe, and they have some of the highest death tolls in the world. Seventy per cent of wine and spirits sales in Italy go through the off-trade, so the blow to the drinks industry has been less significant there than in Spain, where 70% of sales are on-trade.

“Every country has an on and off split, and the bigger the on, the worse the impact,” says Restoy. “We are a distribution company in Spain with the highest on-trade concentration by far. It’s about 82%.”

One saving grace for Zamora could be its geographical split. Half of its sales are now made through exports. It owns distribution companies in China, the UK, France, the US and Spain, and it has offices and partnerships around the world. “Geographically we are spread out and we have eggs in different baskets, so this softens the blow,” says Restoy.

China is seemingly several months ahead of western Europe and the US in its coronavirus recovery, and sales there could help prop up the business while the rest of the world strives to return to normality. Zamora has also been around for 73 years, so it has been through various recessions, while it has a robust stable of established brand, leaving it well equipped to weather the storm.

However, smaller players could fall by the wayside during the crisis. “Consumers look for established brands,” says Restoy. “In times of uncertainty, people want security. They want trusted brands. We are seeing with the coronavirus is that many of the small brands are going to disappear from the shelves, because the supply chain will not make it. Big, trusted premium brands will be strong and come back into focus.”

However, he accepts that Zamora will endure its fair share of struggles this year as the global drinks industry a projected double-digit sales decline. Yet the firm is already working hard on plans to help stimulate the hospitality industry when the lockdown measures are eased.

“The blow for us has been especially relevant,” says Restoy. “It is a big issue, but if you own brands, this industry is very resilient. It’s about taking the blow and engaging with your clients in the on-trade to help them when people start going out. It will not happen all at once.

“It will be slow, and people will be very worried about being in a big pub altogether. We need to help the hospitality industry to recuperate, because the big problem for us, and for the drinks industry, is if the hospitality industry doesn’t recover.

“Clearly the on-trade will not be healthy until there is a vaccine for the virus, that gives people confidence to mix. Until that happens, we probably will not be as comfortable in tight, enclosed environments to have a beer or a gin and tonic or a glass of wine. This impact will be felt in the on-trade. It won’t be up and running fully until there is a treatment. I would bet that it will be within a year.”

Restoy appreciates that brands establish themselves in moments of crisis. Zamora Company has already donated €400,000 to groups such as the Red Cross, Caritas and the Food Bank Foundation since the coronavirus crisis began.

“It’s when you really show what you are made of,” says Restoy. “At this moment, brands have to step up. When people are confined at home, the first message to deliver online and through social media to consumers is about being together.

“Phase two involves talking with the trade, especially with the on-trade. Some businesses will never open again. The mind-set of the brand, is how can we help you? How can we do something together? This is going to be extremely expensive for the brands, because we are going to have to do something with people that don’t have resources, so we will have to put in the resources for them. We believe helping the hospitality to recuperate is the right thing to do.”

When asked how companies like Zamora can help the hospitality industry recover, he adds: “Giving them payment terms. They don’t have cash. It’s as simple as that. But they have to pay rent, taxes and salaries. Brands have social media and contact with consumers. We have desirable products, so we can bring in people. People want to go back to their lives, to have a drink with their friends, to get the heck out of their houses. How can you welcome them?

“We were thinking of inviting them for the first drink to celebrate with friends, the first drink is on us. We want people to go to the bar, to get the wheel to start moving again. They will buy the second drink themselves, and something to eat, and bars will start making money again and slowly we will catch up. The brands have to be extremely proactive and engaging with the people. It’s our route to market. If it doesn’t work, we as an industry don’t work.”