Wine lessons from a past epidemic

The 2003 SARS epidemic hit China’s wine trade hard. While some companies collapsed, others came out stronger. Ian Ford speaks to Felicity Carter about what he saw.

Ian Ford, Nimbility
Ian Ford, Nimbility

Ian Ford had been in China for eight years when everything changed. In November 2002, a farmer from the Guangdong province had been admitted to hospital with flu-like symptoms. The man died of a disease that no-one had ever seen before, later dubbed SARS. Originating in a bat, it had jumped to a civet, and then into a human host.

The epidemic that followed hit China’s fledgling wine trade hard—but Ford thinks it holds lessons for the current situation.

Life in an epidemic

“China was not particularly forthcoming with the public in the early days of the SARS epidemic,” says Ford, an American who was based in Beijing at the time. “And so once they went more public with the actual size and scale of the problem it sort of went from zero to 60 in five seconds.”

Ford had moved to China in 1995 to work for Seagram, the North American wine and spirit company, which mostly sold Cognac and some Scotch - the wine market barely existed, amounting to just 250,000 9-litre cases. “It was pretty small,” says Ford. “To put that in perspective, it’s about 60m cases now.” But Ford thought the Chinese market had huge potential, so in 1999 he and partner Brendan O’Toole set up Summergate, an importer with offices in Beijing and Shanghai.

Sure enough, things did begin to pick up. “We set out to import from France, Chile and Australia. We started very early with Concha y Toro,”  says Ford. “We built a portfolio and we built a wine business.”

And then, in April 2003, came SARS.

“It was absolutely as bad, if not worse, than what’s happened with Covid-19,” he says. “Hotels were still open but running at 5% occupancy. F&B was closed, the independent restaurants were closed, travel around the city was difficult.” Logistics became difficult as well. “The delivery vehicles had to be sanitised twice daily, including the tyres, the exterior, the interior.”

The wine business at that time was heavily driven by Western restaurants, five star hotels and business entertaining. “Today, business travellers are the icing on the cake - back then, they were the cake. Our business virtually collapsed.”

Summergate pivoted. “We had to do a massive gear shift to a home delivery, direct-to-consumer business,” says Ford. “It managed to keep our business on life support. We survived.”

Other important measures

Ford says it helped that Summergate was small and lean. “We probably had 20 people and our overheads were quite manageable. We sort of nipped and tucked and got through that period.”

Having cash reserves was also important—as were good relationships with suppliers. “As a small business, we didn’t have parent companies that could help us with bridging finance, so the working capital was the primary challenge,” he says. “We had some brand owners that understood what we were going through and they were very supportive and creative in how they could help. Companies like Concha y Toro and Villa Maria earned our loyalty for many years.”

Ford says that, of course, suppliers need to be paid, but everybody also needs to understand that in a pandemic, many businesses are up against the wall.

Clear communication with customers, staff and suppliers is also critical for “team morale, team management and making sure people understand that the owners and leaders are handling things. Communications across the board is super important.”

Planning for what comes next is also important. The restrictions lasted from April to September 2003 and then, suddenly, it was over. Domestic travel began again, businesses opened, and business travellers returned. “All of this pent-up demand was now released.” Ford says there was an explosion of business, and he expects the rebound from Covid-19 to be even bigger. “Now it’s the Chinese who have been at home for four weeks, eating noodles, and now suddenly the restaurants are open.” Ford says the last barrier to a rebound is not government restrictions, but people remaining nervous about virus transmission. Once that has passed, people will go out again.

Yet the rebound can bring its own challenges.

The bounceback

Demand didn’t trickle back—it erupted. “The problem was that we had a three-month lead time to get wine into China,” and during the crisis they were managing inventory very tightly, including reducing buffer stock. “You don’t want your working capital tied up in inventory, and you don’t know when the turning point is going to happen.” For Summergate, that moment came when they suddenly realised the hotels and restaurants were reopening, and they needed to get stock levels back up.

It was at this point that the work of managing supplier relationships paid off.

Many businesses did not survive the SARS epidemic. Restaurants and bars closed—but Ford says new ones sprang open in their place.

As for Summergate, it didn’t just survive SARS, it thrived. By the time it was sold to Woolworths Australia in 2014 for $25m, Summergate had 13 offices, 11 distribution centres, more than 400 employees and a fine wine retail business. Today, Ford is a founding partner of Nimbility in Hong Kong, which offers market intelligence and a pathway into Asian markets.

His final advice? That now is a great time for people to “demonstrate their loyalty, support and camaraderie—an opportune time to bolster and secure those relationships.” Ford says he knows that going without payment or certainty is bitterly difficult, but to bear in mind that this pandemic will one day be over. “Keep a keen eye out for when this resolves itself, and think about what your business is going to look like.”

Felicity Carter

 

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