The pandemic may be wreaking havoc on global markets, but for some companies, it’s business as usual. Not business as it was a month ago, but business as it’s been through the last turbulent century of economic downturns, wars and natural disasters.
“Nothing is normal right, now. It’s really a day-to-day fight,” says Dr Andreas Brokemper, CEO of Henkell Freixenet. But he thinks that how ordinary people behave in this crisis, particularly whether they take health and social advice, will determine the economic fallout. “Experts are giving recommendations. If everybody behaves in this way, you can be optimistic that there will be the beginning of a return to normality in two to three months from now.”
Whether the world returns to normality, or whether the pandemic leads to a deep recession, Henkell Freixenet’s history shows it’s possible for companies to thrive – if they’re using this time to think about innovation.
Lessons from the recession
Today, Henkell Freixenet is a sparkling wine powerhouse, whose international portfolio includes Champagne, traditional method wines, sekts, crémants and the blockbuster Prosecco Mionetto. Founded in Germany in 1832, the company has a history of innovating in tough times; as well as investing early and often in striking advertising, the company also launched the now ubiquitous piccolo (quarter bottle) in 1935, in the middle of the Great Depression.
Dr Brokemper is in no doubt of the seriousness of the current situation. His days now begin with a crisis management meeting, with input from every subsidiary of the group. The company has production sites in Germany, Catalonia in Spain and in Italy, and he says continuing production is a challenge. “It’s not easy to bring the product to our logistics centre, then fill the trucks, then bring them to different destinations.”
A particular challenge is finding enough drivers, and then getting the trucks through closed borders. “When the trucks are stuck at the Polish border, in a traffic jam of 6km, you can imagine,” he says. “The goods are not moving.”
The good side, however, is that the relevant local governments see wine as part of food production. “We are able to produce at all our different locations.”
Another positive of the current situation is online sales, as people trapped at home keep buying sparkling wine. “People want to keep their normal life,” he says. “They stock up – they want sparkling wine in their cellars.”
Dr Brokemper says this means that right now is a good time for innovation. “I believe when people need to stay home and cannot go out, they also expect something new.” The company is therefore going ahead with its planned new product launches and brand refreshes. One such includes a redesign of the Freixenet product line. “We introduced the small bottle [into Freixenet], so we have a program to promote the mini Freixenet Prosecco. We will now add an Italian rosé.” Wine in a can is something else that’s new. “It’s a tremendous trend in the USA,” he says. “I think there is potential in Europe.”
Of course, many of the people trapped at home now feel relatively secure. “The question is how will the situation change when people fear for their economic future.”
Dr Brokemper says the recent global financial crisis is the probable model for what comes next, rather than the SARS epidemic in China; the economy bounced back quickly after SARS, but it was also an event that was much more limited in scope. “After 2009 it was a slow recovery,” he says, though he says the real question will be how many people end up unemployed, and whether the state is able to help them or not. “I would expect that this will be a slow recovery.”
What lies ahead
Overall, however, Dr Brokemper sees plenty for the wine industry to be positive about – particularly in the sparkling wine category. “The consumption of sparkling wine will go global. For many, many decades 80% or more was inside Europe.” Then the UK market began to grow, “now North America and South America. Asia is at the starting point.”
Sparkling wine has moved out of its ‘celebration’ niche into the everyday, in large part thanks to Italian aperitivo culture. “Even with the shutdown, in the evening the Italians call via Skype or FaceTime and say, ‘let’s have a glass of aperitif now’. In general, the aperitif consumption of sparkling wine is positive.” Then there’s what Dr Brokemper calls “the three billion” – the women around the world who are entering the workforce, “who have their own income, and who work and then go out, especially in Asia”.
In general, women prefer wine to hard liquor and Dr Brokemper says the demographic trend is driving long-term growth in sparkling wine, rosé and non-alcoholic sparkling wines.
As for Henkell Freixenet itself, Dr Brokemper says it may come out of the crisis changed in at least one way – it will be more digital. “We got used to travelling for any meeting we wanted to have,” he says. “I am 100% sure that we will use the opportunities given by video conferencing much, much more than in the past.” Though, he adds, there are some situations in which direct contact remains as necessary as it was in the 1830s when his business was first launched.