“There’s a link between Brexit, the tariff war and COVID-19” – just-drinks speaks to SpiritsEurope director general Ulrich Adam – CORONAVIRUS SPECIAL | Beverage Industry Interview

In the drinks industry, the coronavirus pandemic has turned the spotlight on to trade associations, with members searching frantically for answers to their many questions. In our latest coronavirus special interview, just-drinks hears from Ulrich Adam, director general of SpiritsEurope, who discusses how his organisation is coping with COVID-19.

SpiritsEurope represents 31 national trade associations in 24 countries

SpiritsEurope represents 31 national trade associations in 24 countries

just-drinks: Which parts of Europe have been worst hit by the pandemic so far?

Spirits Europe DG Ulrich Adam: The problems for Europe are similar structurally in all the different countries, but there are nuances in terms of where the challenges are bigger or smaller. The big concern for us, of course, is the complete shutdown of the HoReCa [hotel, restaurant and catering] sector and the whole on-trade sales channel. That’s a huge challenge for so many of our partners across all of Europe, although it’s more pronounced in certain countries. In Spain, for example, the on-trade historically accounts for just over two-thirds of spirits sales. So, there’s a pronounced challenge in certain geographies about the on-trade.

There are opportunities as well. In Latvia, the Government has now temporarily allowed the sale of alcohol via e-commerce. That’s a positive development. So, all of the countries in our membership face the same massive challenges, but the picture’s varied.

j-d: Have you learned anything from Italy and Spain that you’re able to advise your members about in markets that haven’t been hit quite so hard yet?

UA: The immediate lesson that the sector took was to take actions such as moving into producing hand sanitiser in the distilleries or providing the alcohol to producers. We’ve seen that kind of mobilisation in every country. There’s also a growing list of initiatives – from both small and large distillers – where they are helping their local communities. Then, we’ve seen direct donations being made by our members to partners in the HoReCa sector.

j-d: Are you actually able to prepare your members for these circumstances at all?

UA: We’ve never had to face this kind of challenge before. Our aim at the moment is to provide analysis and coordination to our members. The policy response is critical for our sector – our job is to make sure that, in these tough times, things aren’t made unnecessarily worse. The EU has been very good in recognising very early on the strategic importance of the food supply chain, including spirits. They’ve also been good in giving guidance that food and drink needs to travel without restriction across the internal market.

The other area of work for us is to lend our support to national associations. Then, there’s the area of trade. The wider question is how global trade flows and relations will be affected after the crisis. We’ve had a special situation in spirits, with tariffs in place for nearly two years from the EU and six months from the US. That’s where we need to be formulating to policymakers what measures we will need and how we can best contribute to a speedy recovery once we move out of the lockdown.

j-d: How satisfied are you with the different reactions from governments to the pandemic across Europe? Have their actions been proportionate?

UA: We understand that the measures taken across Europe are necessary at this time. Much that we regret the decision, of course, that pubs, clubs, restaurants and hotels are closed at the moment, closure is needed. It’s clear that spirits needs to be seen as an essential part of food and drink production. That’s something we’ve seen early on as well. It’s good that we haven’t had to struggle with some of the very restrictive measures that we’ve seen elsewhere globally.

j-d: How concerned are you that you might lose some members of SpiritsEurope altogether?

UA: We’re always trying to serve as best as we can and add value to what they need. It’s too early to tell how the exact economic impact will play out. The spirits sector has always had a close community and fraternal spirit – that’s one of our strengths. I would hope this brings the companies and the sector as a whole through this crisis without major damage.

The longer this situation lasts, the higher the pressure will be on companies and trade associations to consider how to deal with the clear loss of business that distillers are experiencing. There will be knock-on effects that will come later in the year, but there are still a lot of uncertainties. We would hope to see the HoReCa channel open up again in the coming weeks, where it is proper to do so. But, certain elements, such as intercontinental travel and, with that, tourism and travel retail, will clearly take longer to return to pre-crisis levels.

Ulrich Adam was appointed director general of SpiritsEurope in
January 2018

Ulrich Adam was appointed director general of SpiritsEurope in January 2018

j-d: Are there any opportunities opening up for the spirits industry from the current circumstances?

UA: The opportunity is there to show solidarity and to take action. That’s something we’ve demonstrated very clearly in the European spirits sector in the past few weeks, and we’ll continue to do that. From a business point of view, there’s no real opportunity in the short term. There’s a responsibility on our side to push out the responsibility messages that we’ve built up over the years. It’s very important that we also give out guidance that in a lockdown situation, it’s important to drink according to the guidelines. That’s an important element – to show that we live by the responsibility criteria that we’ve put on ourselves.

In the last two or three years, we’ve seen a lot in terms of craft, innovation, new product launches, premiumisation. It’s very difficult to keep that dynamic during this crisis. We need the community and we need our partners in the on-trade to keep that at full swing. Of course, that’s something that is taking a temporary hit.

j-d: What do you think the spirits industry will learn from this particular episode?

UA: One result that we’re likely to see is a greater push into digitisation. The sector’s presence online will grow in importance. That will be something that will not go back to pre-crisis levels. We see that e-commerce is going up – that was the case before, but it’s more pronounced now. People are also looking at virtual interaction and the presence of brands in the virtual space. This extends to things like consumer information, where SpiritsEurope is very active. We were already working on new bespoke digital consumer information tools that we need to have in place by the end of 2022 as part of our commitment to the European Commission. So, the crisis has given an involuntary boost to certain trends in digital.

j-d: You joined SpiritsEurope at the end of 2017. Since then, you’ve been dealing with tariff wars, Brexit and now the coronavirus pandemic. Do you regret taking the job?

UA: Not at all. It’s a wonderful sector to be in. When the going gets tough, the tough get going, and we’ve seen that in this crisis. These are testing times, but we’re looking for the right answers and to do the right things.

It has been been a challenging time, but there’s a thematic link that you could draw between Brexit, the tariff war and COVID-19. All of these have shown the importance of keeping goods and border trade flowing. We’ve been discussing this in the context of Brexit – How can we ensure frictionless trade between the UK and the EU? We’ve also been discussing this on an international level with the EU/US tariff war. With the coronavirus, inter-state inter-governmental and inter-country cooperation along with free trade will need to be a cornerstone to speed up the recovery. That’s the debate we hope will take place.

The lesson not to learn from this crisis is to take on isolationist policies. Looking to the future, international integration and free trade, whether in the context of EU/UK relations, EU/US relations or broader international relations, should be part and parcel of the recovery efforts.

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