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Jeff Morgan, co-owner of Covenant Winery in Berkeley, went to Asia in November to introduce his portfolio of wines made in Israel to potential new customers in Taiwan and Japan. The trip was a resounding success.
“Taiwan was interested in Israeli wine because it was good wine from an exciting place. They don’t care about kosher,” he said.
He managed to sell 250 cases in Japan and 50 in Taiwan, not bad for two countries where the kosher wine market is still a novelty.
Now the very fate of Morgan’s Israeli wine operation is up in the air because of the coronavirus.
It’s a predicament shared by other local kosher winemakers, a somewhat niche market. Another boutique winery, Hagafen in Napa Valley, saw sales drop and has shut its tasting room for now.
Covenant, which started in Napa Valley in 2003 and moved to Berkeley in 2014, began Covenant Israel eight years ago, becoming the only kosher winery in the U.S. to make wine in both the Golden State and the Jewish state. The Morgans travel to Israel frequently; they have an apartment in Tel Aviv, and their daughter made aliyah. She introduces Israeli restaurants to the wine and consumers to the brand.
But with the closure of restaurants everywhere came an almost total loss of sales.
With the longer grace period in Israel for paying vendors, “there are people who owe us money since January, and I don’t think a lot of them will reopen,” said Morgan. “This is a death knell for them, and those that do reopen someday — and we don’t know when — they will probably not be in a position to pay us money they owe us from a year ago.”
It’s particularly sad for Morgan because of how established his business had become in Israel, especially after an initial lack of interest from Israel’s booming wine industry in what an American kosher winemaker had to offer.
“We were probably in 75 restaurants, which is more than how many carry us in the entire U.S.,” said Morgan. Covenant wines can be found in many of Israel’s major hotels and restaurants, from fine dining to trendy neighborhood spots, he said.
“It was very satisfying for me, because four years ago no one would pay attention to us, no one knew who we were,” he said.
Without the income from restaurant sales, he doesn’t know how he’ll bottle the 2018 reds currently in barrels, something that was supposed to happen in May (not to mention that he can’t travel to Israel).
[Restaraunts] that do reopen someday — and we don’t know when — they will probably not be in a position to pay us money they owe us from a year ago.
He’s already let go of one employee in Israel and cut the salary of another. In past difficult situations, he’s sometimes used profits from Covenant Berkeley to bolster the Israeli operation, but of course the pandemic has hurt the American market as well.
“While I believe we’ll make it through this crisis, sales were down 38 percent in March,” Morgan said.
March and April are usually the best sales months for kosher winemakers. Not this year.
And despite statistics that say alcohol consumption is way up during shelter-in-place, that doesn’t necessarily translate into higher sales for boutique wineries like Covenant and Hagafen.
“We had already made significant sales in the wholesale supply chain before Passover, but on the direct-to-customer side, that was not so fine,” said Ernie Weir, owner and winemaker at Hafagen Winery in Napa Valley.
About half his sales come directly from consumers, and since large institutional seders were canceled this year and family seders were so much smaller, sales were “disappointing,” said Weir. “But that’s history already. Now we have to learn how to react to the new world, which doesn’t include anyone coming to visit us.”
Weir is thinking about how his tasting room will function once he can open it again. Standup service at the bar is out, tasters will have to be seated at tables spaced far apart, and employees will be masked and gloved. For now, all of his tasting room employees have been let go. The office staff is still working, but at reduced hours and staggered times so people can maintain social distance.
Weir is no stranger to crisis management: He lost some of his agricultural equipment and one winery building in the 2017 North Bay fires.
“Through this I have learned more than I ever wanted to know about insurance and banking,” he said. “It’s not totally depressing, but you can’t be completely optimistic, either.”
One way he’s planning on taking advantage of the slower period is to install a vegetable garden on Hagafen’s property, with some of the output for sale and some being donated to tourism workers in the area who have lost their jobs due to the pandemic.
While Hagafen always did some telemarketing, it is relying on that much more now, and overall, Weir’s office staff is becoming better at marketing through social media and Zoom, as the entire world adjusts to this new reality.
“It’s fun to learn, but it doesn’t really take the place of social engagement,” said Weir. “You begin to miss face-to-face conversations. I even miss the nudniks.”