Old World still facing struggle in UK wine trade
wine market almost to themselves – still need to do more to counter
the ongoing threat from New World producers, a new report suggests.
But solving the problem is likely to require a major change in
attitude to brands, something which France in particular
persistently refuses to do.
Britain is the most important export market for almost every wine producing nation in the world, and New World producers such as Australia have successfully taken market share from Old World stalwarts such as France through a combination of factors such as aggressive marketing and product consistency.
The latest annual survey of UK wine trade buyers from market research group Wine Intelligence suggests that there is little chance of Old World wines regaining the upper hand in the near future – indeed, the increasingly sophisticated nature of the UK wine supply chain suggests that many Old World suppliers may fall even further behind.
“The concept of ‘buying a piece of France’ when you buy a bottle of French wine has been the mainstay of French wine promotion for decades, and indeed it is an image that producers in Australia would give their eye-teeth to share,” Wine Intelligence’s Richard Halstead told FoodandDrinkEurope.com. “But this image is no longer good enough on its own – especially when factors such as product consistency, packaging and price:quality ratios have become such an important part of the modern British wine trade.”
The 2004 edition of ‘What UK Trade Buyers Want’ suggests that New World wines will continue to dominate on supermarket shelves and restaurant wine lists over the next 12 months, driven as much by supply chain changes as by consumer demand.
“One of the signs of a maturing market is a streamlining of the supply chain, to allow retailers to squeeze a bit more margin out a market where volume growth is beginning to slow,” Halstead explained. “While the UK market is far from reaching stagnation point, retailers are nonetheless becoming more preoccupied with increasing profits per metre of shelf space.”
As a result, Halstead said, “major trade buyers have substantially reduced the number of suppliers they use – although the situation has stabilised somewhat since last year. Last year’s survey showed that just over half the trade buyers we asked said they planned to dump a number of suppliers, in particular the small and medium-sized one who were unable to provide sufficiently high levels of service.”
Meanwhile, buyers have also obliged their suppliers to become better at understanding what trade buyers requirements are. “Last year’s survey showed that buyers were highly critical of suppliers, who they said were not doing enough to work with them for the good of the sector as a whole. This year’s results show that more suppliers are spending times in pubs, restaurants and supermarkets to see how wine in presented and sold, giving them a better understanding of how the market works and allowing them to come to the table with growth strategies of their own,” Halstead said.
This, in broad terms, meant that smaller European producers – far more likely to be involved in both making the wine and promoting it than larger New World operators – are at a substantial disadvantage. New World wines are often part of much larger operations with dedicated sales teams or are sold via more sophisticated ‘super agencies’ (such as the UK’s Western Wines) offering trade buyers one point of contact for a wide variety of wines and better able to spend time getting to know the retail trade and its requirements.
All of which does not bode well for entrenched Old World producers, especially at a time when the UK wine trade is taking a step up the quality ladder. “We are at the end of an era in the UK wine trade,” Halstead explained. “Retailers have done their bit to put wine in the hands of the masses, to make it more accessible to the wider UK public, and there is little more that they can do in this regard.
“The aim now is to persuade the wine-drinking public to trade up to more sophisticated products, the wines they really WANT to drink rather than the ones that are simply on special offer. In real terms, wine costs around two-thirds of what it did ten years ago, and the market as whole needs to reverse this deflationary trend by promoting increased consumption of more expensive wines.”
Supermarkets such as Tesco and Sainsbury have been encouraged in their efforts by the success of direct selling operators such as mail order groups or online wine traders, which have managed to persuade consumers to buy more expensive wines through better information management – “making them feel like they are part of a sophisticated club”, as Halstead puts it.
“As consumers become more sophisticated, they do become aware that a ‘better’ wine is likely to cost them more, and that is certainly one of the reasons why supermarket buyers expect the greatest growth this year to come in the £5-7.99 price bracket, rather than the sub-£3.99 bracket as in the past,” he said.
“But it is more than simply this correlation which is driving the move up-market. Stores are certainly stocking more wines in this price bracket than they did before, inevitably leading to increased sales, and disposable incomes have also risen, meaning consumers are more willing to spend a bit more wine.
“But stores still need to do more to make their wine shoppers feel ‘special’ – and many are doing this by employing ‘off licence managers’ in their stores – trained staff who can assist shoppers with their wine purchases by providing much more detailed information about what they are buying.”
This information gap is another major factor which favours New World producers over Old. “France is a classic example of how Old World producers have consistently failed to understand the consumers’ needs in today’s modern wine market,” Halstead claimed.
“The fact that, in this day and age, French producers are still prevented from putting the grape variety on the front of the label is a complete joke. Our research shows that grape variety is one of the main ‘choosing cues’ for most consumers. If they like, say, Chilean Chardonnay, they may want to experiment with other Chardonnays from other countries, but will find it hard to find a French Chardonnay unless it is marked on the label.”
Halstead suggests that the best way for Old World producers to improve their chances of meeting changing market demands would be to rethink their entire branding strategy.
“The argument has been, and indeed still is, that French wine ‘brands’ are the region – Bordeaux, Burgundy, etc. – and that this has been necessary because only by grouping together can the myriad of smaller producers hope to match the marketing budgets of major New World producers.
“But the trouble with this is that there are so many products lumped together under these ‘brands’ that maintaining consistent quality is impossible. All it takes is for a consumer to have a ‘bad experience’ with one poor-quality Burgundy, say, for that consumer to stop drinking all Burgundy wine.
“What suppliers need to do is think about their wines from the consumers’ point of view. The needs of the consumer should be foremost in their mind – as they are for manufacturers of all other consumer packaged goods. This is not to say that all wines must be the same –no more than, say, all washing powders are the same – but simply that producers need to make wines that people will want to drink rather than, necessarily, the ones they want to make.”
With consistent product quality and reliable supplies, New World producers have been far better at doing this – consumers have come to trust their brands, and know that they will always be able to get their hands on the wine they want – and it is this which continues to make them more popular among UK wine buyers – a increasingly strong position which Old World producers will find hard to assail.
For details of how to order your copy of the ‘What UK Trade Buyers Want 2004’ report, click here.
