It’s not just sour grapes. Anyone attempting to earn a living by selling wine in the UK has every right to feel aggrieved after the Budget.
While the government appears to have abandoned its plans for minimum unit pricing and George Osborne binned the duty escalator for beer, there was no such reprieve for wine - and duty is just one of myriad challenges the category has had to contend with over the past year.
Mounting inflationary pressures coupled with a reduction in promotions - particularly of the health lobby-baiting three for £10 variety - have conspired with the duty hikes to push up prices by an average of 6p a bottle.
Much of the modest 2% rise in category value is attributable to these price increases, while volumes inched up just 0.9% as competition with beer and spirits brands for take-home sales intensified [Kantar Worldpanel 52 w/e 20 January 2013].
The industry’s answer? Drive genuine value growth by going posh. Everyone from Tesco to Lidl has been stocking more premium lines of late and this month E&J Gallo’s first premium offering - Apothic Red, priced at a hefty £9.99 - touched down in Sainsbury’s.
“Chateau Lafite is one of the most expensive wines in the world - it’s sold very well online” Lindsey Chadwick, Tesco
Given the declining sales of one of the most premium of wines, Champagne (see right), at first glance such a strategy might seem risky. So why the major push on posher wines - and where does all this leave cheaper plonk?
As far as posher wines go, the depressing truth for Champagne is that it is the exception that proves the rule. Along with other sparkling wines, it has lost out to cheaper fizzes, Prosecco and Cava, while other premium wines are doing very nicely thankyou as drinkers shift from buying cheaper wine in bulk to higher quality wine in moderation.
This is borne out by the figures. Wines retailing for £5 a bottle or less, which make up the bulk of the market, have suffered a 6.8% decline in value sales on volumes down 8.4% last year, according to the latest data from Nielsen. This shows no signs of bouncing back. However, wines selling for between £5 and £8 have grown 13.2% on volumes up 13% and lines retailing for more than £8 are seeing value and volume growth of 17.2% [Nielsen 52 w/e 4 March 2013].
This growth can’t be explained away as merely inflationary either, say wine buyers. “We’re seeing a trade-up in customers’ wine choices,” says Andy Phelps, Sainsbury’s category manager for wine. “There’s very strong growth at the top end - our highest-priced wine is £31 and fine wine growth is healthy, up 23% year-on-year. People don’t want to spend £80 on dinner out, but will buy a couple of steaks and have a bottle of Burgundy.”
It’s a similar story at Tesco. “There’s been a steady move by shoppers towards more premium wines over the last year and many of our customers have been asking for a wider choice of fine wines,” attests fine wines buying manager Lindsey Chadwick.
To satisfy this demand, Tesco has added to its Finest range and introduced more than 100 new lines priced at £10 a bottle and upwards to its fine wines portfolio in the past six months. The priciest, a 2009 Chateau Lafite Rothschild, sells for an eye-watering £4,800 a case, equivalent to £800 a bottle. Yet even it has found a market, claims Tesco. “It is one of the world’s most expensive wines and has sold very well through our dedicated online wine site Wine By The Case,” says Chadwick.
Morrisons is also reporting growth at the pricier end of the market, fuelled in part by last November’s launch of wine website Morrisons Cellar, which stocks everything from a Chateau Palmer Margaux 1996 (£195 a bottle) through to sub £3 bottles.
Wines priced in the ‘affordable treat’ bracket are showing particular promise, says Andrew Turner, Morrisons trading manager for wine. “The £7-plus tier in Morrisons is growing ahead of the market at 22.5%,” he says. “We haven’t specifically targeted this sector but created an improved offering that offers value across all price points.”
Even the discounters are going posh. “We’ve seen an increase in demand for affordable luxury - we launched our premium Wine Cellar selection last year in response,” says a Lidl spokeswoman. The range, which includes a Chateauneuf du Pape priced at £12.49, helped Lidl achieve category growth of 10.3% last year [Kantar].
The key is to ensure premium wines justify their higher price tags by delivering on the quality front, says Booths Wine buyer Andy Green. “The more we can lower the odds of failure and make sure they get a bottle of something special, the better,” he reasons. “We are working hard in this area - in the last 12 months our average bottle price was £6.28, up nearly 7% on the previous year.”
The multiples are increasingly using the trust associated with their upper-tier own labels as a “security blanket” or a stamp of quality to guide wine-shy consumers, adds Michael Saunders, MD of wine merchant Bibendum. “However, they have to make sure their Finest or equivalent is really great of its type or they could undermine not just the wine category but the whole of the finest category,” he warns.
There’s nothing to suggest this is happening at present, however. Accounting for about a third of the total market, own-label wine sales surged 16.2% last year on volumes up 11.6%, driven primarily by the rapid expansion of premium own-label offers. Brands, meanwhile, slipped 3.6% in value as volumes fell 3.9% [Kantar Worldpanel].
Although premium is growing in importance to the retailers, the mid-priced tier isn’t being ignored. Sainsbury’s launched its bySainsbury’s Winemaker Selection mid-range with Spanish and Portuguese wines in October to bridge the gap between its standard House and premium Taste The Difference ranges. Next month, the range will be extended with American, Italian and French wines.
Nowhere is the importance of mid-priced alternatives more apparent than in sparkling wine. Proseccos and Cavas are in double-digit value and volume growth [Kantar], while four of the top 10 Champagne brands are in decline, according to SymphonyIRI. “We can safely say that the Champagne category has suffered from recessionary effects,” says Tim Eales, strategic insight director at SymphonyIRI.
Some Grand Marque brands are still thriving, however. Moët & Chandon has grown 8% in value on volumes up 6.3% [SymphonyIRI], helped in no small part by an increase in volume sold on deal from 44% to 49%.
But while promotions continue to be crucial to Champagne, they’re not always as deep or prolific in the wider category as they once were. Morrisons has reduced its promotions over the past year and The Co-operative Group has also kept a tight rein on deals, says category trading manager Simon Cairns.
“Being predominantly a convenience retailer, in the majority of our stores wine occupies just two or three bays,” he says. “Having lines that only sell on promotion isn’t an effective use of this limited space. A balanced range catering for the broadest range of customers is paying dividends. Overlaying this range with fewer but deeper promotions is also working well.”
With less emphasis on promotions, retailers and brands are looking for different ways to mitigate the price rises, through format, for instance. While the days of cheap 75cl bottles of plonk may be numbered, cheap wine is still available - it just comes in smaller bottles.
Sainsbury’s launched a 20cl single serve Prosecco in June and Blossom Hill is rolling out 50cl formats of three of its most-popular SKUS. The 50cl format offers “the biggest opportunity in glass”, believes Jonathan Owen, Percy Fox’s head of marketing at Blossom Hill owner Percy Fox.
Another price engineering tactic has been to reduce abvs. “Consumers want lighter wine with less alcohol for their midweek tipple, not a robust 14% shiraz all the time,” says Lucy Bearman, head of marketing for wine at Pernod Ricard, owner of brands including Jacob’s Creek and Campo Viejo. “Wines like Jacob’s Creek Cool Harvest offer that lighter style at 10.5% abv.”
” A balanced range overlaid with fewer but deeper promotions is working well” Simon Cairns, The Co-operative Group
And wines are getting lighter - and sweeter - still. Last March, First Cape launched its Light range, which is made from muscato and fruit juice blends and has an abv of about 5%. The aim of such products is to attract the new fruit cider and RTD drinkers to the category.
“We’re excited by new consumers coming into wine from other alcoholic drinks categories,” says Rachel O’Shea, marketing manager at Percy Fox. “We’ve launched Blossom Hill Vie in the last six months - white and rosé at the 5.5% abv - and those have been performing strongly.”
Of course, tax breaks for lower-alcohol lines have helped bolster NPD. For traditional strength wines, the key to success is different, says Saunders. “All of us have to make sure we give consumers good quality wine and encourage them to drink less volume, but better quality. I hover between being quite nervous and incredibly excited about the future.”
As do all the retailers and brands banking on posh wines to drive growth.