Have we got wines to entertain you...

Sorry. Have I missed something? Who are you trying to entertain and why?

Well, it might take more than a one liner to get you off your seat, but look around and everyone on the high street, on the interweb, or bouncing around on social media are all trying to catch our attention by not just selling or telling us stuff, but looking to entertain and offer us an experience as well.

You mean turning the high street into the equivalent of It Ain't Half Hot Mum?

Now you're getting it. Yes, it's like all our retail chiefs have picked up on that famous “meet the gang cos the boys are here, the boys to entertain you, with music and laughter” line and are doing their very best to turn an afternoon down the shops in to an experience in its own right. Welcome to the world of “shoppertainment” which increasingly is as much about show business as it is selling you a pound of carrots, a bottle of Pinot Grigio, or a lifetime of insurance.

 

Gon then, give me some examples.

How about this. All the serving staff at John Lewis' new flagship store in Oxford's Westgate shopping complex have been taking acting and performance lessons at the local Oxford Playhouse. The idea is to give them personal confidence skills in how they talk and what their body language is like when serving customers. It's about the chain's ambition to “reinvent the department store for the 21st century” including dedicating a fifth of the store to 21 “services and experiences” areas offering haircare and styling advice, to helping you buy your Christmas decorations.

Anything else?

This week's Halloween saw as many ghouls, ghosts and contortionists on restaurant and retail floors as sommeliers and store staff. All trying to shock and awe to attract customers in. Martin Williams refers to his M Restaurants as being like a stage on which he can use his training from drama school to perform and project himself as head of house. Debenhams' stock room is even known as the “backstage” and there are signs for staff heading on to the sales floor that say, “Smile, You're On”. It's a different spin on the kind of welcome Bet Lynch would give you in the Rovers Return.

So why are retailers and restaurants behaving this way?

Just look at how you are reading this. Chances are you're glancing at this on your smartphone whilst doing a host of other things, be it downloading music, following a route on Google Maps, or taking part in a Twitter exchange. Getting someone's full attention is hard. Even if they are actually in your place of business looking to buy what you sell. Simply putting goods on a shelf, or writing out a carefully crafted menu, won't wash with the modern consumer who has probably downloaded your range on an app and done a SWOT analysis on your prices.

So good experiences are good for profits too?

Absolutely. Get the whole shopper experience right and not only are consumers happy to pay a lot more for the basic item in question, they are likely to come back for more and bring some friends and family with them.

Is that why more wine tastings are taking place in grungy nightclubs and underground bunkers?

You have been paying attention. Yes, the traditional wine tasting is slowly being transformed away from silent, oak panelled, soulless rooms, full of pin striped suits pouring wine. If all you have to offer is trestle tables and a cold buffet then it does not matter how cool climate your wines are. You run the risk of your wines being unloved and unbought.

But surely we don't have the time or money to be turning tastings in to “winetainments”?

Why not? It's about changing our collective mindset about how we as an industry are talking and promoting wine to the end consumer. To get that right we have to start with ourselves and how we talk and sell wine to each other. It does not need to cost any more money, it just needs more creative thinking, and risk taking to do things differently that are genuinely as memorable and exciting as you claim your wines to be.

What about retailers and restaurants?

Again you don't need to be hiring Billy Smarts Circus to sell a few more bottles of New Zealand Sauvignon Blanc. But you need to start offering more than a plate of salami and cheese to get people to turn up for a tasting. Look at last month's Wines of Argentina Barullo event which started off as a normal tasting and ended up as a full on rave with DJs from Shoreditch House. We've come a long way from expecting to be entertained It Ain't Half Hot Mum-style, but we still need to find new and fresh ways to “raise the rafters” and put a “hey, hey, hey” in to everything we do.

Why wine has to find a way to free itself from the shackles of the multiple grocery sector

This all sounds rather grown up, what do you mean shackles? Isn’t over 80% of wine sold in grocery retailing?

Yes, it is and probably more when you factor in c-stores and online. Which is all well and good when the dynamics of grocery retail are all swimming in the right direction for the benefit of all. But in recent years the driving factors within the grocery sector have changed. They have been turned upside down to become an unhealthy imbalance of power between the big supermarket chains, beholden to their share prices, and the privately owned German discounters that have no investors to please and can play a completely different game, backed by the strength of their global retail networks. Throw in the spectre of Amazon, that can afford to run a retail empire based on never seemingly having to make a profit, and you have a trading environment that is uneconomic for even the biggest FMCG brands, never mind the impracticalities of the wine retail model.

Phew! That's a lot to get off your chest. But why is wine at such a disadvantage in the current retail environment?

Wine businesses supplying the retail sector are no longer in control. They’re being forced to make decisions about where and how they sell their wine which they know to be unsustainable in the long term, but unavoidable in the current retail climate. That’s if they want to continue to have their products on shelf, and cash flowing down their supply chain. The knock-on effect of that means the wine industry as a whole is like a boat in the wash of a retail super tanker being thrown this way and that.

So what’s the big fix?

It’s not one answer, but a multitude of things. The big issue the wine industry has versus other packaged goods, including beers and spirits, is you can’t just turn a tap on to produce more wine when the market needs it. But that does not change how major retailers source, buy and sell wine. Wine is seen as even more of a commodity than it ever has been. Used to drive not just footfall to retailers’ stores, but full on stampedes with people queuing up at dawn to get their hands on £3.99 German discount-sourced bottles of Prosecco.

So what can we do?

The biggest change has to come from within the Big Four supermarkets themselves. They need to regain their confidence and start acting like the world leading chains they were once famous for being. For at least the last five years they have stopped driving their own agenda in the interests of their shoppers, but have been fixated on copying and following the retail strategies of the German discounters they are simply not equipped to compete toe to toe with. There has been a serious lack of leadership and direction from the supermarket sector. Just look back 10 years ago and the chief executives of the Big Four grocers were leading business figures in their own right. Everyone knew what each of the supermarkets stood for. But where are the Justin Kings, Terry Leahys, Allan Leightons or Lord MacLaurins of the current generation of retail leaders? What has made matters worse is the discounters, that have this magical power over the Big Four, have a policy of not talking to the City or the media and explaining what their retail strategy actually is.

Anything else?

Tesco is getting its act together again. Chief executive, Dave Lewis’s turnaround strategy is starting to make a real difference to not just the company’s bottom line but the confidence of the wider grocery industry. The wine sector could be about to benefit from those changes. Last week’s announcement that Tesco is to move its commercial strategy and development director, Robert Cooke, to head up its BWS division, is arguably one of the industry’s most significant news of the year. The fact you’ve probably not heard of him is potentially a good thing. The wine department is going to be led by a senior Tesco executive with direct contact and relationships with the board. He is not a wine trade professional beamed in from outside the company. Let’s hope he uses his influence with the board, he was formerly Tesco’s commercial operations director, to drive a sustainable, profitable wine strategy that goes back to mutually benefiting its suppliers and customers.

What steps should the industry be implementing?

We have talked recently about the steps wine companies are taking to take more control of their futures. This has to continue and become more widespread. Be it consolidating and growing their buying power; investing in technology, data and insights to make themselves more relevant; adapting their financial model to cope with a post Brexit future; focusing on innovations, new products, packaging and formats that provides solutions for retailers and customers to benefit from.

And finally?

Wine businesses can also be braver and actually say no to the buying demands of the supermarkets and discounters. No-one is forcing anyone to sell wine that is uneconomic. There are now many ways to drive your wine business forward, and different growing channels to sell your wine too. The current multiple grocery retail environment makes making those changes even more of a necessity than ever before.

Why big and small businesses need to work together for mutual benefit

Sounds like you've been reading too many corporate annual reports. What are you on about?

You're not wrong there. My secret summer reading. But if you look closely enough it seems in the modern business world, big and small can and should work together. Rather than David spending all his time trying to kill Goliath he would better off finding a way to catch his oversized eyes and cosy up together.

David and Goliath, really?

If it catches your attention, then yes. You only have to cast your eyes over to the spirits industry to see how many of the major drinks producers now have their own strategically important innovation hubs set up to specifically work with and invest in start up businesses. Diageo set up its Distill Ventures hub as long ago as 2013 and has already spent £50 million in seeding and funding new spirits entrepreneurs. Pernod Ricard has followed suit with a similar Ventures initiative where it offers up to £1m to invest in startups. These drinks giants have realised the business potential in working with companies who might in sales terms be minnows, but who might have the edge in dreaming up the next creative, cutting edge idea.

You mean nick their ideas for themselves?

You might say that, but I couldn't possibly comment. The explosion in craft beer and spirit products has changed the rules for even the world's biggest drinks companies. They are no longer the all powerful, dominant figures they used to be. They also know they can't keep their investors happy by relying on year in year out growth for all their global power brands when drinks categories are being stretched by an increasing number of niche, more on-trend, craft-driven brands. The likes of Diageo can't compete by creating the cool artisan, authentic brands that consumers now increasingly want. But they can learn from the entrepreneurs behind those brands to find what trigger points they are using, what social media platforms are best for reaching their target customers.

Sounds interesting. What else?

Running these startup hubs has moved up the corporate agenda even more now the major grocers are cutting ranges where even Diageo and Pernod Ricard products are not safe. It is happening right across the food and drink industry where R&D budgets are notoriously much smaller than in other industries - making up only 3% of the $680m global industry spend on R&D, according to PwC. Coca-Cola, Kellogg’s, General Mills, Campbell Soup and Unilever all run similar funding schemes. Unilever says such initiatives are going to be vital for business success in the future. Aline Santos of its start-up division, The Unilever Foundry, says working with startups “can no longer be viewed as an optional extra...it's a strategic imperative”. Adding: “Startups are now widely recognised as invaluable sources of innovation, fuelling growth and providing pioneering business solutions.” Which does not say a lot for the well paid Unilever executives working alongside them.

So how do these start-up initiatives work?

There are all sorts of arrangements and partnerships being set up where the whole purpose of the link-up is for mutual benefit rather than being purely predatory. They simply would not work if they were. A startup might agree for a drinks giant to take a Dragons Den-style stake in their company in return for seed funding and expertise. Take Seedlip, the world’s first non-alcoholic spirit, which allowed Diageo to take a 20% stake in its business to help fund growth and development.

But surely these big drinks giants are looking to ultimately gobble up their competition?

For some, yes. Particularly in the beer industry where all the world’s biggest brewers have now bought up craft beer brands. Anheuser-Busch InBev has acquired 10 alone in the last few years. But again the time comes when smaller players are happy to take the corporate dollar. Super hip Innocent Drinks is now part of Coca-Cola, Ben & Jerry’s is owned by Unilever.

What about the wine industry?

There is, as yet, not the same level of partnership or strategic thinking that start-ups or smaller businesses can take advantage of working with major wine producers or distributors. But it is surely only a matter of time. For all the talk of consolidation in the sector, if two major distributors come together it is only creating more of the same. It's not radically changing the way they work or re-inventing an increasingly broken wheel. Big merger and acquisition deals are also high risk with no guarantee of success.

So how could it work?

Well, what if a national drinks distributor signed strategic partnerships with smaller merchants to bring flair and dynamism to their range? There has to be more room for collaboration and partnership between large and small distributors and importers. Where one can help each other, be it with range, contacts and creativity on the one hand, and efficiencies and distribution on the other. If it makes good business sense for both sides then what's to stop more David and Goliath partnerships evolving in the future? It can only be good news for the industry if it brings out the best of both sides for the benefit of all.

 

Why to sell more wine we have to know how to sell more beer and spirits

Sounds like you have been drinking all three. What are you talking about?

That's actually my point. We might in the wine trade be obsessed with all things to do with grapes and vines, but the majority of our customers aren’t. Wine is just one of a number of drinks they might have during the average week or month.

Yes, but what’s that got to do with beers and spirits?

Well, think it through. It makes sense for us to know the kinds of other drinks our wine customers are also purchasing. What sort of beers, ciders or spirits do they turn to on a night out? In an ideal world we would also know the kind of food they like, what sort of restaurants they go to, the holidays they go on. All of which help us build up a 360 degree picture of the kind of customer we are trying to attract. For deciding what sort of wine you want has become more of a lifestyle choice, as it is a desire to drink a particular grape variety or explore a certain wine region. 

“Too often our trade teams are split category by category and never the twain shall meet. Sommeliers are in charge of the wine, and bartenders stick to their cocktails.” 

OK sounds interesting. What else?

Looking at consumers more as drinkers rather than just through the prism of wine allows us to see them in a completely different way. It helps us to understand, for example, why there has been such a surge in interest in craft beers and spirits in the last three or four years. Products that are much easier to produce and tap in to the overall general consumer demand to explore and try out new things and experiences. We have talked a lot before about how the smart phone has not only opened our eyes to so many more possibilities in our lives, but has made it far easier to go out and get them. We are no longer having to rely on the tried and tested and the likes of Judith Chalmers to tell us which holidays to go on, or Delia Smith what dishes to cook. We are constantly on the look out for what’s new, different and exciting. The world has opened up and it’s all available at the touch of a button.

So what are we seeing across the drinks trade?

Supermarket drinks aisles and pub back bars are now made up of brands and products that have been created to serve a specific consumer need or drinking occasion. It is why we have seen such an explosion in new beers, ciders and spirits that are constantly changing before our eyes. Those categories have been far quicker to realise the need to personalise, even pigeon hole if you like, their offer and target specific customer groups or create brands that are occasion and experience driven. They also don’t have to rely on the vagaries of the weather and annual harvests to get their products on shelf.

And what about wine?

Just look at the two big wine success stories in the last three years. Sparkling wine and rosé. Both are, in their own way, riding the same wave that has been so successful for craft beer and spirits producers. Products that are on the one hand aspirational, yet affordable, but are also creating specific drinking occasions for consumers to enjoy and treat themselves.

So wines, beers and spirits should work together?

Well, for all the talk of having separate bespoke trades for wines, spirits and beers, they are usually all sold together, or at least next to each other. Be it in the BWS fixture of a supermarket or across the back bar of the average pub or bar. The majority of independent wine merchants also sell beers and spirits. And if they don't they probably should be. But how much notice do we take of what is being sold in which category and why? Too often our trade teams are split category by category and never the twain shall meet. Sommeliers are in charge of the wine, and bartenders stick to their cocktails. Yet watching, analysing and talking to your customers about the beers and spirits they buy will teach you a lot about the kinds of wines you should be listing too.

In what way?

It can help determine quite how adventurous your customers are, and how willing they are to pay for it. Do they stick to the Stella and Gordon’s or prefer a Belgian Pilsner and small batch distiller. How happy are they to trade up to exotic beers and untried spirits?

Anything else?

Forget the drinks industry for inspiration. You could just ask them if they would stick or twist at 14 in Blackjack. If they twist, go heavy on the Grüner Veltliner, local craft ale and Bathtub gin and if they stick, keep stocking up on the Pinot Grigio, Fosters and Smirnoff. 

Could bigger formats and gifting be the saviour for wine brands?

You sure? That’s a lot of gifts to go around.

Calm down. One step at a time. But, whisper it gently, things are a-changing down the local supermarket wine aisle. The wall of wine is slowly being broken down into more distinct areas, where we are no longer just confronted with row after row of exactly the same sized bottle of wine.

You must be going to different stores than me.

Well, it’s not everywhere, but if you know where to look then there are some very interesting changes taking place. Each of the major multiples all have their trial stores where they bring us freshly made coffee and ironed newspapers long before the rest of us get to see them. It is in those stores where you are seeing new additions to the wine aisle. Particularly different formats, bigger sizes, magnums, and where limited edition gift packs are being used to make shopping the wine aisle a bit more of an experience.

What’s bringing all this about?

It won’t be the first trend that starts in the on-trade and ends up in our supermarkets. Flick through any on-trade report worth its salt in the last couple of years and sales of bigger sized bottles, particularly magnums, are giving Prosecco a run for its money. Which is good news all round, as bigger formats should, in theory, mean better margins. The recession may have made us all far more cost conscious consumers, but as the boom in sparkling wine has shown us, we are also far keener to find ways to give ourselves a treat, and share new experiences. Splashing out on a bigger sized bottle of wine ticks both those boxes.

What about gifting?

Well, unless you are constantly celebrating something we are not buying these bigger sizes just to drink at home. Instead they are being seen as the ideal alternative, but ultimately super safe gifting option. Ideal for a memorable wedding present, or to add a bit of theatre and drama to a dinner party.

What does this mean for brands and the wider wine trade?

It could potentially shake up what’s being sourced elsewhere down the wine aisle. For the last 10 years it has been the rise of the super varietal that has driven supermarket sales. Shoppers may not know their Nuits-St-Georges from their Walker Bays, but they know which grape variety they like. It has created a Premier League of grape varieties that now rule the world.

So where does gifting and new formats fit in to that?

If they continue to grow as they are now, it does tip the scales a little back towards all those producers and suppliers that have invested so much in developing wine brands. Proper brands with real values that don’t just introduce a Pinot Gris to keep the chattering classes happy. They now have the opportunity to develop well designed, positioned and beautifully executed larger formats and gifting options for their brands. New packs and bottles that crucially move them up the pricing ladder.

Sounds interesting, anything else?

For the brands that get it right it potentially moves at least part of their business out of the wine aisle completely. They could now become very relevant to those more premium shoppers looking for new ideas for their occasion-driven shopping missions. The opportunity to engage with higher spending consumers in a completely different way. It also gives them the chance to be sold in different retail environments, like at airports or in premium department stores. It would mean rather than look for a mention in one of the weekly national wine columns - rare for a mainstream wine brand in any case - it will become far more exciting to be featured as part of the gifting ideas sections that pad out women’s lifestyle and luxury magazines.

Who’s doing this well?

Well of course nothing is really new. If a wine brand really knows how to succeed in the gifting arena then they only have to look over to the Champagne brands as they have relied on gifting boxes and larger formats for decades.

What other ‘gifts’ have you got for us?

Well, for the more premium supermarket wine brands it offers the chance for salvation. The opportunity to escape the sword of Damocles that stands above any brand on a multiple fixture. Super size yourself, get out of the rat race, trade up, find a pretty box to put yourself in and the world can look a very different place. 

* This is part of the latest Grapevine news and views review produced for the London Wine Fair. You can sign up and subscribe to receive Grapevine here.

Why everyday pricing is no longer possible or expected by consumers

You’ve been reading too many wine supermarket press releases.

I doubt that. I think they’ve stopped sending them out. But just look at the numbers. We as a nation are now prepared, if not happy, to buy an average bottle of wine that is closer to £6 than £5 for the first time. OK that move to £5.56 at the turn of the year might be all down to inflationary pressures, including the 15% drop in value of sterling, but it means the average bottle price is up 19p a bottle in the last two years, and that's not even factoring in the latest duty hike in March.

 

But surely price is always the first thing any wine buyer looks at - for trade and consumer?

It certainly used to be, and is still a hugely significant deciding factor, but our overall relationship with “price” per se is changing. At least it has since June 23, 2016. That decision to leave the EU also set in motion a series of economic pressures that have resulted in grocery inflation now sitting at 3.2% and overall inflation not far behind at a four-year high of 2.9%. The impact of that on the average shopper is the equivalent of having to do an extra seven shops a year or £133 per household, says Kantar Worldpanel. So, yes, on the one hand consumers are still very sensitive about the individual price of any given product on the shelf. But when we realise prices are going up across the board (butter by 20p, tinned salmon up 14%, plus similar hikes on clothing, energy, or even computer games) then it’s the collective impact that becomes the issue, rather than the individual cost of a bottle of wine. 

OK, tell me more?

You only have to look at the national newspaper headlines over the last fortnight to see how our collective attitude towards “price” is having to change due to Brexit. For the first time families will have felt the direct backlash of a weak pound by having to pay more for their annual holiday and seen how far your pound goes when travelling abroad.

This is all getting a bit political. Thought we were here to talk about wine.

Bear with me. You don’t need to spend too much time on social media to see how divisive the whole Brexit issue has become. But equally we know as a country we voted to leave the EU, better or worse. A fact demonstrated in a YouGov poll last week that found three out of five people who voted to leave regard "significant damage to the British economy to be a price worth paying" for Brexit. What’s more 39% of the nearly 5,000 people surveyed said it would be worth losing their job, or having a family member lose theirs, in order to leave the EU. So if prices are going up then that’s a cost we are prepared to pay.

That’s all very interesting but what does it mean for us all in the wine trade?

Well, it’s important we understand the consumer we are trying to sell to and there’s no doubting we are all living and working in a very different retail environment to just over a year ago. But there are also long standing factors at play here, regardless of Brexit. We have talked before about having to serve the post-recession consumer that has never been more price aware or sensitive. But at the same time you only have to look at the boom in Prosecco to see how even price conscious consumers are happy to treat themselves - on a regular basis.

If that’s the case why are Aldi and Lidl continuing to do so well?

They are indeed, but look closely at their figures and it’s not just all about saving money that has made Aldi and Lidl the darlings of the high street. It has had great success with its premium own-label wines and has found selling wine at £15 plus a bottle has all been part of its strategy to attract more middle class shoppers through its doors.And the multiples?It’s also where the big supermarkets are succeeding. It is their collective sales of premium own-label, up 13.9%, that is driving the grocery market compared to branded growth of just 0.9%. The fact supermarket own brand lines now have a record 51% share of grocery spend shows how we have all become value conscious consumers.

So in a nutshell?

We might all in an ideal world like to still have our cake and eat it, otherwise known as everyday low pricing. But in these unforeseen pre-Brexit days, we are now far more understanding that unforeseen economic and political factors mean we are going to have pay a bit more for our daily bread - including an above average bottle of wine.

This is part of Grapevine newsletter that I produce on a fortnightly basis for the London Wine Fair. You can subscribe to receive a free copy here.

  •  

Running stores could be the next big thing for wine suppliers and producers

Come again? Wouldn’t that be robbing Peter to pay Paul?

Well, that depends on who the Peter and Paul are in the equation. If you mean are we going to be seeing a Matthew Clark or Gallo-themed wine shop on the high street any time soon then probably not. At least not for now. But behind the scenes careful thought is being given as to how wine distributors and producers can get closer to the market by being part of either their own retail operations or working alongside partners in the industry.

How do you mean?

A lot of this activity is taking place already, but under the guise of wine vans and pop-up bars at food and drink festivals, and sporting events around the country. Not a week goes by without news of another wine business running their own pop-up. Be it a wine generic like Vins de Bordeaux running its recent Bordeaux Butterfly Bar at London’s Broadgate Circus. We've even seen big high street names like Aldi and Tesco run their own wine-themed retail pop-up shops. Get it right and you can become a consumer and tourist attraction in your own right. Take Campo Viejo’s well established annual Spanish fiesta and its recent five-day wine and food experience, ‘Fiesta de Color’ near London Waterloo. 

What about wine distributors?

Going direct to the consumer is already big business for some major wine distributors. Conviviality even has its own division, Conviviality Trading, that looks after its own events and sampling campaigns. Its Peppermint businesses, for example, is a dedicated outdoor bar event operator managing over 40 events a year. The Wondering Wine Company, which started life at Bibendum, its also now covering 40 plus consumer and sporting events a year selling Conviviality drinks through its fleet of vintage vans and has had a go at running its own pop-up retail store.

What else?

As traditional wine importers become brand developers and owners in their own right then running their own retail - or event - concept is a great way to first trial, develop and then seed those brands with consumers. Copestick Murray, which usually has to rely on its retail partners to sell its wines, is currently promoting its iHeart wine range with a summer tour of festivals and events in its new branded camper van. Buckingham Schenk is running a pop up bar for the Viñalba Argentine wine brand in London this October. Look hard enough and there are plenty of other examples of wine importers doing the same.

So where’s the high street retail angle?

Ah, good question. Yes, the vast majority of this activity has currently been targeted campaigns, mainly at outdoor events, for short periods of time. Restaurants might have evolved out of pop-ups, but wine merchants or retails stores haven’t. But that could well change as distributors look to take more control of their destiny. They might be in charge of sourcing their own wine, but they have no control over how their wines are sold.

OK, sounds interesting.

Major drinks distributors are already providing lots of commercial support to help bars and restaurant groups build their wines sales and manage their drinks lists. It would not be a big leap of faith to turn that support into funding a restaurant, bar or wine merchant to open a retail site (or two, or three) where they would have a lion share of the wines being sold there.

Are you just making this up?

Heaven forbid! But you only have to do a bit of lateral thinking to look at the amount of time being spent by traditional wine distributors on setting up these pop-up bars and events to make you question what the ultimate objective is here. Particularly when you could argue such initiatives are a big distraction from the day job of servicing their customers and getting the right wines to them on time.

So what is going on?

All of this pop-up and events activity is doing one thing. Bringing wine businesses and producers in direct contact with consumers. It is cutting out the middle man. It is allowing them for the first time to get their hands on real, raw consumer data it can use to better understand the business they are in. They don’t have to rely purely on Nielsen, CGA or IRI sales data. They can see and hear with their own eyes and ears how consumers behave when buying not just any wine, but their wine. That’s worth trudging around muddy fields in the summer for. Or better still having a retail store you have a stake in and let the sales data do the work for you.

  •  

How the UK's wine future is as a trendsetter not volume sales driver

You’ve been watching too much of the G20 summit?

Thankyou, you give me too much credibility to think that, the reality is more spending time listening closely to how the world of wine now views the UK. Regardless of Brexit and what all that might mean in terms of future trading arrangements, the UK is now being seen in a very different light by most major wine producing countries that it was three, five and most definitely 10 years ago. 

 

How do you mean? 

If you think about it major producers in Chile, Australia and South Africa are going to be catching whatever cold is coming out of the UK a lot faster than we get to see it right under our noses. 

They have been the first to feel the fall out from the big seismic changes that we are now seeing in how our major supermarkets are behaving and the impact of the slow, but sustained and strategically vital switch in power away from the grocery giants to the discounters. Aldi and Lidl might only even now only hold 12% of the market, but their influence on how the rest of the grocery (and wine) industry is behaving is total. 

 

That’s a bit dramatic isn’t it?

What we often forget about the quite, unassuming, cheap and cheerful image of the discounters is they are, in fact, global retail juggernauts. They may act like minnows, but in reality they are big Great Whites circling the world, slowly dominating where they operate. It means they can operate small buying teams, compared to the big supermarkets, as they are backed up by the huge buying power of their central office. They have a fraction of the operating costs as they have tiny ranges, very limited stocks and are not bogged down by pleasing shareholders every quarter.

 

But what’s all this got to do with wine?
What Aldi and Lidl have done is send shockwaves around the traditional grocers who simply do not currently have the infrastructure to respond. They need big property empires to drive the volume and value sales their shareholders demand. They need big ranges to attract hordes of family shoppers and they also now need to run state of the art online and home delivery operations to satisfy changing shopping behaviour. All of which the discounters don’t need to worry about. 

As a result it has seen massive changes to the way the average supermarket wine aisle is now run. For producers and distributors it means buying decisions based, to coin a phrase, “for the few, not the many”.

 

So the rest of the wine world has felt the after wave of that?
Not so much the after wave, but global wine producers were hit with all this months before we saw the impact on shelf. Suddenly guaranteed volumes of wine from what might have been their biggest export market are no longer there anymore. It has forced them to change their export strategies and look at the UK through very different eyes. Yes, it might mean pushing more wines in to the independent merchant and on-trade sectors, but for big volume, co-operative based wines from Old World classic regions that has not been a realistic option. Most big branded wines can’t play in those sectors either. 

 

What are you hearing on the ground then? 

Well, it has been interesting to talk to major producers, co-operatives and negociants over the last year and hear how their tone has changed when they talk about the UK. It’s a subtle difference, but, yes, you will still hear them enthusiastically describe the UK as being a “trendsetter” a “key benchmark” a “shop window” for the rest of the world. That has always been the case. But the big difference now is it’s not then followed up with talk of how their sales are increasing and what big plans they have for the future in the UK. What’s more their export managers are spending less time in the UK and concentrating on bigger, more profitable markets around the world. 

So we’re becoming a strategic hub?
It’s not probably going to be the sales line used by the government’s UK Trade and Investment team, but for large parts of the wine industry, then, yes. The UK is still going to ship and sell a lot of high volume wine, it’s just the number of producers that will benefit is going be greatly diminished.  

 

And the good news? 

There’s also plenty of that going round too. The supermarket channel may have become increasingly difficult to crack, but it has resulted in far more interest from wine producers to sell their wines in different channels and to help fuel the growth in small independent distributors selling to niche independent and fine wine merchants, wine bars, and a vast and diverse restaurant and gastro pub scene. The type of agenda-setting outlets and operators that will become the UK’s increasingly premium wine image to broadcast around the rest of the world.  

* This article was first published on Grapevine, produced for the London Wine Fair. 

Why own label makes increasing sense for shoppers and retailers

You and your own label. Why are we returning to this now?
 

I’m not being rude, but it’s all about the economy, stupid. Yes, own label, private brands, exclusive labels, call it what you will, have been enormously important for supermarkets and retailers over the last 30 years. The big difference now is that private label is not just being driven by retailers, but consumers are increasingly changing their shopping habits and voluntarily deserting household brands for a cheaper own label alternative. Average household budgets are being squeezed. Families are having to live with lower than inflation salary rises and increased utility bills and are becoming ever more knowledgeable about how they can cut their basic food and drink bills. Starting with switching more to own label.

Where’s the proof for that?

Everywhere. Analyse the latest end of year trading statements for the major grocers and whilst their headline growth figures are nothing compared to what they were 10 years ago, where they are all doing particularly well is their increase in own-label sales. Tesco’s overall sales might be up 1.9% but they are being driven by a 6% increase in own label. Morrisons says its new ‘The Best’ premium own label line is behind its recent return to form. If you drill down in to individual categories, like wine, then the growth in own label is even more marked. 

 

Any specific figures? 

Recent research from Retail Economic shows that 48% of consumers would switch even more to own label if weekly food shopping bills go up by 3%. Kantar Worldpanel has average food bills up by 2.3% on this last time last year and some analysts are predicting average 8% price rises for products from the EU over the next two years.

 

So what’s fuelling this? 

Well, a number of factors are at play here. Firstly, the fact own label has been a stable part of our dinner table for the last 30 years means we are all quite comfortable with the idea of buying retailer own brands. Particularly now there are such well defined economy, mid-price and premium ranges to suit all needs and tastes. Then there is the discounter factor. The vast majority of shoppers, regardless of their background, are now familiar with the Aldi and Lidl offer. Ranges that are almost exclusively dominated by own label. Discounter brands benchmarked to be as good if not better than their branded alternatives. They have helped raise the bar of what we now expect from own label. And the fact their respective sales growths (Aldi 18.3% and Lidl 17.8%) far outstrip what the multiples are doing will drive the push to own label even more. What’s more major retailers are now far more confident about taking out even the best selling brands (noticeably Sainsbury’s) as they increasingly believe their customers don't mind.  

 

Anything else? 

The other major driving factor is price. We might not have left the EU yet, but already food and drink prices are going up and with sterling showing no sign of improving they’re likely to go up further still. So it’s only to be expected that the average shopper will turn more to those retailers that have spent the last 20 years continuously telling us they are there to make our lives easier - and cheaper. They have gone out of their way to be part of our lives way beyond our kitchen table. Trust us, they say, to find you the best value holiday, look after your household and car insurance, offer you the best rate credit card or loan deals. If you are prepared to have effectively an own label bank account then any negative perception of a retailer brand is over. If food and drink prices go up further still post-Brexit, then we will expect our retailers to look after us and protect our family spending. Because that’s what they tell us they’re there to do. 

Is this just a supermarket phenomenon? 

Not at all. Yes, they will benefit the most, but shoppers we are now quite happy accepting or even voluntarily choosing the own label equivalent in all areas of our life. Providing we think it is good quality and good value. It is opening the door for national and local wine specialists to develop their own ranges like never before. Step forward the new “Majestic Loves” £5.99 range. Similarly the on-trade now has the opportunity to really cash in on own label from pubs, through to wine bars, or Michelin-star restaurants.

 

What are brands doing?
Not a lot. There isn’t much they can do faced with the overall economic picture. Instead they are switching their promotional strategy away from big expensive above the line advertising campaigns to more targeted, consumer specific, online and social media campaigns where they can build that individual relationship with their core audience. The big trouble for the major household brands isthat option is not really open to them. So they’re having go toe to toe with the major retailers just to get any of the shelf space that used to be theirs by right. The big winner in all this? The consumer. So when you’ve finished the day job, cash in and get your hands on your favourite retailer’s privates. 

* This article was first published as part of the Grapevine publication I produce for the London Wine Fair. 

 

 

Will wine ranges soon be picked by Big Brother algorithms and bots?

You’ve been reading your Steve Jobs book again? What’s all this about robots and wine?

If you are traditionalist and like to think of wine suppliers and buyers carefully working together tocurate lists and negotiate prices based on their years of experience and tasting skills, then look away now. Computers are already automatically determining ranges and prices of goods in wine and other categories based on equally carefully crafted algorthims. Just look at Amazon. It is not employing members of staff to trawl the aisles of Aldi and Asda to look at their ranges and work out how much, say, their own wines need to be to keep up with the competition. It is using carefully programmed algorithms to trawl the internet, compare prices and change automatically up to half of all the prices on its site every day. There is no need for a Master of Wine or wine buyer with decades of experience to assess sales pattern trends using that model, the algorithm will do that for you. 

 

You’re right it all sounds very Big Brother. 

We may not realise it but carefully constructed algorithms are dictating many of the decisions we make on a daily basis. Take the movies you are shown to watch on Netflix. That is based on all your previous searches and are said to result in 60% of the films you watch. Data scientists are even being used by Hollywood to decide which films to make. It’s why Wall Street now employs some 2,000 physicists to keep ahead of the algorithms managing the millions of transactions taking place every day on global stock and currency exchanges. Algorithms that can close a deal a milli second faster than another really are worth their weight in gold.  

 

But are algorithms dictating what wines we are buying and selling?

Yes, and they will do so to a greater extent in the future. You might be working in a company that already has algorithms and bots helping to manage what you do. Particularly if you are involved in ecommerce or using wine recommendation apps. Vivino has just introduced Vivino Market that is using a range of machine learning algorithms to scan the 20 million consumer reviews, 65 million ratings, and 10 million wines it now has on the platform, to give any of its 23 million users a personalised wine recommendation in less than a second. 

 

That’s a potential game changer? 

Absolutely and what is particularly worrying for the traditional wine trade is that Vivino is not a wine business. It has from day one been focused on collecting enough data about highly marketable, well heeled consumers to drive a Big Data-fuelled business, one that is now highly attractive to third parties to access. “We had to grow our community first in order to leverage the power of our data,” says founder Heini Zachariassen. An increasing number of other algorithm-based apps and websites have all been set up in the hope of taking their cut from the marketing power of the average wine drinker.  

 

This is too much for me. I can’t keep up...

Sorry, but you have very little choice. There is no place for luddites in modern business. Many of the software tools we innocently use on our smartphones, laptops and desktop computer are jam packed with bots and algorithms effectively controlling what we see and do. Our social media feeds are full of them, which is why we all get to see the same daft videos of cats and dogs on Facebook.

 

Any other examples?
Well, brands, retailers and social media platforms like Facebook and Snapchat are increasingly using artificial intelligence and chatbots to engage with users. Beauty brands are now able to “talk” customers through trying different types of make up to selfies posted on a smartphone. If a website takes you through a series of conversational steps to book a table, buy a plane seat, change your password, or order a case of wine then you have probably been interacting with a chatbot to do so.

 

What else can they do?
The most advanced chatbots are being used by brands on messaging apps, like the new Facebook or eBay Shopbot service, to not just “chat” to users, but are capable of learning from each interaction so that they appear even more authentic and personal to the next user. Chatbots are increasingly being used to improve our experience of e-commerce by placing orders knowing what we have previously bought, contacting us throughout the delivery process and then following up to find out what we thought of what we have just bought. Soon bad customer service will be for any transaction where we don’t feel like we’ve had our hand held all the way through the process. Even if by a robot. 

 

What else can we expect

Well, here’s one for you. Facebook is working on new augmented reality technology that could allow us to type, hands-free, up to 100 words a minute just by using our brain waves. All it would involve is for us to wear a device that can read our thought patterns and then write them out for us. I can assure you this article has not been written by a robot...by a robot.

 

Why businesses need to be ready to change or risk being left behind

That sounds very philosophical. Have you been raiding the Chinese fortune crackers again?

Oh very funny. Excuse me whilst I churn out one of the most repeated business mantras of modern times and good old Jack Welch's line that if the rate of change going on outside your business is faster than the rate of change inside your business, then chances you’ll soon be going out of business. Or words to that effect. It might sound like classic US management speak, but how many businesses really are able to adapt and cope with changing times?  It is one thing saying you have a flexible business model it is another proving it. But there has arguably never been a more important time for companies to look and change what they are doing.

How do you mean? 

We are living in such disruptive times. Be it politically, economically or socially. The wine trade, for example, is still coming to terms with last summer's collapse in the pound which continues to wreak havoc across the sector, not just here in the UK but around the world. What's more we've not seen anything yet. The UK has not even triggered the infamous Article 50 and we are already seeing the impact the forthcoming Brexit is having on the economy. 

OK I’m all ears... 

What is particularly crippling for business is uncertainty and we are up to our neck in it. Talk to any UK business chief, big or small, good or bad and they all say the same thing. The current trading conditions make normal business planning impossible. Particularly for an industry that is 99% reliant on importing the goods it sells from around the world. Goods that are bought not just on how good they are but how much they cost due to the relevant strengths of the currencies where they come from. Drop the equivalent of a bomb on the value of those key currencies and you have the nightmare scenario we all find ourselves in. Yes, currencies move up and down all the time, but not to this degree and over such a length of time.

So what's all this about the need to change? 

Well, it stands for reason that if the trading conditions you are operating in have changed completely then it does not make sense to carry on doing business in the same way. It is striking how polarised the wine industry has become in the short period of time since the referendum vote. Split between those companies that have carried on as normal and those businesses that are dramatically changing the way they work. This is not just a post Brexit trend, but it has helped intensify and shine the spotlight even more on how companies are choosing to operate. 

 

In what way? 

It is all about taking more control, to coin a phrase, of your own supply chain. In particular taking steps to do all you can to manage the costs at each stage of your own trading circle and where possible put in measures that make them most efficient. That might mean going out and working with producers to make and blend your own wine. It could be bottling more wine in the UK and creating more exclusive labels. Or it might mean looking outside your current markets and opening up new areas, moving in to exports, or shipping wine direct from producers to other customers around the world. It could even mean moving exclusively out of wine and start sourcing, shipping and selling spirits, beers or soft drinks. Standing still and being tossed one way or another based on the whim of the currency markets does not seem the best place to be. 

But are you not just advocating change for change’s sake? 

Absolutely not. There is no point changing your business model if you are not sure a switch in direction is going to work. It might mean just re-evaluating what you are already doing and making sure every part of the business is operating as efficiently as possible. Tweaking 5% to 10% of what you do could have a much bigger impact on the overall business. But spreading your risk, working in different channels, selling different types of wine or alternative drink categories, gives you flexibility and protects you far more from being over reliant on one channel or a limited number of customers. It might even mean we are not all fixated by any movement in the rate of sterling, the euro or dollar. And there is more change going on there than even Jack Welch could handle. 

* This article was first published by Grapevine the fortnightly insights, news and views publication I produce for the London Wine Fair. 

Are you doing enough to help the aged?

That's a bit of a personal question isn't it?

Sorry, I don't mean you individually. I mean us collectively. How much time and dedication do we as an industry spend trying to sell and promote wine to the 60 plus age group?

How do you mean?

Let's face it, none of us like getting any older. There's nothing worse than reading the latest consumer survey and realising you are about to slip from one demographic to another. So imagine how the so-called baby boomers feel when they read the latest stats about how many Generation Z or millennials are getting into wine. Not only are they slipping ever deeper in to the last age demographic on the list, they are doing so much pretty much unloved, and from a marketing point of view uncared for.

Where’s the evidence for that?

Well, when it comes to advertising and marketing the 60 plus age group is pretty much forgotten. This is ironic considering they are the people with the largest disposable incomes, the most time on their hands to read and discover more about wine, and even go and explore different wine regions. The vast majority, 70%, are also regular drinkers (ONS), and hardly likely to have their head turned by the latest cranberry infused cider on the market. Yet they are usually the last to be actively marketed to.

Go on then show us some figures...

New research by High50, a website aimed at the over 50 market, claims only 4% think advertising is directly aimed at their generation. A “Marketing to the Over 55s” report from Mailjet found that nearly a third (27%) of those aged over 55 in the UK feel brands are too focused on targeting younger people. A worrying 32% said they never received any relevant offers or promotional material from brands they are interested in buying. It's not just wine, but the same across all major consumer and FMCG categories. In the US, baby boomers dominate spending in 119 out of the top 123 consumer goods sectors, yet only 5% of the “advertising dollar” is spent on them.

There are also a lot more older people?

Now you're getting it. The number of people aged 60 years and over, already outnumber those under 16, and by 2024 up to 20% of the population will be over 65 or retired compared to 17% now. That figure is expected to rise to 25% by 2035 (ONS). They are also increasingly well off, fuelled by payouts from final payment pension schemes, the ONS estimates the average income of a retired couple is 13% higher than they were before the recession in 2008, compared to a 1.2% fall for non-retired households.

 

But surely wine companies recognise the importance of the older drinker?

Indeed and there are parts of the wine trade that have the grey pound firmly in their sights. The big, direct mail companies have long seen the potential in tying-in loyal customers to monthly payment plans. The Wine Society, Laithwaite’s and Sunday Times Wine Club all have focused wine lists aimed at older, safer customers looking for tried and trusted wines. Laithwaite’s, for example, runs its informercial TV adverts to target the daytime Cash in the Attic audience. Even the average age of customers at Naked Wines and Majestic are nearer 45 to 50 than in their 20s or 30s. Younger people have different priorities than spending over £100 on a case of wine.

But don't we need to concentrate more on attracting the next generation of wine drinker?

Clearly it is in everyone’s interest to bring new and younger drinkers into wine. Which is largely the role of the major mass market supermarket brands. But we should not lose sight of where the bread and butter of our trade is coming from now, and increasingly in the future as we live, and drink, for longer.

So what should we be doing?

Well for all the miles of content that is written about so called hipster and natural wines we need to be also talking and writing about the Chiantis, the Grand Reservas and making sure what you might call the safe Sunday night, costume drama wines are also getting more attention and focus. ITV’s new The Wine Show is very much on the right tracks. The celebrity stars of the show are based in the safety zone of Tuscany and only ever venture out to other traditional Italian holiday hotspots favoured by the 60 plus age groups. They might get wine brought to them to be tasted by the globe-trotting whippersnapper wine expert, Joe Fattorini, but it is in the comfort of a Tuscan villa. If you are looking for inspiration on how to talk, listen and engage with the older consumer then it may be worth going to see the New Old exhibition at London’s Design Museum, which is packed full of creative ideas of how to do exactly that from leading brand, design and advertising agencies. After all, as we have learnt along the way, wisdom really does come with age.

* This article was published as part of the Grapevine newsletter I produce for the London WIne Fair.  

Are we going back to the days of Penguins and Puffins?

Are we going back to the days of Penguins and Puffins?

Sainsbury's decision to introduce its own Chilean private label wine range is one thing. To do so with an uncanny resemblance to the leading Chilean brand Casillero del Diablo from Concha y Toro is quite another. What implications does this have for other wine brands and major retailers?  

The Wine Show's Joe Fattorini on bringing wine to Saturday night TV

The Wine Show's Joe Fattorini on bringing wine to Saturday night TV

During the week you will find Joe Fattorini quite happily blending in to the background in his day job as internal communications manager at Bibendum, one of the country's biggest drinksdistributors. But come the weekend, from mid-April, he will be transforming himself in to a prime time TV presenter in his role as wine expert on The Wine Show, ITV1's attempt to bring wine to a mainstream Saturday night audience. It's not quite Ant & Dec, but it will be on your TV just before them.