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Simon Farr is deputy chairman of Bibendum, one of the UK’s biggest wine companies, who supply to private clients, as well as to the off- and on-trade.
I don’t think consumers are disengaged. Consumers are confused. They don’t really understand why we’re in this mess and the people who got us in this mess don’t know either. People feel insecure and when you’re insecure it’s rational to save money. I don’t believe people are going to stop drinking wine, but I think there are some temporary things happening. We had some reports back from America where were selling Argento [Argentine brand] and they’re finding some stores are merchandising beer because it looks less expensive, so they’re encouraging lower ticket purchases. But I haven’t seen anything that says the consumers doesn’t want to drink wine. In the UK one in three bottles were given away anyway, so it’s not clear to me that the underlying consumption level was as high as it looked.
We’ve got all this volume and if you think a third of bottles have been given away, that’s 40m cases that are grown, vinified, warehoused, transported, recycled, all for free. It’s better to have the 80m cases but buy two thirds of the volumes and have a better experience. It’s not sustainable. The economic realities of wine production are catching up now. The 25 year boom we’ve been through was basically about free and plentiful money, but the days of free and plentiful money are over. I think we’re going back to a smaller business. Things are going back to something we used to see 20 years ago, interesting small to medium-sized businesses run by people who were passionate, with products that were different from anywhere else. Any dwindling interest on the consumer side will be reignited, because wine will be different from other alcohols. If we continue having the Blossom Hills of this world, people will get bored, if you just give them alcoholic grape juice with sugar.
I think retailers rationally used discounting as a way of creating some of way of navigating through this bewildering choice but it was consistent with supermarkets wanting to create market share first and foremost and their interests aren’t necessarily aligned with wine. And nor should it be; their duty is to respond to opportunities for supermarkets and as a result we’ve ended up with an odd way of communicating what wine is to the consumer. On the whole the consumers will follow the discount line.
We’ve got too much wine, so wine has got dragged into binge drinking, which is never should have been - wine isn’t a very efficient way of getting drunk. The last 25 years have been characterized by a land grab of public corporations trying to take over the world of wine and they think they’ll get power and they found out that the retail side was consolidating faster.
It’s not sustainable, so that |
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model didn’t work. The future is going to be about value not volume and in a way I think we should be looking for a slightly smaller business, but also we’ve got all this volume and if you think a third of bottles have been given away, that’s 40m cases that are grown, vinified, warehoused, transported, recycled, all for free. It’s better to have the 80m cases but buy two thirds of the volumes and have a better experience. It’s not sustainable. The economic realities of wine production are catching up now. The 25 year boom was basically free and plentiful money. This massive leveraging allowed big companies to go off and buy each other and create a boom in production, but the days of free and plentiful money are over, so there is no way this can be sustained anyway. I think we’re going back to a smaller business. Australia is going back to something we used to see 20 years ago, interesting small to medium sized business run by people who were passionate with products that were different from anywhere else. Any dwindling interest on the consumer side will be reignited because wine will be different from other alcohols. If we continue having the blossom hills of this world, people will get bored, if you just give them alcoholic grape juice with sugar.
There is going to be a process of creative destruction. We’ve been on a binge, we’ve been living a lifestyle, all of us beyond what we’ve actually earned and the bills got to be paid and one of the realities, whatever category you’re in, is there is frankly too much capacity. There are too many restaurants, too many hotels, too many vineyards, too many brands. People have got to look hard at their business to make sure they have a business built on a sound basis. This is going to be the period where you will get through it if you’re a private company that is well enough run. We’re all going to have to dodge our way through a mine field. Were working harder and harder to be more and more efficient. Were taking a much closer interest in risk. Were gearing up for growth.
Elisabetta Geppetti, owner and winemaker of Fattoria Le Pupille, a 500,000 bottle winery near Magliano in Tuscany, Italy.
In a moment of difficulty such as the present one, we have noticed that there are more consumers who try to better select products when they purchase, rather than ones who only try to spend less. In short, there is more interest in wine/wine producer reliability, its history and its brand, than in simply obtaining a more convenient price for a product of similar variety. Fattoria Le Pupille has always made it a policy to follow this direction, making wines of superior quality compared to the relevant price and in time, trying to keep both factors constant as much as possible: quality and price. Today this is paying back and it has financially supported, and in some cases increased, our selling.
In the few markets in which we struggle to sell, we intervene with a |
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higher direct presence of the winery, participating in events or organising visits, such as tastings and direct meetings with final consumers. We do not make discount policies on our prices, but we try to induce trust in our wines.
Kate Langford managing director of Cellarmasters, Australia’s largest direct-to-consumer supplier, believes the Australian market is bucking the international trend of consumers trading down in wine value or swapping to other beverages.
Despite the GFC, more customers are actively purchasing now, but they are becoming more discerning with their spend, foregoing quantity for quality. As our national palate matures we are starting to see a greater confidence in our customers as they graduate from bulk ‘cask’ purchases to regionally specific bottled wines. More of our customers are prepared to spend A$15-$20 ($12-16) for quality bottled whites and A$15-$30 for quality bottled reds.
The styles driving this growth are those that better reflect the Australian climate, cuisine and lifestyle; Marlborough Sauvignon Blanc, Australian Semillon Sauvignon Blanc blends, Australian Sparkling whites, Pinot Noir and Australia’s flagship variety Shiraz. Another interesting development is that our customers are more likely to seek out wines from benchmark regions. They now know which varieties and styles specific regions are renowned for and are prepared to spend that little bit more to get them. Ultimately this is a good news story for specialist wine suppliers like Cellarmasters. It means we need to ensure we’re providing the right product to meet the demands of a more judicious market and continue to provide customers with educative, honest and compelling reasons to buy. The ‘slash price and burn brands’ loss leader approach employed by the supermarket liquor chains is, I believe, not a sustainable approach for us, nor is it necessary.
Chris Indelicato is CEO of Delicato Family Vineyards, California, a winery which has seen sales of its wines rise recently, which the company suggests is because they offer value in the $12-15 segment.
Today’s retail environment has shifted towards value with wine drinkers looking for a deal. There’s no need to offer the lowest price but the focus should be on quality and experience. Consumers are no longer willing to spend money on products that don’t deliver. More importantly wine drinkers are now keener to spend money on products they feel have authenticity. Packaging has to be attractive while displaying environmental awareness and other convenience benefits. Today’s social networking and internet chatter provide a healthy dose of skepticism that must be overcome by providing superior quality in the bottle. Inferior products are weeded out quickly.
Consumers are focusing more on home entertaining which means larger packages to save money. Shoppers have also reduced the amount of experimentation with new or niche brands. Now brands with a real home, appellation or personality have the advantage. Keep in mind that sometimes customers know our products better than we do so we have learned to listen.
Consumer needs change more quickly these days so we need to analyse what people want and be nimble enough to deliver in a timely fashion. Brand managers need to keep personal biases out of product development and focus on what the market is seeking. People today are choosing to stay home and cook a great meal for themselves. Wine is an essential part of that experience so promotions should focus on the consumers’ current desires. The best way to keep someone focused on wine is to win them with a memorable experience every time they consume your product.
This is a longer version of an article that originally appeared in Issue 3, June/July 2009
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