Half-price wine brands under threat

Selling high-volume wine brands in the UK off-trade is becoming increasingly challenging as retailers curtail price-cutting practices and place more emphasis on developing sales of own and exclusive labels.

The amount of wine sold on promotion in the UK off-trade has fallen by 6% in the last 12 months

This two-pronged threat to branded wine was identified by Paul Schaafsma, UK general manager for Accolade Wines, who stressed the need for major suppliers to alter their approach to selling wine in UK supermarkets during a discussion with the drinks business last month.

“There is definitely a need for own-label and exclusive label in the marketplace and there is a need for brands to move away from the deep discounts that have been there in the past,” he stated.

Continuing, he said, “There are fewer half-price deals, it is more commonly 20-25% off – or a different mechanic – and you need to make sure your portfolio is capable of that… those focused on half-price drivers will struggle and you need to make sure you will sell off-promotion.”

One aspect encouraging a move away from deep discounting wine brands in UK supermarkets are new regulations from the Office of Fair Trading, and in November last year Aldi, Co-Op, Lidl, Marks & Spencer, Morrisons, Sainsbury’s, Tesco and Waitrose all agreed to adopt a new code of practice set out by the regulator.

These include the avoidance of any artificial price inflation to make a later discount look more attractive, as well as ensuring that any promotions run for the same or less time than the product was sold at its full price.

As a result of supermarket’s adoption of these retailing regulations, Schaafsma said the amount of wine sold on promotion in the UK off-trade had fallen by 6% in the last 12 months to July this year, quoting Nielsen figures.

He also said that 54% of the wine sold through retailers in the UK over the last year was purchased on discount, a much lower level than seen in the market over recent history.

Furthermore, a combination of factors, including fewer price promotions, has meant that the total off-trade wine market is down 2.9% in volume.

Hardy’s will unveil the results of a global relaunch in the UK on 3 September

As for the increasing development of retailer own label business, Schaafsma said that Accolade, which owns the Hardy’s wine brand, had had to adapt its business to benefit from this change in the market.

“We are now helping in the sourcing, developing and packing of supermarket own and exclusive labels – the days of being just a branded wine supplier are over for Accolade.

“We do have strong brands, but we have diversified our offer,” he added, although Schaafsma also said that he doesn’t foresee a complete move away from branded wines in the major UK multiples.

“Some supermarkets have gone too far into own and private label and that has affected their volume, so they now recognise that consumers are looking for specific brands.”

Further outlining the changes at Accolade, which has its own bottling facility in Bristol called Accolade Park, Schaasfma said, “My ultimate aim is to work collaboratively to find solutions for both parties [suppliers and supermarkets] so both businesses can win.

Continuing he said, “Culturally the business is more focused on delivering solutions, with a far flatter structure than before, which allows us to react faster to our customers demands than before, whether its from a sourcing, buying or NPD point of view… Things happen very quickly in the UK market and you need to be able to respond.”

Further stressing the demands of supplying the UK market he commented, “The industry is going through a period of consolidation and you need to be relevant, you need to be aware of trends; every day is a challenge to make sure your business is appropriate – what you did 12 months ago is not relevant today, and what you do today is not going to be relevant in 12 months time.”

As previously reported by db, Schaafsma is also overseeing a major relaunch of the Hardy’s wine brand in the UK, encompassing changes to the wine style and packaging, which he has dubbed a “revitalisation”.

A new look will be unveiled in the UK on 3 September this year, which is designed to “show the quality and reflect the heritage of the Hardy’s brand,” said Schaafsma.

One further aspect to the “revitalisation” is a greater emphasis on Hardy’s more expensive wines.

“Hardy’s has won 3000 awards in wine shows over the last 10 years so the quality is there, but we need to create better distribution of the more premium tiers in the relevant market segments.”

Concluding he said, “We’ve done a great job developing commercial wine brands, but we need to develop the premium side and we need to look at how to grow distribution.”

Accolade Wines is the largest wine company by volume in the UK and Australia, and is owned by Champ Private Equity.

The company comprises wine brands Hardys, Kumala, Echo Falls, Stowells, Banrock Station and Geyser Peak as well as Stone’s Ginger Wine and Ginger Joe alcoholic ginger beer and Babycham perry.

Schaafsma also told db he would like to extend the Babycham brand to include a Moscato for the UK market.