Lost in translation

"Two Buck Chuck" has proved invaluable in shifting an oversupply of wine in the US. But would "£3.99 Chuck", as it might be known over here, do more harm than good? Robyn Lewis reports

THE FIGURES for US wine in the UK market could not tell a better story as far as the State of California is concerned.  The category as a whole is growing above market rate in the off-trade – currently rising 5% a year – with an increase of 17% to fifth largest share by volume, with a solid 9.2% of the market (Nielsen MAT to May/June 03).

In value terms too, the USA looks fairly invincible with an average off-trade bottle price of £4.05, a favourable comparison to the market average of £3.72 (Nielsen May/June 03). This lofty price-point puts it in third place in value terms with 10.2% share behind leviathans France (21%) and Australia (24%).

That reflects a strong pattern in growth of volume and value over the last decade that has pushed the country from just six million litres in the UK off-trade in 1992, to 53m litres in 2002.

Or, in other words, turn a 1.9% share of the off-trade market into an 8.7% share. And at the centre of this lies the happy State of California.  "There are no specific breakdowns in the figures released by the US department of Commerce," explains John McLaren of the California Wine Insitute in London, "but it’s fair to say that some 95% of all exports from the US are accounted for by California."

This puts the region in the rare but glorious position of being one of the biggest single regional presence on the UK shelves bar Bordeaux. No mean feat in just a decade.  However, there are concerns on the horizon. California’s strengths, in value terms particularly, are coming under threat from a potential explosion in volume. 

Oversupply has become an issue on home soil that is making it difficult for California, and hence the US as a whole, to defend its high value positioning against the likes of South Africa and Italy, both of which are nipping at its heels in the above mentioned value league tables.

A result of the so-called "Californian wine glut" was the appearance of the now notorious "Two Buck Chuck" on the American domestic market last year.  Appearing under the name Charles Shaw, the concept has turned into a marketing phenomenon.

"The invention of Two Buck Chuck means, at least, that any excess volume can be got rid of domestically," says a positive Charles Marshall, senior marketing manager at Paragon Vintners.

"The only question is if the success of the exercise with the American consumers means that we will end up with it over here."  The unleashing of Two Buck onto a UK audience will undoubtedly be viewed by the British trade with a wary eye.

For some it will be seen as a sensible listing for consumers thirsty for bargains.  "I heard on the radio just last week that some guy is planning to import it to the UK and I think it would do well if it got a listing in one or two of the really big multiples," says Safeway wine buyer, Paul Bowness.

 "The success of it over here, though, depends on costing and margins to get it into the major retailers.  I can’t see it doing very well if it is just stocked in a few independents. The idea is sound and the catchy American name can’t do it any harm."

For others it is more a case of hoping that the phenomenon stays where it is.  "I think Two Buck is a great thing in the States," comments McLaren. "It shifts volume out of the system in time for the new harvest and that can’t be a bad thing.

One of the problems with shipping it over here is that it would translate into £3.99 Chuck and that’s not so much of a story.  What we need to do is to ensure that, instead of driving the market down with a Two Buck equivalent, we use the oversupply situation as an opportunity."

What McLaren would like to see is an increase in quality rather than a decrease in price as a result of the glut.  "A lot of £2.99 Californian wine going through the supermarkets could be the death of the region, but if the £4.99 wines have improved then that’s great for the industry and the consumer.

At the end of the day each brand is going to behave differently in the light of this situation but, on the whole, it probably won’t affect the brands too much.  Maybe they’ll create sub-brands or something to deal with it," he says.

In fact, there is evidence of this strategy already developing. Fetzer, the Californian label owned by Brown-Forman, has just released new pair of wines at £4.99 under the name Pacific Bay, now the cheapest wines in the range.

"The reason we’ve been able to bring out these two wines is because the oversupply situation has meant that the quality and value are such that we could bring out excellent quality wines at these price points," says Simon Legge, European marketing manager for Fetzer Vineyards.

"The surplus means we are able to bring out wines in the £4 to £5 bracket that are much better than they ever could have been in the past and I believe that’s exactly the market that we need to be in.

It’s all well and good having strong premium brands but California also needs to perform better in the mid-premium range.  I mean, everyone has heard of Mondavi but it doesn’t even register on the scale in terms of UK sales.

Historically, if you look at the range of Californian wines, there has been a kind of ring-doughnut effect with a lot of cheap stuff at the bottom and esoteric-y, boutique-y wines at the top with nothing in the middle.

Fetzer and Turning Leaf are really the only Californian wines in the gap.  That’s great for us but we really need more if we are to compete against Australia, in particular, which has five or six brands aimed at this level."

Constellation Wines, one of the bigger players in the Californian market, appears to share a similar view as it has also launched a new Californian brand into the mid-market.  Earlier this year the Seventh Moon label was launched at the UK consumer at £4.99.

"Traditionally, the Californian wine market has been dominated by only a handful of mainstream brands, so we introduced Seventh Moon with the aim of opening up the UK Californian wine sector to increase consumer choice and offer significant potential to retailers," confirms Helen   Wright, senior brand manager for the Americas at  Constellation Wines.

But Wright admits that achieving success in such a competitive market as the UK, needs a more radical approach than simply placing a wine from California in the mid-range market.

"Success is much more than just launching a good quality wine.  Wine brands need a point of difference and must offer the consumer consistent quality and value for money.

The wines within our Californian portfolio over-deliver at every price-point and their packaging and branding are key in ensuring that the product stands out from the crowd," argues Wright.

Constellation has already learned this lesson through the success of another of its Californian brands, the Paul Masson label.  "Paul Masson was one of the first Californian wines to hit the UK market and, despite increasingly competitive trading conditions, it has successfully maintained its position on the wine aisles in the UK," says Wright.

"It has gained a loyal following of consumers who have grown with the brand through the ages and its distinctive packaging has made sure it is a constant feature of their shopping basket."

Wright also points to other Californian brands from Constellation that have won the British public over with their innovative packaging; the success of the Echo Falls brand being a case in point.

"The Echo Falls range has exceeded all our expectations and we have just expanded the offering to include three varietals in a bag-in-box format," she says.  The success of this launch will no doubt be closely watched by Safeway’s Bowness, who says, for him, the way forward for California is innovations just like these.

"I think that for the future, Californian wine producers need to be looking at packaging, closures, bag-in-box formats, whatever it might be to try and find the next big thing.  If you look at a brand like Blossom Hill – it came from nowhere – it proves that someone will come up with something.

Sometimes it is just a matter of something as simple as a name.  The trick is to make sure it is you who finds it!"  Sutter Home, one of the biggest brands in the US market (over 9m cases a year) is hoping it has found "it" with its marketing campaign which is aimed at the UK consumer for the first time.

"So far, Sutter Home has failed to make an impact in the UK but this autumn there will be a marketing spend of £350,000 focused on the major women’s consumer magazines and lifestyle magazines," explains Pamela Dunn of PLB, the UK agent.

"One of the more exciting and innovative things we are looking at doing is hooking up our White Zinfandel varietal with a breast cancer charity." 

The aligning of brands with a "healthful" message is, of course, a trend being driven by the US across the board in the drinks industry, with "drink in moderation" messages now appearing as standard on many alcoholic drinks brands.

And, by either luck or judgement, the Californian wine industry has already found itself able to capitalise on the healthy organic movement in UK retail.  The organic sector is definitely something we have paid attention to," says Sainsbury’s wine buyer Andrew Bird.

"There has been strong growth in the category over a few years now and there are plenty of organic producers in California.  There is no reason why the region should not remain a significant player in this area."

McLaren at the California Wine Institute also sees great potential in this niche market. "People are very sceptical of the category, but California is very well placed to take advantage of the movement as it develops.

This way of growing wine has become popular in California, not because it is fashionable but because it is a good way to make wine and that is always a benefit," he says.

For others, however, the organic sector remains a niche market and serious growth will have to be sought elsewhere.  "For me it will be through the sheer breadth of varietals that California will really succeed in the UK," says Camilla Bordewich at Majestic Wines.

"The Italian, French, Spanish, etc grapes that are produced in California will prevent the consumer from getting bored of the wines," she argues. Zinfandel, Viogner, Pinot Noir are all beginning to feature much more significantly in the UK retail market and California certainly seems very well placed to capitalise on the development.

"Those kinds of new varietals are all being planted right now," says McLaren. "And when you look at how Riesling has performed for Australia – you know, you can talk to consumers now who have no idea that Riesling is a German grape variety – then there is no reason why we cannot capitalise in the same way.

If Viogner is the new Chardonnay, as some say, then we are more than well placed to take advantage of that."  Of course, it remains to be seen whether UK consumers will really take to Viogner or, indeed, Riesling in the same way as they have to Chardonnay – and there are sceptics.

"I don’t think people will be going from Chardonnay, Merlot and the rest for some time," says wine buyer, Bowness.  "These are soft, fruity, easydrinking wines.  It might be relevant in years to come but if it were me I wouldn’t be planting new varietals."

However, whether we do or don’t take to other varietals, the one thing you can be sure of is that California will be ready to capitalise on the situation.  "In the long-term the thing to remember is that California is not sentimental about growing grapes.

There will, therefore, nearly always be a much faster adjustment to grape and wine supply in California than in Italy or France or Germany or wherever," notes Sainsbury’s Andrew Bird.

And surely this, if nothing else, means that we can rely on the survival of California’s UK market share, not just through the short-term oversupply situation but into the long-term as well.