Channel Hopping

The beer bubble might have burst in the cross-Channel shopping market, but wine, you’ll be "pleased" to know, is still doing very well, says Robyn Lewis

CROSS-BORDER shopping has always been something of a political hot potato, and in northern Europe in particular, where the situation is complex, it is an issue that gets a lot of airtime.

In a continent where established EU member countries lie cheek by jowl with those only recently allowed into the hallowed EU club, the average price of spirits and wine can differ wildly.

According to figures from the alcohol control database of the World Health organisation (WHO), for example, a bottle of spirits bought in Norway works out at a breathtaking €39.01, but in bordering Finland the cost is just €14.80.

Similarly, the Finnish are popping over to Estonia where a bottle costs as little as €5.57.  As this last example shows, a sea crossing is little obstacle to those shopping for bargains, which has been proved by the runaway success of the Calais "booze cruise".

The latest figures, however, taken from a Brewers and Licensed Retailers Association (BLRA) survey and provided by the Wine and Spirit Association (WSA), show a decline in the crossborder share of market for the UK.

Sparkling wine in particular, while still the biggest cross-border purchase, is now showing a significant slowdown.  The millennium fever obviously pushed cross-border sparkling wine sales to an all-time high but the subsequent slowdown has seen sales drop well below their pre-1999 average.

Now sparkling wine commands just 13.25% of the market (MAT to end of the first quarter 2004), a drop from 17.10% over the same period last year.  For spirits and still wine in the cross- Channel market the story is less dramatic, though both are showing a slowdown.

Still wine charts a steady increase through the late 1990s but, again, after the 2000 peak, sales dropped to a 14.86% share of the market (MAT to year end 2001), then 12.17% (MAT to year end 2002), and finally 12.66% (MAT to year end 2003).

First quarter sales this year are just 11.81% (compared with 12.14% over the same period last year).  Spirit sales post a similar story, albeit on a much smaller scale, commanding just over 4.81% of the market at its peak.

This has dropped to 3.46% MAT to the end of the first quarter, 2004. So why the decline and is this a long-term trend we are seeing or a mere blip in the Calais retailers’ fortunes? Quentin Rappoport, director of the WSA, has campaigned long and hard for the UK drinks industry on this matter and he says that in his opinion the increase in tobacco prices in France has had a profound effect on the Calais market.

He warns, however, that rather than decreasing cross-Channel shopping, the effect has been to just move the destination.  "It seems to me that people aren’t visiting France as much but are perhaps going to Belgium instead, where the cigarettes are cheaper.

The question is whether they are buying alcohol from there as well.  The important thing is that we don’t get complacent looking at the Calais figures and think the bubble has burst.

 Another duty rise on alcohol from the government and we would be right back in the same place."  That is, according to Rappoport’s figures, with 16% of the market "just disappearing over the Channel".

Others put the decrease in shoppers down to better deals from the UK supermarkets and high crossing prices from the ferry companies.  "We have certainly felt the lower number of customers here and I’ve heard other retailers as much as 40% down in business," says Luis Da Silva, buyer at the EastEnders store in Calais.

"The ferry prices are definitely not helpful and people are looking at some of the UK offers in the multiples and wondering if it is worth coming.  I mean, our business used to be a lot of beer but these days the prices in the UK are so low that you can only save, for example, about £3 a pack.

Our wine sales, meanwhile, have gone up and up – now you can save something like £3 on a bottle. So the customers that are coming are seeing bigger savings there and wine is by far our biggest line now, definitely."

There have been other lines to benefit from the change in the climate too, and at EastEnders the portfolio of products has been extended in order to continue to attract consumers. "We have, for example, introduced Persil washing powder and other popular brands to the offer," confirms Da Silva.

 "We have expanded our product base to remain competitive, particularly in the light of UK retailers opening up here – Tesco, Sainsbury’s and Majestic all have outlets here and the increase in competition is posing a challenge to us all.

People do go there because they know the name and that’s an advantage they have over the likes of us."  Rob Nichols, general manager of Sainsbury’s Calais agrees. "Ultimately, people come here because they know who we are, where we are and they know we will be cheaper because of the duty.

Interestingly, we have a lot of customers who shop here who do not shop at Sainsbury’s in the UK." Sainsbury’s Calais has not, Nichols claims, been hit by the same level of decline in shoppers that other retailers have experienced, a situation he attributes in part to the recent refurbishment of the store.

"We extended our current operation in the latter part of last year and we have a very unique proposition here now.  The sales space was extended by something like 77%, which basically means we put in about 900 new lines, some of which are exclusive so you can’t get them in the UK branches.

At the end of the day we have a wider choice than anyone else and we do an on-line service as well.  The point of that is you can peruse the offers at home, order your products, book your preferential P&O crossing and then travel over and pick up your order, which is all ready for you.

Then you can spend the rest of the day enjoying what the area has to offer.  We even offer preferential deals for lunch bookings with some of the restaurants around here.  So, that’s another of the reasons people pick us – you almost have a complete service from start to finish."

The Sainsbury’s Calais team is eager to maintain the same standards in store as any of the UK outlets and is also very keen to educate its customers.  "Because of the way the store is laid out we ensure that people spend more time on fixture," explains Nichols.

 "That means they read the tasting notes we display and can question the staff.  They are also in less of a rush than they are when shopping at home and that presents us with an opportunity to get them to try new things and perhaps trade up. It is hard, though, as 90% of the time people know what they are going to buy even before they leave their front door."

This pattern of planned purchasing does make it difficult to persuade customers to experiment but some of the Calais retailers would argue it is not their role to educate in any case. Jeremy Palmer, marketing director of Wine and Beer World, the Calais arm of Majestic, says, for example, that while Majestic in the UK is about education, Wine and Beer World is "not about persuading people to try new things but to sell them a decent quantity of good quality wine and beer that they probably already know they like".

Palmer also dismisses the idea of a crisis in the Calais retail sector, saying the company has not seen a decline in business.  "This is probably down to us being far better retailers than this time last year, and we have a constant set of good offers also," he says.

"If you contact us and tell us you are going to spend over £300 we will give you the day trip free, for example.  We also have a base of regular customers that come – some every month – and we mail a full price list to those on our database five times a year.

We also put price lists in motorway stations in the southeast en route to the port.  The southeast is really our main catchment area but also Yorkshire, believe it or not. 

The thing is if you are going to buy a lot of high value products you can genuinely save a lot of money, even if you are travelling quite a distance.

The demographics for us have changed, in that we are selling less beer and cigarettes, but we are selling more premium products instead." 

So is it through selling more high-end products that the Calais retailers will survive? Or will it be through diversifying their product lines? One thing is for certain, the Calais retailers can no longer rely on cheap prices alone to attract savvy UK consumers.