Help from the aged

The specialist, age-dated Sherry sector is doing well as retailers realise latent value in the category, but down on the shop-floor there is still a battle for market share, writes Roger Brownlie

"The campaign’s results are beginning to bear fruit," says Christopher Fielden, chairman of the Sherry shippers’ committee.  "These are happy figures.  There is now more interest in restaurants listing Sherry as a wine, and in bars offering a range of Sherries.

It has been a difficult market for a number of years.  What I’m finding is there is much more interest in quality Sherries, but we are talking from a very small base.  People are now getting used to the variety that Sherry can offer.

This counts for Manzanilla which has come from virtually nowhere.  While it’s small figures, the sales are increasing steadily.  And there is no doubt luxury Sherries and aged Sherries are attracting attention at the top end of the market.

For the campaign to succeed it has to get across to the consumer the variety, not just of style but also the difference between young Sherries and old Sherries."  Bosco Torremocha, general secretary of Fedejerez, is similarly pleased:  "We believe the generic campaign is doing extremely well and is well focused.

We intended to raise consumer awareness and trials of Sherry, and this is happening now.  The fact that some styles are moving better than others may be due to diversity and versatility messages driven by our campaign.

From pale to dark and dry to sweet, there is a taste for every occasion and consumer."  In terms of volume, specialist Sherries are a fraction of the market.   Any success of aged and fine Sherries cannot buoy the category alone.  "You have got to keep it in perspective," says Michael Hall, director of Emilio Lustau. 

"Aged Sherries are getting a lot of press but they are not actually getting a lot of sales.  It does add interest to the category and we should really be having aged Sherries below 12 years.  I don’t see the logic of having 30, 20 and 15-year aged Sherry.  If you look at the way whisky and Port is marketed, age statements mean something to the consumer, and it adds value to the market."

To lift the category as a whole and reverse the decline, any success and interest in fine Sherries must somehow influence the mass consumer.   "There are two sorts of Sherry businesses happening now," says Tim Holt of Bodegas Hidalgo.

"The cheaper range in the supermarkets and the special more connoisseur level of Sherry which deserves a completely different treatment.  And our customers, which include Waitrose, Majestic and Sainsbury’s, are all definitely interested in doing something more with the Sherry category.

There is genuine belief that there is more to it than their own-label basic range."  At the multiples very different battle lines are being drawn out as the latest AC Nielsen figures reveal.

Of the leading two brands, Croft Original and Harveys Bristol Cream are both showing declines in value, albeit a less serious decline for Croft at around -6% and -13% for Harveys.  But the story is slightly different for market share with Croft Original showing slight gains in the short-term and Harveys Bristol Cream declining by -3%.

Naturally any gains in a declining market are significant, however small, and Jeremy Rockett, marketing director of Gonzalez Byass UK, for brands including Tio Pepe and Croft Original, is anxious to capitalise on them to stabilise the decline, at least for his brands.

"Value has dropped slower than volume so the average value has gone up.  The amount of  ace given to a category tends to be linked to its turnover.  If Sherry loses market share over time it  will lose shelf space.

As it loses spaces it’s a vicious circle – there’s less to choose, less to see and you will lose share even faster.  So the challenge is reversing this and maintaining Sherry’s share on-shelf, as well as trying to get the new consumers via the on-trade.

"What’s interesting is the specialist area.  There, decline has dramatically reduced over the past few years.  They were declining at 20% two years ago.  They are now declining at 6% – the same as the market.

There has been more press interest in aged Sherries so the retailers have also become more interested.  But our problem is getting people who buy own-label to trade up to an £8 bottle."

Allied Domecq, a company that owes its name to the Domecq Sherry group acquired in the mid 1990s, has also been working hard on its specialist Sherries.  "Industry trends identified a consumer move towards higher quality wines," says Joanne Smith, brand manager for the Harveys and Domecq brands.

"We were also finding that consumers were showing more interest in brands that offered history, heritage and authenticity, offering a reason to trade up.  We felt it was a good time to launch the entire portfolio in the UK.

Last year the Domecq VORS (Very Old Rare Sherry) range was repackaged with a modern and contemporary style and we focused on launching the entire range of rare Sherries as a full portfolio.

"The decline in Harveys Bristol Cream’s share is due to the fact that we did not repeat a price promotion that we undertook last Christmas, resulting in lower volumes.  We are not looking to focus on Harveys Bristol Cream specifically this year, rather to continue to create interest and increased trial in the Sherry category.

We are doing this in a number of ways using Harveys Pale Cream and the Harveys Discovery Pack," says Smith.  So how have the retailers faired from this renewed consumer interest in the category? According to TNS, the total UK market performance is down 4.7% over the last two years but Tesco and Asda have bucked this trend with share of value increasing 6.8% and 11.1% respectively.

Tesco’s growth has been driven by penetration – the number of households that have bought the product – but new buyers are bringing down average consumption levels.  On the other hand, ASDA is managing to grow both penetration and consumption levels.

"What’s not helping the category," claims Rockett, "is British fortified wine.  You have some brands on the shelf at £2.09 and consumers see it on the Sherry section and buy it as a Sherry replacement.  Some retailers like Waitrose refuse to stock it and that’s a good move because they get much more value from their Sherry category per bottle by not stocking it." 

Although the image of the old-age pensioner plagues the Sherry market, the evidence – exports, retail sales and consumer research – would suggest that this is a category with longevity, sustained not through advances in medical science, a maturing baby boom or any other stroke of  demographic luck, but through a passion for the product, its quality, and its value for money.

"You often hear people talking as if Sherry were dead and buried and they couldn’t be more wrong," says Michael Hall. 

"Hopefully, volumes have stabilised, but it still must be  remembered that Sherry is selling more than 2m cases a year which is larger than Rioja or Cava, and not far behind gin, and that surprises most people in the trade."