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Wine Peddler
d=”standfirst”>Constellation’s Peter Spencer listens very carefully to pub owners’ misgivings about branded wines – but once they’ve lost the ‘terror’ they seldom look back, says Patrick Schmitt
For Peter Spencer, senior vice president for on-trade sales at Constellation, understanding the on-trade is a little like deciphering the London Underground Map – there are, as he says “a number of ways to get products into either managed estates, leased and tenanted or the free trade.” A little like, one supposes, the many routes to King’s Cross St Pancras. However, Spencer is not merely ensuring Constellation’s products make it into the on-trade in the most efficient way possible, although that is one aspect of his job. He is also trying to build brands in what is, historically at least, a brand-averse sector of the market. Furthermore, he is attempting to grow wine sales as a whole. After all, Constellation’s brands alone account for over 10% of the wine sold in the on-premise.
Spencer joined Matthew Clark, now well and truly under Constellation’s wing, back in early 2000, starting as a regional managing director for the South East, before heading Constellation’s cider sector. This post lasted about 12 months, “until the company decided to break out of business units, for instance, wine, cider, drinks, water and move to a cross-brands business”. At this point Spencer took on the on-trade role, with “the aim to gain distribution both through the routes to market and also in the outlets themselves. The challenge, he adds, “is in trying to unlock as many opportunities as we can for our brands.”
This task Spencer is well equipped to take on. He spent six years working for CocaCola Enterprises prior to his involvement with Matthew Clark. Before his soft-drinks days, he was at Esso. Both companies he describes as “fantastic training grounds for developing overall business skills.”
Spencer’s on-trade strategy involves in particular “working incredibly closely with our customers to try to work out what their requirements and needs are from us,” because, he is keen to point out, “we looked at the market place and, we believe, there is a distinct lack of listening in the on-trade.” He then uses his field sales force to set outlet goals and review results.
Spencer is keen to use Constellation’s “huge” amount of experience in category management in the off-trade, “to really take category leadership in the on-trade, by looking at people’s ranges against where the market growth is; by talking about the requirement of branded and non-branded products; by looking at training, both for the outlet and our own or the customer’s sales force; by providing the right point-of-sale and merchandising advice at the outlet; by gaining consumer insight and using that better; and by using packages such as World of Wine, which we’ve just launched.” This is a training manual and DVD on wines for the on-trade, which staff can study in their own time, and culminates in British Institute of Innkeeping (BII) accreditation.
Such a learning tool is really aimed at the pub trade, which, “still, in the main, massively undertrades in wine”. In some places around 4% of pub turnover is wine whereas, realistically, it should be about 8% to 10%. This situation exists because “there is a distinct lack of knowledge and hence an apprehension, almost a terror in selling wine,” according to Spencer, “and that goes for the licensee, the brewer or wholesaler sales force and then the consumer actually going in and buying. There is a mystique around wine which puts people on edge – our aim is to try to simplify it; take all of the highbrow elements out of wine so that somebody at the base level can start to get into it and enjoy it and understand the benefits of merchandising it.”
Spencer does concede however that the on-trade is a complicated sector: “If you sell Foster’s, Foster’s is always Foster’s, day in day out, year in year out, whereas with wine, the varieties will change – and we talk about varietals but do the consumers and publicans even understand what varietals are? We are all guilty of assuming everywhere is like an All Bar One, but the reality is that there are a huge number of pubs out there where wine is Liebfraumilch on the back bar they bought from the cash and carry because they happen to know that somebody occasionally asks for it.”
But why should a beer-led pub be interested in developing its wine offering if few customers ask for it? Spencer argues that by selling wine a landlord may be able to keep people in his pub for longer and extract more spend from them, because “if there’s a good wine offering maybe the person who’s drinking wine in the group will want to stay.” Further, if branded wines are present, they “give a consistency people can gain confidence from.”
With brands, it is the managed estates that have proved the most amenable. Spencer is pleased to point out that when they have taken on brands, “their wine growth has been incredibly strong, because where consumers get the opportunity to buy brands, they buy them.” Nevertheless, many on-trade outlets are still reluctant to stock brands, nervous of price comparisons with the off-trade. For this reason, over the past 12 months Constellation has developed ontrade exclusives that still have Hardy’s, Banrock and Stowells soft branding on the label, so the outlet does not have to sell the supermarket product, they can sell an ontrade version. There is also the fact that some customers do not want to stock wines Matthew Clark distributes. Hence there are some brands which Constellation develops exclusively for Matthew Clark, such as Footsteps, Cave Cliff, Southern Rivers and Mill Cellars, and some brands which it develops exclusively for its own sales force, such as Banrock Bandicoot, Hardys Quayside, Jack Rabbit and Orca Bay.
But whatever the reason for not stocking supermarket brands in pubs, Spencer does not believe it is a consumer problem, judging by the success of brands in the ontrade where they are stocked. “As long as the glass looks bright, the wine’s fresh, chilled or served at the correct temperature, the staff are helpful, then people don’t mind paying a premium.” The big challenge, he says, is “the trade mindset.”
Another challenge is wine preservation. Spencer is currently running a “perfect serve” draught wine trial with a retailer where the wine by the glass was not always fresh and refrigeration was inconsistent. ”The premise of the experiment,” Spencer says, “is that the consumer gets a perfectly served glass every time, so when they have a white Chardonnay it’s exactly as it should be, so the chance of them having a second glass is higher because of the good experience of the first – rather than them thinking, ‘Jeepers creepers, I’m never having Chardonnay again because that was just unbelievably bad.’” In this case, Spencer believes draught wine is suitable. Currently around 5% to 6% of the entire on-trade is using draught wine that is Stowells branded. “We don’t want the consumer to think about it as draught wine,” Spencer says. “We want the consumer to think, ‘I’ve heard of the Stowells brand and I want a clean, fresh glass of wine.’” In other situations Spencer might advocate mini-bottles, “because then the outlet can offer a reasonably wide range and they don’t have to have a huge inventory.” But he suggests many outlets might want to migrate into offering 75cl bottles, if they are selling food.
What about the move away from an Old World on-trade dominance? Does Spencer see the situation mimicking the off-trade? “Yes, without doubt, both in the house-wine level and higher, but the on-trade does lag behind because the consumer can only buy in the on-trade what the outlet stocks.” The overall trends in eating are helping this change: “Eating out is becoming more prevalent and the styles that are growing the market are not what we’d describe as ‘traditional experience’ outlets like the Savoy, but much more the city centre portfolio style of restaurants, brands like Garfunkels.” This explains why Constellation is, according to Spencer, “getting quite a lot of growth in the Horeca sector with New World products, and while Nielsen is reporting that the whole of the sector is down by about 4%, we are getting considerable growth there, probably because we are canniblising from the Old World offering.” Spencer also reports “great growth in the managed pub sector, in the leased and tenanted sector and in the free trade pub market” and suggests that Constellation as a whole, which sells some 20% of its volumes through the on-trade, “has experienced fantastic growth over the past 12 months”, probably because it has “focused on the on-trade opportunity”. He says: “Overall, the on-trade wine market is growing at 2% or 3% and we are considerably outperforming that.”
Nevertheless, Spencer is still trying to increase the wine category with his mission to “make sure people have a much better experience every time they have a glass of wine in the on-trade. We can’t rest on our laurels,” he says, “we need all the wine trade to be looking forward and trying to gain its share.”
Oh yes, and back to that underground map. What are Constellation’s routes to market in the on-trade? “If you look at the leased and tenanted sector we would supply into whoever the porter was for that leased and tenanted group, so we don’t deliver to those groups’ outlets or their distribution centres, we supply to their third party who then delivers on. So for someone like Punch we would deliver into whoever their carrier was, say Carlsberg, and then Carlsberg would then deliver it into the outlet. For Mitchells & Butlers it could go into Coors or Carlsberg to be delivered into an M&B outlet. There’s nothing completely uniform about anything to do with the on-trade. If you look at the multiple operating groups it’s another fantastic concoction. A multiple operating group may have some Punch leased and tenanted pubs within their estate as well as some Enterprise Inns ones, as well as some free trade outlets, so the complexity of how you access the market is high, hence distribution is vital. So the more routes to market you are available in, the more chance you’ve got of being sold.”
If only it was as simple as Cockfosters to King’s Cross on the Piccadilly Line.