Promotional Blackmail?

So “successful” has new world branding been that consumers now expect to buy their wines on promotion. This is a pitfall the French can avoid, says Roger Brownlie

AT LIWSF 2005 an audience of around 100 people listened intently as five leading figures offered their views on promoting French wine in the UK. For this drinks business event, in association with French Wines, the panel consisted of Françoise Collache, managing director, Sopexa UK; Greg Wilkins, director, Brand Phoenix; Alex Anson, trading director, Thresher Group; Jean-Charles Boisset, president of Boisset; and Michael Saunders, joint managing director, Bibendum Wine. Françoise Collache began with an insight into recent research commissioned by French Wines and undertaken by Wine Intelligence. “What can we learn about promotions in wine retailing from customers?” he asked.

The research was based on a sample of 1,331 consumers with wideranging tastes in wine: 23% said they mostly drank French wine, 27% Australian and 50% the rest of the world. The sample also had an even demographic and age spread and a 50/50 split between the sexes. The research was based on four broad questions: Is consumer segmentation relevant when talking about promotion? Which countries are most associated with promotion in the consumer’s mind? How loyal is the consumer to brands that appear to be constantly on promotion? And which retailer has the best promotional offers?

With regard to consumer segmentation, the sample was asked “When you are buying wine from a shop, for which wine drinking occasion do you buy wine on promotion?” It was discovered that wine bought on promotion was predominantly consumed while relaxing at home. Of wines bought to drink at home, women were more likely to purchase on promotion than men. The research also revealed that people aged between 35 and 44 are most likely to purchase New World wines on promotion, as opposed to only occasionally buying European wines on promotion. Of consumers that show loyalty to a country of origin, which “loyalists” are most likely to buy on promotion, asked Collache. The research showed that devotees of Australian wine have the highest tendency to buy on promotion followed by Californian fans. Of the European countries, the aficionados of Spanish wine are the most likely to purchase on promotion.

The second research focus question was, “When you buy wines from a country, how often are they bought on promotion?” As it turned out, Australian wine has the highest association with promotions followed by South African wine, yet, as Collache pointed out, South Africa does not organise the biggest number of promotions.

Indeed, according to the study, over a period of nine months to April 2005, across the main multiple retailers, measured every fortnight, there were 611 Australian wine promotions, followed by 378 French promotions, then 285 by the USZ and 276 by South Africa.

The third research focus question was, “How loyal is the consumer to brands that appear to be constantly on promotion?” Or, posed another way, when you go into a shop, if the wine you are looking for is not on promotion, what do you do?

Loyal subjects

50% of consumers will buy the wine at full price anyway. “This was quite a surprise for us, compared to those who will look for another deal instead,” said Collache. If you take a closer look at that data, it is men who are the most likely to shop around for a better deal if they cannot buy what they initially intended. But, of the New World producers, which country garners the most loyalty? Fans of Californian wine will buy at full price 70% of the time, against the more promiscuous drinkers with a preference for Chilean wine, who will only buy it 30% of the time. Australia and South Africa devotees are similarly loyal and will buy it 50% of the time. Of the European countries, Italian wine drinkers are the most loyal followed closely by French and German supporters.

The fourth research focus question was, “Which retailer do you think has the best promotional offers for wine? Tesco is the clear winner here with 30% of the sample saying that Tesco is the best for special deals, followed by Asda at 14%, and Sainsbury’s at 12%. Collache says, “The result was no surprise, with Tesco winning, but if you look at the advertising spend, you can see that Sainsbury’s is spending twice as much but only receives half the recognition.”

The story is much the same if you break this data down by country loyalty. Whether you are a fan of Australian or French, new or Old World, Tesco is still thought to have the best wine deals, followed by Asda, then Sainsbury’s, then Morrision/Safeway. But a quick reality check reveals that over nine months to April 2005, measured every fortnight, Waitrose had the widest range of promotional offers, followed by Tesco.

Different for France?

 Next to take the stand was Greg Wilkins, director, Brand Phoenix: “When I saw this research from Sopexa, it raised a couple of issues for me. Is it as easy to build brands from France as it is from Australia, South Africa and California, and are the methods the same? Also, how is France sitting in the market?

“Is the research indicative of consumers’ feelings about France or are we really seeing in this research the strength of brands within their country of origin? For example, Australia has six or seven strong brands and, therefore, the consumer expects to buy Australian wine on promotion because Australia’s exposure by retailers is so great,” he said.

For years people have been bemoaning the fact that France’s share of the UK market has been declining, and what France is going to do about it. But Wilkins turned this question around to ask, “Given that France hasn’t got that much exposure by retailers in the UK market, how strong can France’s share of the market be in the next 10 years if brand development out of France works well?

“Our job is to get the Tescos of this world to give France the gondola exposure that it needs, and in order to do that we need to create brands to get them excited about the whole category,” he argued.

Three types of brands

“Consumers expect to buy Californian wine on promotion often. California loyalists buy on promotion all the time. But really they just buy a lot of Blossom Hill and Gallo. So it’s actually the brands in that category that drive the generic category,” Wilkins continued.

“Out of the research we see the strength of branding in three ways. First, there’s the strength of retailers as brands themselves – Tesco, it’s clear, is a very strong brand with a high level of trust with UK consumers. What we need to understand as suppliers is the impact that six or eight companies can have on the whole wine market in the UK – it’s how 70 to 80% of people buy their wines. Also, there’s the underlying strength of certain countries as ‘trustmark’ brands.

“France is a huge ‘trustmark’ for UK consumers. The problem is when they buy French wines, consistency has not been there in the past, and also the presentation of the brands have not been there. They have lost a little confidence in France when looking at a competitively priced offer. Finally, there’s the strength of wine brands themselves. Australia and California are totally branddriven. This means there is a great opportunity for France to come back and tune its branded strategy in the market and take some major share back from places like Australia.

“But this is not so easy in France. You come across AOC appellation rules and regionality rules. So if you create a brand successfully it is very difficult to grow it. So you have to think about the brand in a completely different way. But we really are starting to see the fightback from France now.”

Alex Anson, trading director at Thresher Group, took to the podium to tell the audience about the “rich and varied world of opportunity” of retailers in the UK. “Promotions are there to drive sales and aggressive promotions are to drive footfall. We’ve also seen price promotions being used as trade drivers to drive customers through stores through pure price. Tesco and Asda have been giving wine away at 35% discount.

“The impact of promotions is phenomenal for a retailer. Promotions will make or break your performance. Big promotions are able to deliver 400,000 nine-litre cases in a four-week period, more than some producers make in a year. However, if you get it wrong, you have one almighty mess on your hands. All too often retailers are pigeonholed as being the devil in the industry – the nasty buyer that squeezes margin and makes you do promotions that you really don’t want to do. It’s not the case. It’s the supply and demand conditions that are causing the current conditions. The promotions you see now are a function of the imbalance of supply and demand. Retailers are vehicles for getting the surplus sold. A lot of the promotional activity is being driven by production conditions. There is not a consumer-led demand.”

Building brand equity

“So it’s going to be a very competitive market out there and doubly so for new emerging French brands as Australian growers announce record crushes. But we need to bear in mind that successful promotions have been able to create brands. Quite frankly, Hardy’s Crest five years ago was a product that was about to be delisted by Constellation and now it’s a top 10 brand. And it’s because it’s been promoted very heavily by retailers. But on the other hand, there are brands that have lost their brand equity.

“In this intense atmosphere of competition it is going to be very complex and difficult to get your brand position across to the consumer. “However, with a buy-two-getthird- free, as in Thresher, you start to see what people want to buy rather than forcing them to buy certain brands. And you can begin to see French brands coming through because they still have their brand equity intact.”

Following on from that theme was Jean-Charles Boisset. To promote, by definition, in both the English and French language, is about raising the status, improving progress and publicising, Boisset began.

 “But are we really seeing these definitions in UK promotions?” he asked. “We need to hire more accountants to calculate margins, not marketing staff, because over the years we have seen promotions evolve into just discounts. I’m not sure that this is really the right direction. The goal is to educate more consumers and bring more consumers into the wine category and certainly help them grow as consumers and grow up in terms of the average price per bottle.

“The amount of French wine on promotion is not as high as other countries. So it is encouraging in many ways because many of the big brands have sold about 50% on promotion whereas French wine is sold on promotion about 18% of the time.” So there is an opportunity for French wine by not selling on promotion, Boisset believes.

 “But in the US we have seen a tremendous effort with merchandising. Not only is it very aggressive merchandising in the wine department of a store but in other areas of the store to educate consumers and generate impulse buyers. For example, what we have learnt from the US is that if you put white wine in the fish department you increase sales by more than 70%.”

 Also, in Boisset’s experience, “In-store tasting really adds more value for the customer and brings more people to the category. However, it is often poorly implemented. If we want to increase wine consumption, sales and profitability, we need to work better in-store to improve winesampling. Properly implemented sampling is probably one of the most successful wine promotions we have ever seen.

Think before you discount

“BOGOFs are fine, discounts are fine, but ultimately what we want to do is better manage the category because driving price down is too expensive and we are not going to build wine brands that way and certainly not increase wine consumption. We need to educate, make better wines, and work in synergy with the off- and on-trade.”

Finally Michael Saunders took to the podium, representing Bibendum, which has both on- and off-trade presence in the market. He said, “We firmly take the view that growth of the wine category will continue as it becomes the drink of choice. It will reflect the move towards more guilt-free drinking to suit people’s lifestyle. We believe that grocers will continue to grow share by discounting and there is a strong focus on their margins and that, of course, has an impact on producer and agent margins.

“The statistics all look very promising for the on-trade consumption. By 2020, 50% of all meals will be eaten in the on-trade. The on-trade is itself beginning to see the competition not as other ontrade retailers but the off-trade.

 “We see the New World continue to take market share sub-£5 and increasingly sub- £10. But we also believe the Old World has a huge opportunity and will bounce back above £5.

“The percentage sold on promotion EDLP will increase so price deflation will continue. “There is an excellent opportunity for brand loyalty to increase as there is a polarisation, as the research suggests, between loyal consumers and promotion junkies. The one thing that needs to be explored by all of us in the industry is ‘word of mouth’. The concept out there to do this is viral marketing.

 “Michael concluded that many consider the on-trade as a more lucrative alternative channel to explore than the offtrade. The difference is, the access to market is a lot more complicated. Wines outside the multiple retailers are seldom promoted, but those off-trade brands are increasingly trying to buy space in the on-trade wine lists. That is, buyers are starting to reflect some of the off-trade patterns.

“But a final word; consumers buy things because either they need them or they want them. Needs are functional, wants are emotional. Most promotional purchases are needs, most nonpromotional are wants. The Old World is wanted.”