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Out Of Body Experience
“standfirst”>Argentina needs stronger wine brands but, above all else, an active generic promotional body if it is to break the £5 barrier and perform to its true potential in the UK, says Chris Orr
Even those who have been to Argentina and fallen in love with its wines and landscape will find it difficult to gloss over the statistics for the country’s performance in the UK market over the past 12 months. Consistency and quality in its wines may have improved dramatically, but the figures show that Argentina is failing to grasp the opportunities that many believe exist for it with the great British wine consumer.
Sobering thoughts
While the likes of Australia have seen volume share of the UK off-trade market increase by 10%, and Chile an impressive 13%, over the period to 14.5.05 (MAT AC Nielsen), Argentina has seen its share eroded by more than 17%. And the same is true of its value which is down also by 17% over the same period. Only Bulgaria has shown a poorer performance in the marketplace, which is a sobering thought.
Total sales in the UK during this period, amounted to 1.1 million 9-litre cases of wine while total value hit £5.03m, with an average price per bottle of just £3.70. Compared to Argentina’s overall export figures, which show growth of 39% in value terms and 31% in volume, the UK appears to be underperforming significantly. Last year in the UK, the light wine market rose by £222m, reaching a total of £3,831m, up 6% on the previous year (MAT 19.03.05, AC Nielsen).
But there is some good news on two fronts for Argentina. The first comes when one dissects the main areas where the country has lost ground in the UK market. According to figures for the off-trade over 2003-2004, the Argentine category saw a drop of just under 50% (in real terms) in the proportion of bulk being shipped, meaning that in 2004 only 28% of all sales were bulk compared to 45% in 2003. Conversely, the branded sector rose by a modest 5% (in real terms) taking it from 57% to 73% of the total mix.
Value added
Likewise, in terms of average price paid per bottle, Argentina managed to maintain its price of £3.70, despite the drop in volumes. More importantly, the figures for sales within price bands show growth at the higher end, admittedly off a small base, while the under-£5 category is seeing a decline. The value of wine sold within the £5 or less band fell from £56.24m to £44.49m, while the value of sales in the £5-£6 band rose by 4%, from £1.68m to £1.74m. The £7-£8 category fell by 35%, but the £8-£9 banding rose by 26% and the £9-£10 category sold 24% more, while the £10 or more banding was up by 37%.
However, despite these positive signs, the same issues appear to remain for Argentina when selling in the UK, the most important of which seems to be the lack of a generic presence. Despite a good showing at both the London Wine Trade Fair and Vinexpo this year, the news shortly before the latter event that Wines of Argentina was again without a head after the departure of Bernardo Hoffman, did little to reassure people that the country was in a position to drive growth.
Looking at the price band performance, while the news of growth at the upper end is welcome, the decline of the £5 or less banding is cause for concern. According to the ACNielsen stats for national wine sales, the category for £5 or less accounts for 79.8% of the market for light wine in the off-trade. Argentina, however, despite its fall in sales has maintained a relatively steady 91% share in this regard. So while bulk sales may well have fallen, many of the brands appear to be trading in the under-£5 category.
Many believe that establishing a credible generic body within the UK is part of the solution. “During the last year, Argentina has lost its market share to other wine producing countries,” says Christian Yaniez, business director for Terrazas, the LVMH-owned, Mendoza-based winery. “When you look closer at the data, you can see that the loss is coming from the entry level wines (especially own-label wines) while the higher priced segments are showing double- digit growth. But without a doubt the lack of generic presence during the last year has affected Argentina as a category,” says Yaniez. “Argentina needs to increase its brand awareness in the UK market, especially when other generic bodies likes Wines of Australia, Chile and New Zealand are investing heavily. The lack of generic presence is felt by wine buyers, customers and consumers.”
But, as he points out, that shouldn’t stop individual brands from effectively growing their own business. “We believe Argentina has tremendous potential in the UK market. We may have started later than other countries but our wine diversity and quality give us the potential to become the leading wine country from South America,” Yaniez comments.
The search
“Wines of Argentina is going through a transitional stage,” admits Frederico Boxaca, marketing director for Allied Domecq in Argentina, which owns a variety of Argentineanbased wine brands, and is currently leading the search for a new head for Wines of Argentina, and investigating the possibility of establishing a generic body in the UK. “The UK market represents a huge potential due to the level of knowledge of the consumers and the shift in style preference that has occurred in the past years. These factors play favourably for Argentina mainly because of the overdelivery of the country’s wines and the diversity of its wine portfolio,” says Boxaca.
“But there is no doubt Argentina needs to strengthen its presence in the distribution channels and to improve the consumers’ awareness of us as a producer of quality wines,” he continues. “The achievement of these two goals will give the base to increase sales volume while also increasing the average FOB price. To achieve these goals we are assembling a new structure and appointing a managing director who will be the face of WoA for all the overseas markets and be in charge of developing strategy.”
But it would seem that speed is of the essence for Argentina. “There is definitely a window of opportunity,” says Phil Reedman, from Tesco’s buying department. “But a generic body has to be there to help develop the category and promote Argentinean wines. The benefits of an organisation in the UK such as Wines of Chile are plain to see.
“South America itself is performing very well in terms of sales, but within South America, Chile is a stronger performer than Argentina. Having recently spent four days in Argentina, we are convinced that there are exciting wines that are distinct from wines of neighbouring countries such as Chile. We believe that these can offer good value for money for our customers.”
“Argentina needs a strong generic presence in the UK,” says Philippa Carr, from Asda. “A Wines of Argentina office is necessary to raise the profile of Argentinean wines and change the image of Argentina in the UK. A generic office could also co-ordinate generic promotions, as with Chile or South Africa, which would raise the profile of the wines. But most of all Argentina needs to develop USPs, like Malbec, which is a real point of difference. The category has to develop a strong generic presence and more importantly the category needs stronger brands.”
League table
The league table of exporters from Argentina is, not surprisingly, dominated by a small handful, many of which dabble in both branded work and in bottlings for the major supermarket chains. At the top of the table is Donaldson, which exports some 307,941 cases, with a value of US$4.79m, followed by La Riojana, which exports some 294,185 cases with a value of US$3.76m. Perhaps the strongest performer in the UK, however, lies in third place, with Grupo Catena Zapata, which exports 245,168 cases, but with a US$5.508m value, putting it at the head of the export table in terms of total value of exports and average price paid. Interestingly, just behind Catena in volume terms, is Origin Wines, the Thresher brand that saw more than 189,910 cases flood into the UK last year. Zuccardi, another well known name, comes in at fifth place with 173,895 cases exported, though again its ranking is based on the high value of its exports. Concha y Toro, the Chilean giant, ranks in sixth place, while Allied Domecq’s combined activities put it in seventh place in value terms with 85,610 cases shipped.
Identity crisis
“The UK is a very important market for Argentina. We’re doing well in the world wine market as a whole, and some markets are moving faster than others,” says Marcelo Marasco, commerical director for Familia Zuccardi. “The US, Brazil, Canada and the Netherlands are currently the best performers. But with the UK, it’s a question of getting the communication with the consumer and the trade right, and improving distribution. But I feel confident that Argentina is going to be as well established in the UK as in other markets in the long term.”
”There still needs to be a lot more done with brands,” says Neil Bruce, commerical manager for Bibendum, which represents Catena in the UK. “But that needs to be done with the backing of a generic. Argentina needs its own identity in the UK.”
Whether funding and, indeed, a generic will be forthcoming in the UK is a matter of debate. Anyone who has followed the recent history of the country’s wine performance in the UK, will realise that the above comments from producers, agents and buyers alike are hardly novel. What remains to be seen is whether Argentina can get its act together before the aforementioned precious window of opportunity disappears for good.