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The In-Cloud
“standfirst”>Unspoilt by excessive promotions, New Zealand wine is a uniquely value-driven category, still boosted by the Cloudy Bay effect, says Penny Boothman
We have Australian brands that are the same size as the whole New Zealand category,” says Amelia Nolan, marketing manager at Cellar Door by Constellation. “Which puts it all in perspective really.”
It sure does. New Zealand has recorded impressive growth this year of 29.6%, claiming 9th place from Argentina in the UK top 10 (ACNielsen MAT year to 14.05.05). Sales value reached £74.9 million last year, but this still represents just 1.9% of the light wine market (up from 1.6% last year), and in the context of their antipodean rival’s 23.8% share, the true scale of things becomes clear. However, New Zealand’s exports are making impressive progress, with shipments to the UK up 64% (year to end June 2005), now accounting for 40% of total New Zealand wine exports.
“The great thing about New Zealand is that it’s a valuedriven category and it’s unique from that perspective,” Nolan continues. “I think New Zealand has been lucky because it’s a small country, with a small wine growing region, and a small number of brands. They’ve had the opportunity to be very focused, while somewhere like Australia is a very complex message to get across, so to simplify the complexity they’ve had to develop brands.” Cellar Door’s Drylands brand is a niche market line sold through small regional wholesalers as a route to market for the on-trade channel and is also listed in Oddbins and Majestic.
The thing that makes New Zealand the envy of every other player in the market is its high average bottle price of £5.99. Although this has fallen slightly from £6.30 last year, they are still £1.73 ahead of their nearest rival, Australia. In times when every other New World country is talking about encouraging trading up and promoting regionality to boost their price point, New Zealand is still struggling to meet orders for wines selling at over £6. The holy grail of wine retail. How?
“I think Cloudy Bay probably did a huge amount,” comments Nolan. “The icon of Cloudy Bay put New Zealand Sauvignon on the map so it was almost a bit of a top-down process. A lot of consumers who are willing to spend more than £6 on a bottle of wine probably would know what Cloudy Bay was, but they might not be able to name a £20 white wine from Australia or the US.”
And this halo effect still seems to be working, even with larger volumes of wine coming to the UK in recent years. “The average price point has dropped recently because of the very good 2004 harvest, so that’s enabled people to promote a little bit more but, going into 2005 I think you’re going to see less promoting and you might see that price buoying up again,” comments Fiona Holifield, brand manager, Hatch Mansfield, whose Villa Maria brand is the fourth largest selling New Zealand wine in the UK.
Maintaining a high price point is an even more important issue for smaller importers with smaller brands. Even when you’ve found a loyal, well-heeled consumer base there are still logistical issues to overcome. “About five years ago we were shipping 200 to 300 cases at a time, and it sort of worked then because we had an exchange rate that was over NZ$3 to the pound so we were shipping part containers at £3 to £4 a case,” says Philip Addis, MD, Great Western Wines.
“But the problem for New Zealand over the past two years is that the exchange rate has gone from $3 down to more like $2.61 and, of course, the shipping costs have gone up each year. We’ve been lucky because we’ve managed to grow West Brook as a brand, and he’s kept the price in NZ dollars the same, and we’ve kept the selling price in the UK the same because little by little we’ve managed to move up to whole containers. So our shipping price has gone down to NZ$1.50 per case. That’s how I’m able to keep the prices the same.”
Brand Value
Montana, one of the country’s few large brands has managed to increase sales volumes and range extensions while maintaining the all-important, value-adding regional focus, and has recently released a Terroir series of wines from specific Marlborough vineyards.
“With New Zealand, where there is a scarcity of supply, it’s all about managing the resource for profit and making sure that we continue to add value to the offering for the consumer,” explains Sally Warmington, marketing controller, Allied Domecq Wines UK. “Our job as brand owner is to try to ensure continuity of supply – and it’s not a tap that you can turn on. It’s all about ensuring that we maintain the quality, which is key, because without the quality New Zealand couldn’t earn the higher price points.” As boutique oriented as the NZ market may seem, this is, in fact, a very branded arena, where over 85% of New Zealand sales come from the top 10 players. Allied has spent some considerable time researching these much sought after consumers who are willing to hand over a tenner for a bottle, without expecting to find a fiver in their change.
“Consumers who buy into New Zealand wine buy into it because they know it’s guaranteed quality, and is stylistically suited to the way people are drinking wine now. And those consumers are the heavy and premium wine consumers who are prepared to pay more,” Warmington explains. “We’re very much aiming at this cluster of consumers called the ‘experimental enthusiasts’. We know they love NZ wine, we know what their interests are, we know what they do in their leisure time so we talk to them in the most relevant way.” Allied Domecq is working with a premium adventure travel company called Explore, whose high-end demographic customers represent a good target audience for New Zealand wine.
With consumers who are prepared to pay more, and a tight supply situation, Montana is in an enviable position compared to many of its New World branded rivals. “The Montana brand is actually less promotionally reliant than many of its competitors from the broader New World arena and even from NZ,” comments Warmington. “Less than 50% of the brand is sold on promotion, which is pretty good when you’re the number one brand in the category with 30% market share!”
Montana’s very cautious approach to price cutting has set a good example for smaller brands as well. “In a way we’re lucky that there is a market leader like Montana which has always managed to sell at fairly healthy prices, so they’re managing to keep the overall average selling price up,” says David Gleave, MD of Liberty Wines. “Unlike Australia, there hasn’t been a glut and there hasn’t been a mad rush to sell which has led to lots of discounting and aggressive promotions in the high street. Otherwise if we have people coming in and doing a BOGOF on New Zealand Sauvignon Blanc then that’s going to drag down the whole category,” he continues.
But promotion at some level is vital, and if you want to play with the big boys, you have to play their game. “It very much depends on the promotional requirements of the client, we don’t have a specific one-sizefits- all strategy,” says Gerard Barnes, buyer, Raisin Social. “Sileni, with the volumes of wine that they will have available, realise that promotions are necessary. We promote to encourage trial to drive the brand – with Sileni it is more initially to create the awareness. But we realise that if you are supplying some of the big players, promotional strategy is in many cases a prerequisite to obtaining a listing. They need to know that should they choose to select your wine for promotion that you will be able to step up to the plate and take part.”
And Raisin Social has certainly stepped up to Thresher with two varietals hitting the shelves later this month. “They’ve taken two wines from Sileni, the Sauvignon Blanc and the unoaked Chardonnay. The pair of them are £8.99, but that will be £8.99 on the permanent promotion. It’s early days yet but we have several South African lines in Threshers and judging by the speed of reorder either our products are doing exceptionally well, or what I gather from my colleagues the initial signs are that [the promotion is] doing extremely well.”
Another brand taking a sensible approach to promotion is Constellationowned Nobilo, which has introduced new entry-level Sauvignon Blancs for the offtrade, Five Fathoms, and the on-trade, Orca Bay. With the entry-level wines selling happily at £5.49 in the off-trade, Constellation is simplifying its offering and concentrating on the premium price points.
“We had a very confused message with White Cloud and House of Nobilo so now the focus is very much House of Nobilo to establish the brand,” says Fleur Redshaw, brand manager New Zealand Brands, Constellation Europe, explaining that White Cloud is now being treated as a standalone brand in its own right. “Year-on-year growth is around 35%. The plan is to do a lot more PR. At the moment we’re really just driving awareness and distribution of House of Nobilo, building on the regional collection. That’s obviously a premium price point and we’re not planning on promoting hugely heavily because it’s at a price point where consumers feel it doesn’t have to be price promoted.”
Varietal Variety
Sauvignon Blanc still seems to be the variety on everyone’s lips, but consumers are starting to realise that there’s more to this country than one single varietal white. “It’s quite interesting because Sauvignon Blanc is such a huge part of New Zealand, but we’re finding that there seems to be more and more interest in other varieties and that’s where a lot of our growth seems to be,” says Paul Stratford, MD of Stratfords W i n e A g e n c i e s , whose Cable Bay, Coopers Creek and Lincoln brands grew by 30% last year. “People are really looking to extend their ranges past Sauvignon Blanc as far as retailers are concerned. I think the danger is that in the future if we keep just selling SB then the consumer might get fed up with it as they have done with Chardonnay.” The rise of an A.B.S.B. (Anything But Sauvignon Blanc) movement would certainly present significant difficulties for the New Zealand wine industry.
In fact, research by Allied Domecq shows that 63% of New Zealand exports are Sauvignon Blanc. Is this small country putting all its eggs in one basket? David Gleave of Liberty Wines has taken action by investing in a new project in Marlborough, Delta, which will focus exclusively on Pinot Noir. “Our cue was that Pinot Noir has tremendous potential in New Zealand generally and Marlborough specifically and that it wasn’t really being realised for Marlborough because a lot of people were being ‘spoiled’ by Sauvignon Blanc,” comments Gleave. Other producers are starting to think along the same lines. Pinot Noir is also a key focus for Montana and the company has a brand new unoaked Chardonnay as well. Drylands has small quantities of dry Riesling and a Merlot, while West Brook is branching out into Pinot Noir, Riesling and Pinot Gris.
“There’s a very broad offering. SB is very much the heart of the range but there’s plenty of other interest,” says Fiona Holifield. “We have Chardonnay, Riesling also sells very well and we do a Pinot Gris and Gewürztraminer. For the reds, Pinot Noir is obviously gaining speed rapidly – that’s a bit of a case of availability. Syrah is quite a nice up-andcoming varietal as well and we’ve got the Merlot/Cabernet Sauvignon varietals too. And we’ve just launched a Private Bin Rosé as well, which is a growing sector. That there’s something for everyone on all occassions is the intention basically.”
Generic marketing body the New Zealand Winegrowers is being given a fresh lease of life with the appointment of a new marketing manager for the UK and Europe, Warren Adamson, who will be taking over the reins this month. Caroline Park, who will be stepping down from the role explains some of the forthcoming activity. “Our approach is evolving. We haven’t been in a position to do that much before because we’ve never had enough wine, but with the recent larger vintages in 2004 and this year we have more options and we have a lot more events/initiatives planned. We’re also looking to increase our consumer activity, and continue with our regional roadshows which have been successful for consumers. This year we’ve done the Badminton horse trials and the CLA Game Fair, and next year we’d look to increase that and possibly take a stand at a consumer wine fair.” A
nd for the trade? “We’ll definitly be at LIWSF again, with an even bigger and better stand than before.”
All in all the outlook seems to be pretty positive for the kiwis. The average price point may have fallen a little, but not enough to do significant damage to the category, and agents are still targeting the most profitable areas of the trade with a balanced approach to promotions.
“New Zealand is one of those countries that’s actually very strong in both on- and offtrade sectors, that’s the exciting thing,” comments Paul Stratford. “In all areas whether it be for a retailer or a restaurant, I think New Zealand certainly adds credibility and image to the whole range.”
And growing sales of an ever growing range of wines show that the land of the long white cloud still has a lot to offer the international wine market.