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Chile Storms The Charts
“standfirst”>Chile’s impressive UK growth is being driven by branded wines, at the expense of own label, which is helping to make friends in the impulse sector, says Penny Boothman
Ponchos are out, capes and shrugs are in. So say the fashionistas, but as the sleeveless body rug drops from favour, there is another aspect of Chilean culture that has been adopted by the great British public. Chilean wine has quickly found a permanent place in the hearts and glasses of UK consumers, now with two entries in the UK top-20 light wine brands. This may not sound like that much when compared to Australia’s and America’s six each, but consider that France has only two, and Spain and Italy none at all, then you see that brand Chile really has been working its way up the charts.
Apart from anything else, consumers are simply more aware that wine comes from Chile – or even where Chile is come to that. The perception may previously have been of cheap, soupy, tannic reds (and in some cases this image was unfortunately justified) but times have changed for Chilean wine. “In the UK market the consumer can now find really good quality wines from Chile, at many different price levels,” says Pamela Dunn, marketing manager, PLB Group. PLB has recently launched a Chileno Gold reserve level tier to its brand. “I also believe that some consumers are turning to Chilean wines to replace other New World wines from Australia. Chilean wine although very fruitdriven is often more subtle in taste and style than many wines from Australia and I feel this is helping to increase their following within the UK market,” she adds.
Accessible styles
Growth of a recognisable Chilean style is clearly necessary for growing brand Chile within the marketplace. Combine this with market research and careful product targeting and it’s surely a recipe for success. “A growing understanding of consumers’ – and buyers’ – needs in the UK has meant more approachable wine styles and better packaging,” says Damian Carrington, head of marketing, Enotria Winecellars. “The work done by Wines of Chile continues to raise the profile of Chile with the consumer and helps to communicate the diversity of styles and price points that Chile has to offer, while the work done by the brand owners continues to make the brands more and more available to the consumer.”
Accessibility is the key to brand success in the multiple grocery sector and Chilean wine is now broadly accepted and recognised as a good value option in the under £5 bracket. “For the consumer an easy-sounding brand name with warming packaging – a refreshed label will be on-shelf from September 2005 – develops both the feel and brand name,” says Kathryn Allison, marketing, Buckingham Vintners which represents San Pedro’s 35 South in the UK, the fourth biggest selling Chilean brand in the UK. “We have a good presence in the multiple grocers which we intend to capitalise on and further develop our entry into the impulse sector in 2006. We are looking to penetrate the on-trade sector further following success in a leading national chain.”
Brands building
Although private label (own brand) wines still hold the lion’s share of the Chilean category with 31.6% of the market, their share is in fact down from 38.2% last year, showing that more consumers are turning to trusted brands. “Chilean brands compete extremely effectively against brands from other countries. The growth for Chile as a category is being driven by brands,” says Lewis Jones, marketing director of D&D Wines International, whose Luis Felipe Edwards brand has joined the Chilean chart at number 10.
“The latest ACNielsen report shows that the Chilean branded category is growing at 30% (MAT), which is the highest growth rate from any category in the fixture. There has been some significant new brand development from Chile in recent years and, consequently, major retailers have increased the shelf space attributed to the category.” This, in turn, drives a higher awareness of the Chilean category as a whole.
However, Australia is more than Jacob’s Creek and, likewise, Chile is more than just a few core brands. “Chilean brands are growing as the country champions the production of quality wine at all price points and is moving away from bulk production. Also, as more awards and accolades are won, Chile is being recognised by consumers as a producer of world-class wine,” says Sarah Wicks, brand manager, Hatch Mansfield. “Errázuriz is positioned as the premier family wine estate from Chile and great effort is put into the quality of our wines through the whole of the production process. The wines are targeted at key price points and provide a ladder of quality for consumers to trade through and the brand has experienced steady organic growth,” she says.
Chile’s top-10 selling wines in the UK is a list of very solid, very well known brands. However, the average price point for Chilean wine in the off-trade has dropped slightly in the last year from £3.75 to £3.68, falling further below the total light wine average price point of £3.79. This means that while Chile’s share of the light wine market by volume has grown from 5.9% to an impressive 6.6%, the value share is growing at a slower rate from 5.9% to 6.4%. How can they build the value back?
Underlining the diversity and regionality of the country’s wines is a good way of demonstrating that allimportant point of difference needed to persuade consumers to part with a few extra quid. This is the route Enotria is taking with Mont Gras, which has the highest average bottle price point in the top 20, at £5.69. “By transmitting to the consumer the specific characteristics of certain vine growing regions they’ll discover more than just ‘Chilean wine’ and it should encourage them to trade up to wines from premium regions,” Carrington says. “Chile should also diversify out of the ‘big four’ varieties and grow its offer of distinct and unique wines such as Carmenère, Syrah and Viognier among many other varieties.”
Whatever consumers decide to buy, it is getting your product on the shelves in front of them in the first place that is important. Placing your brand in the right place with the right retailers is the only way to get the sales. The multiple grocery sector is the traditional stamping ground of Chilean wine, but some producers are now setting their sights on the burgeoning impulse sector.
“As ever, forming and maintaining successful relationships with the multiple grocers is key to the success of Luis Felipe Edwards in the UK,” says Luis Felipe Jnr, MD, Viña Luis Felipe Edwards. “However, the impulse sector is also a key target area for LFE going forward. With a large and ever-increasing number of outlets, and a growth rate faster than that of the multiple grocers, this market sector is providing good visibility and sales volume for our wines.” Indeed, LFE is the fourth largest brand in the impulse sector with an impressive 7.4% market share (ACNielsen Wines of Chile report 2005).
One brand that really has made it big in the multiple grocery sector is Viña Cono Sur’s Isla Negra which is at the top of the tree in both volume and value share in the top-10 Chilean brands listing, and at 15th place in the UK top-20 brands overall with 0.7% of the total light wine market. All this when even the leading umbrella brand has just 5.4% of the market.
However, UK agent Western Wines is taking a different approach with its sister brand, Cono Sur. “The focus for Isla Negra is mainly on the multiple grocers and impulse sectors whereas Cono Sur focuses more on the independents and multiple grocers,” says Zoe Bristow, South American category manager, Western Wines. “The wines in the Isla Negra portfolio are extremely commercial in style and are competitively priced to encourage new world grazers to try Chilean wines. Cono Sur’s consumer base is firmly rooted within the wine cognoscenti who buy into Cono Sur’s expertise in winemaking, awards and the breadth of grape varieties on offer.”
The price is right
It’s horses for courses then and Concha y Toro is playing a similar game of market positioning. Its range of labels operate throughout the different distribution networks in the UK with dedicated sales people in each sector, supported by a marketing strategy of consumer trial, PR and advertising. Compared to most brands – and the light wine market in general – its average net price point of £4.83 (ACNielsen MAT to 11/6/05) is enviable.
“Taking Casillero del Diablo as an example, the brand performs extremely well offpromotion,” explains Cristian Lopez, UK managing director of Concha y Toro. “This is due, firstly to the high quality of the wine but also because of the level of investment in supporting the brand and building its recognition with UK consumers – our programme of tastings, advertising in consumer press, PR, etc. This gives us strong leverage with buyers and supports listings in, for example, the impulse sector, which tends only to work with highly recognisable brands.”
Second only to Isla Negra in the sales volume and value chart, Concha y Toro’s average price point falls not far behind Mont Gras and Errázuriz, who are fifth and sixth in the total sales by volume and value (although as we go to press we have received some new statistics showing that Concha y Toro has overtaken Isla Negra to become the number-one selling Chilean wine brand by value for the first time). Cristian Lopez explains the secret of their success. “The establishment of the UK office marks the start of really strong and sustained growth for Concha y Toro,” he says. “The strategy behind this investment was to get close to the market and learn as much as possible while being in a position to be flexible and better meet the needs of our customers. To put things into context, in 2000, Concha y Toro was exporting 28,000 cases of Casillero del Diablo to the UK. In 2004, we exported 417,318 cases. Concha y Toro now accounts for 32% of Chilean growth and we’re on course to export 1.5m cases this year.”
With this kind of targeted sector focus and full marketing support with a brand at every price point, it seems that Chilean brands are no longer the under-achievers of the wine world.