France: Seminar / Have you got the bottle 2?

Sopexa invited a number of experts from the French wine industry to take part in a debate on the future of the category. They gave us their opinions on how the category could innovate and appeal to the UK consumer

In a bid to discover what is causing French wine to lose market share, Sopexa, in association with the drinks business, commissioned Wine Intelligence to analyse the behavioural patterns of UK consumers.

The research found that two out of three UK wine consumers drink French wine regularly. But out of the 15 million people who drink French wine, only 21% favour the country over all others. Currently, 4.9m regular wine drinkers are France “loyalists”. But 36% of regular wine consumers – 8.5m people – have not drunk French wines in the last six months. The category’s hope for the future therefore lies with France “trialists”: the 10.1m people who represent 43% of the regular wine-drinking population that have drunk French wine in the last six months but are loyal to another country.

The dominance of supermarket-led promotions in the UK wine market is often given as an explanation for flagging sales of French wine, with some claiming that promotions do not always benefit French wines as much as New World wines. There is no doubt that promotions have definitely left their mark on the UK consumer. According to ACNielsen, 48% of all wines in the off-trade were bought on promotion last year. Alex Anson at the Thresher Group feels that the wine industry created a monster when it started offering deep discounts on wine. “The promotional monster continues to grow and there is even more discounting now than ever before, with half-price offers quite common.” Unfortunately, this means that promotions and trade drivers have to be bigger and better every year in order to drive like-for-like growth.

Anne Burchett at Castel feels that promotions have changed the competitive landscape for good. She says, “49% of UK consumers will not buy a wine if it is not on promotion – we have created promotional junkies. Through promotions, the wine industry is giving the consumer the illusion of value, yet promotions in the wine industry are not generating as much brand loyalty as in other product categories. But hi-lo is here to stay, since the volumes generated are irresistible to both producers and retailers.”

Noel Bougrier, a négociant in the Loire Valley, says the wine industry is witnessing an increasing rate of promotion. “In the UK, we used to offer 50p off a bottle of wine, but now it is closer to £1 per bottle. In France, we used to give away one free bottle per case, whereas nowadays we are more likely to run buy-one-get-one-free offers on cases,” he comments.

Anson has not noticed French producers participating in promotional activity, or at least not to any great extent. According to him, the most common French promotions involve own-label Chablis and £2.99–£3.99 own-label entry wines, with only a limited number of £3.99–£4.99 branded promotions. Anson adds, “There is therefore very little brand exposure for French producers, and the £4.99 volume sweet spot is still dominated by New World brands. All of these factors have served to perpetuate the current declining performance of the category, which now has a total market share of 17.9%, and continues to lose out to Australia.”

Other decision factors
However, it is not all doom and gloom for French wine. According to Anson, France is doing well in more premium stores, where it has grown market share and increased total net sales year on year by 71.5%. “The category has shown good growth in rebranded Wine Rack stores, where some of the best-sellers include Louis Jadot, Georges Duboeuf and Radcliffe’s regional classics,” he explains. French red has also done particularly well and has seen over 100% growth in Wine Rack outlets.

Although, as a rule, UK wine consumers are more price-loyal than brand-loyal, the relative importance of promotion and origin tends to vary according to the consumer‘s level of involvement with French wines. Behavioural patterns appear to be different among consumers who spend more than £5 on a bottle of wine. Among France loyalists, only 27% think that promotions are important, with 39% considering the country of origin to be of more importance. France trialists, however, are swayed by promotions, with 36% citing them as an important decision-making factor when spending more than £5 on a wine. Yet country of origin is still more important for 39% of France trialists. Bougrier feels that French wine still has lots to offer. “France still has a great potential to develop its market share, and promotions are not everything – the quality of the product is more important,” he says. In fact, UK consumers take a number of factors into consideration when choosing what wine to buy. According to the research commissioned by Sopexa, off-trade French wine drinkers are most interested in the origin of the wine and the varietals used. In fact, there appears to be little divergence of opinion between France loyalists and trialists regarding this subject, with 68% of loyalists and 69% of trialists citing grape variety as important or very important when making a purchase. Country of origin is also of interest, with 57% of loyalists and 56% of trialists
citing it as an important factor in the decision-making process.

Keeping it simple
Meanwhile, in the on-trade, producers have to be listed before they can even think of running a promotion. Waverley TBS supplies approximately 11% of all the French wine sold in the UK on-trade, but its sales of French wines have been declining, while its total wine business has been growing. According to Simon Bradbury, “France has been losing listings to New World brands with clear, bold packaging, very competitive pricing, strong promotions and a product with a consistently good taste”.

According to consumer research carried out by Waverley TBS, New World wine has the advantages of being safe, easy to drink and often on promotion. In fact, only a third of the supplier’s target consumers drink French wine. Bradbury explains: “French wine is considered ‘better’ than New World wine but is also viewed as old-fashioned, and more appropriate for special occasions than everyday drinking. Some consumers have had bad experiences with French wine and think that it is only drunk by experts.”

Provenance is important in the on-trade, where both regular consumers and trialists like French names. Quality labels, associated with authenticity, are also important, as are style cues such as embossed bottles. “Consumers want distinctive characteristics that make the wine stand out, but AOCs are meaningless to the vast majority of the consumers questioned,” says Bradbury.

Burchett believes that, traditionally, French producers have made the mistake of assuming that consumers know and like the product more than they actually do. “French wines are seen as too complex, and consumer knowledge of French wines is patchy at best since there is a good deal of confusion between brands and AOCs,” she explains.
In fact, when eating out, France loyalists are more interested in the wine’s origin than ordering a brand that they recognize. This indicates that French wines have strengths besides brand recognition and should consider their varietals and regional appellations as key to winning over UK consumers. Burchett adds, “You have to manage your AOCs ruthlessly, like brands, and keep your offering simple”.

According to ACNielsen, on-trade consumption of French wine is down by 10%. In order to buck this trend, Waverley TBS chose an evolutionary, rather than revolutionary, approach to packaging its wines. Bradbury explains: “We went for a classic French look, with simplified labels with a clear brand name and varietal, while all other details were subdued. As a result, we have regained several on-trade listings that were previously lost.”

Torn between old and new
Bradbury warns French wine producers to be careful about who they target with their marketing strategy. “It is important to refresh your offering while not spreading your offering too thinly. You also have to talk to your customer directly and tailor your product accordingly,” he explains.

But French wine producers are in a difficult position, since France loyalists want French wine to move with the times and be innovative, while France trialists expect French wine to be conservative. When it comes to innovation, France loyalists are more open-minded than France trialists and are more likely to buy a wine made from an unknown grape variety or a sparkling rosé. Meanwhile, France trialists have a more conservative view of French wines, with only 10% prepared to buy a French wine made from a grape variety that they had never heard of as opposed to 15% in other wine categories. Only 23% are likely to buy a French sparkling rosé compared with 35% who would buy one from another country.

But France loyalists are not open-minded when it comes to packaging. In fact, the most unpopular innovation appears to be the single-serve aluminium can, closely followed by the 1-litre carton and the single-serve bottle, with only 3%, 7% and 10% (respectively) of France loyalists saying they were likely or very likely to buy French wine in this kind of packaging. Packaging is also an issue for France trialists. Only 18% said they would buy a French wine in a bag-in-box, but 28% are happy to buy a wine of a different geographic origin in a BIB, while 18% are unlikely to buy a French wine with an unusual bottle shape, compared with 26%, who would have no problem doing this with a wine from another country.

Out of all the innovations in the category, screwcap bottles performed the best among UK regular drinkers, with 41% of those surveyed either likely or very likely to purchase a wine bottled with this kind of closure. In fact, survey findings highlighted a marked reduction in hostility to screwcap closures, with one in three France trialists likely to buy a French wine in a screwcap bottle. But this figure is still behind the 47% who have no issues buying a wine from another country in a screwcap bottle.

Innovating French wine

The problems facing the French wine industry are well documented. Complacency brought on by success, a regulatory framework run by producers, a profusion of small suppliers, the lack of a coordinated communications strategy and inconsistent product quality have all led the category to lose market share. Bruno Kessler at Les Grands Chais de France, owner of JP Chenet (the only European brand in ACNielsen‘s top-10 UK off-trade brands) says: “In the past, we have made the mistake of trying to change the consumer rather than adapting ourselves.”

There is a big paradox in France between modern and traditional ways of making wine, but things are changing. This year has seen the advent of new winemaking techniques. From now on, oak chips will facilitate the production of wines adapted to the UK consumer, while next year will see the reform of the OCM, which may lead to the end of chaptalisation and distillation, as well as the freedom to adopt modern winemaking techniques and perhaps create a national category of varietal wines. One of the most important developments in the category is scheduled to take place in 2009, when the new AOC agreement process will be implemented, enabling a more accurate and independent reflection of quality in premium French wine.

Kessler is optimistic about the future of the category. “France has all the attributes to succeed if we are professional. We have the largest vineyards in Europe, with the scale to create innovative brands. We also have an unrivalled diversity of terroirs and grape varieties, with the potential to create innovative wines to seduce the consumer, even those who don’t drink French wines currently.”

Seducing the consumer is something that Kessler knows all about, since JP Chenet sold more than 7m 9-litre cases in more than 140 different countries in 2005 and is on track to sell 8m cases this year. “In France, we have the natural fruit and acidity, as well as a large promotional budget, strong administrative structures, logistical advantages and a strong image,” he continues. “There are many opportunities for the French wine category: the next three years will be decisive.”  db June 2006