French Focus: Gallic spirit

French wine producers are adopting multiple approaches in their attempts to reclaim the top spot in the UK market. Giles Fallowfield reports

There is a vineyard in France that boasts major individual brands with significant marketing spends to support them. Several large, international companies operate there, and the interests of both growers and négociants are taken in account in the management of this single appellation. In fact, there is considerable and beneficial cooperation between these two factions, whose views of the world don’t always coincide elsewhere.

As a consequence, this AOC is remarkably successful: sales have grown consistently during this decade and, in an effort to meet increasing demand, the producers who run this appellation have applied for permission to increase yields while they try to establish a framework for expanding the size of the vineyard and thus further raising production.

As you have probably guessed, we are not talking about Bordeaux, but Champagne. The rest of France’s wine regions envy Champagne’s position but – with a few exceptions – have failed to mimic Champagne’s blueprint for success. As Yves Bénard, president of the Union des Maisons de Champagne which represents all the négociants, has noted in the past, an important part of Champagne’s success has been about having strong brands, but keeping price increases down to a reasonable level has also been a key factor in preserving the category’s steady growth.

André Dubosc is a friend of Bénard’s and the man credited with transforming the Producteurs Plaimont cooperative in the southwest into one of the most innovative and successful wine companies in France. When talking to him in June, it was interesting that it was the success of the Champagne model he kept referring to, although he also mentioned Chablis and Sancerre in the same context. Creating one strong brand name, one appellation under which all the companies involved in the region could operate, was what Dubosc set out to achieve with Vins de Pays des Côtes de Gascogne (VPCG) when he started working at Plaimont in the 1970s.

Three decades on, and he sees the fact that producers put the grape variety on their VPCG wines as a sign of failure. “It’s because people don’t understand Côtes de Gascogne, so for me the region has failed. We could have had one very strong product like in Champagne, Chablis or Sancerre.” That’s a pretty harsh judgment given that white-wine production in Gascony has now reached one million hectolitres a year (mostly VPCG, plus some Vins de Pays de Gers) – making it the leading department for the production of white vins de pays in France, with a similar output to Alsace. But for Dubosc, the key is for the consumer to know the product, not the grape variety, as long as the wine has personality, as with Chablis or Sancerre.

Importantly, in a country where consumption of wine is declining, the growth of VPCG is export-led, with 80% of sales outside France, and the UK taking half of that. Germany is next, with around 19%; Benelux countries account for 15%, and a similar amount goes to “all other” markets.

French revolution
Dubosc is now the spokesman for, and the driving force behind, the new Southwest Regional Partnership. Representing 18 different appellations stretching from Cahors to Jurançon, and no fewer than 22 vins de pays, this partnership was set up as a result of close collaboration between the region’s institutions and local wine growers to develop the southwest wine sector. The idea that producers from so many different sub-regions might work together for a common cause is revolutionary.

Cynics should take note of an early success, albeit on a smaller scale: the Madiran 1907 project (the first vintage of which was launched at the London International Wine & Spirits Fair in May). This is a wine jointly made by the two local cooperatives and most of the independent winegrowers in the AOC to produce a “benchmark wine of the Madiran appellation”, and it’s a good example of the benefits of cooperation. There are many appellations where even basic cooperation between different interests appears extremely hard to achieve.

However, it is to be hoped that the revelations from the EU in June about how it intends to act to reduce Europe’s vast wine surplus will concentrate minds. In Bordeaux, the plan championed by Christian Delpeuch, president of the Conseil Interprofessionel du Vin de Bordeaux (CIVB), to dig up between 8,000 and 10,000 hectares of uneconomic vineyard took a setback with his sudden departure. This was even before the EU commissioner announced plans to encourage the digging up of 400,000ha of European vineyards, suggesting, not unreasonably, that subsidies used to pay for the distillation of wine no one wants might be more usefully spent.

Asked whether he thought the CIVB would continue with this policy or return to a shorter-term solution like distillation, the CIVB’s directeur générale, Roland Feredj, said, “The decision made by the CIVB is a technical one: there was too much wine in stock, so we decreased those stocks by distillation.” He sees the EU proposals for reform as something different and expects them to be: “fought by all producing countries. As the commission knows this, it has also envisaged giving a limited envelope to each country, which looks like a new nationalisation of the CAP. The message to producing countries is if you prefer to spend the money in subsidies, rather than modernising your wine sector, do it yourself! And it is undoubtedly what they will do,” says Feredj.

He admits that “distillation is not a long-term answer”, but suggests it is a “pragmatic solution given the economic situation. Agricultural production cannot be adjusted like industrial production”. If digging up vines isn’t the answer, asked what the CIVB proposes to resolve the oversupply problem, Feredj says, “A mechanism of regulation based on reasonable yields and the right to produce more related to the commercial capacity of the company. The idea is to give more rights to those who are able to sell.”

This should be good news for the companies that have worked at developing brands in Bordeaux and are producing more obviously commercial wines, particularly at the lower price points, where the vast majority of wine is sold in the UK off-trade (see table).

French wine by region in the UK off-trade (2004/5)

Not too low a price though because, as Jean-François Mau, CEO of Yvon Mau points out, “If Bordeaux is going to build brands, they have to be at a sustainable price, and that means at or above £6 a bottle, if you want to have any sort of promotional activity built in.” This is precisely what Mau has done with its Premius Merlot/Cabernet blend (normally retailing at £6.99) and Sauvignon Blanc (£5.99).

As the drinks business/Sopexa research earlier in the year showed, promotions have definitely left their mark on the UK consumer. According to ACNielsen statistics, 48% of all wines sold in the UK off-trade were bought on promotion last year.

Brand Phoenix UK, a relative newcomer to Bordeaux, but not to brand building, has adopted a similar approach with its three new regional wines launched under the Renaissance label. Director Greg Wilkins explains, “The Bordeaux Renaissance wines – a Merlot/Cabernet, a Sauvignon/Semillon and a rosé – retail at £7.99 a bottle, with two possible built-in promotional mechanics; £3 off or half-price.” Available since May this year – currently only in Asda and Morrisons, but Wilkins says other major retailers are also interested – this range has already made its mark, outselling in volume terms both the James Herrick and La Baume brands (AC Nielsen MAT to 20/05/06), and it is growing rapidly while they are currently falling back.

Regional success
Wilkins is impressed by the interest in these regional wines: “They already outsell the entry-level Renaissance offerings,” two vins de table styles, the red a blend sourced in Bordeaux and further south in Languedoc-Roussillon, that retail for £3.99. “We think there are further opportunities to push regional wines, perhaps a Médoc and a St-Emilion, but they must be typical of those regions and good – or great – examples. There has to be something in it for the retailer to do it and for the consumer, whether it’s price or an element of education, to start the way back for the Old World.”

The Renaissance brand is a 50/50 joint venture between Brand Phoenix UK and Maison Sichel. Sichel sources the wines, Phoenix handles sales and marketing, targeting only the largest UK retailers as it has done successfully with its wines from South Africa and Chile. The aim is for Renaissance to be among the top-10 French brands in the UK within one year. “And it will be, based on orders and projections,” says Wilkins. The thinking behind Renaissance was that France lacked authentic brands, and brands are still driving the UK off-trade market. “Our research suggested that consumers are generally confused by the French offer and don’t understand the difference between AOC, vins de pays and vins de table. Furthermore, their experience is that, priced under £5, French wine is not nearly as reliable or consistent as the New World,” says Wilkins.

Interestingly, Wilkins feels that the French have the great advantage that if you mention France, people immediately think of wine, whereas with Australia it comes further down the list, after sunshine, sporting achievements, barbies… and that’s even more the case with California. The problem, or perhaps we should say challenge, for France is how to turn this goodwill, this admiration for the French food and wine lifestyle, into improved sales in the increasingly competitive, brand-driven and promotion-led UK wine market.

Not ‘Bourgogne’

Over in Burgundy, they have thrown out the possibility of producing vins de pays, in the Côte d’Or at least, partly to retain the possibility of varietal labelling. The latest idea to raise the appellation’s profile in the UK is to emphasise that Burgundy (not Bourgogne) is the birthplace of both Chardonnay and Pinot Noir. Under the catch line “Burgundy, the home of Chardonnay” and a list of appellations (Chassagne Montrachet, Pouilly Fuissé, Meaursault, Montagny, Mâcon and plain Bourgogne), it says: “Burgundy is where the Chardonnay grape originated. The environment there is perfect for getting the very best from the grape, so naturally white Burgundy is crafted from Chardonnay. For the unique experience of Chardonnay choose our white Burgundy.”

Whether this will help sell more Burgundy remains to be seen. For the first four crus mentioned, it’s tempting to think consumers either know what it is they are drinking or don’t care, and for basic-level Bourgogne, many producers are already taking advantage of the possibility of putting the grape variety on their labels. In any case, Burgundy sales were up in 2005 compared with 2004 in terms of both volume and value, even if the average price in the UK slipped slightly from £6.99 to £6.93 a bottle. 

At Louis Latour, one of the largest négociants in Burgundy, UK managing director Alexander Nall says, “The move to push ‘Burgundy’ rather than ‘Bourgogne’ in the UK market (one of three ‘competitive strengths’ the new campaign is communicating) has taken quite some time. Not surprisingly, consumers are much more familiar with the word Burgundy.” By also emphasising the grape variety, the campaign aims to lower “the risk of purchasing Burgundy wines without varietal labelling”. Listing the wine regions alongside the grape types will make consumers “more confident in identifying what they are purchasing. Pinot Noir, in particular since the film Sideways, has become a more fashionable grape and so a campaign designed to educate which Burgundy wines contain Pinot Noir is ideal,” says Nall.

Curiously enough, it was the lack of decent-quality, affordable Chardonnay and Pinot Noir in Burgundy that led to Louis Latour investing in the Ardèche and the Var regions. Now the EU plan to grub up vineyards potentially presents a problem there. “In the Var region, where we produce Domaine de Valmoissine Pinot Noir, our need to plant this variety is at odds with the EU and French government policy of monetary incentives to grub up vines and surrender plantation
rights,” says Nall. This is not an issue in the Ardèche, however, he says. “We pre-empted the current situation when setting up the operation there in 1979, effectively saving the livelihood of hundreds of growers. The price paid is based on the quality, not just the quantity, of grapes they produce. The growers supplying Louis Latour receive a higher going rate than the general market and, as the demand for these wines continues to grow, it’s unlikely that incentives to grub up vineyard will be sufficiently attractive.”

Nall welcomes the news that the UK will receive all Beaujolais’s promotional money for export markets. “Historically, the UK has been a key market for Beaujolais, and over the next three years, investment in the brand will aim to raise the profile of quality cru wines from the region,” says Nall. “We see Beaujolais as a growing opportunity. Recent successes include our Morgan Les Charmes 2005, which is selling extremely well.”

For Louise Steel, wine category controller for Europe at Waverley TBS: “France is not in decline, but going from strength to strength. I can’t believe the latest Nielsen figures that suggest France is losing market share. It’s certainly not the case with WTBS: it’s our largest category, and I have access to half the UK on-trade.”

WTBS has 120 sales staff selling to the independent UK on-trade, plus 35 dealing with national on-trade outlets. It also has an off-trade sales force supplying grocers, multiple specialists and cash and carries, so it’s in a position to present a good snapshot of “brand France”.

Waverley’s key French suppliers are Ropiteau in Mersault, Ackerman in the Loire, plus JeanJean for the South of France and the Rhône. “We have 27 lines from Ropiteau within our portfolio. For the on-trade there are four entry-level house styles which are varietally labelled: a Sauvignon Blanc, a Chardonnay, a Merlot and a Cabernet, under the Ropiteau L’Emage brand. These vins de pays with their New World-style labels have been key to our success in growing the French category, with consumers easily able to identify the clearly marked grape varieties,” says Steel.

“The easy-to-pronounce Ropiteau branding is strong on all wines from the range, which comes in 25cl as well as 75cl servings, which has helped grow our business within the hotel sector and core pub trade. Ropiteau has seen major sales
for us outside the traditional Burgundy consumer too. We also have everything from Beaujolais Villages to Puligny Montrachet,” she says.

“For Ackerman, our key partner for the Loire, Vallée des Jardins has been launched this year with four styles: Muscadet, Vouvray, Cabernet Rosé and Cabernet Franc. Again, the packaging is simple and easy to understand, and the wines are modern, fruity, easy to drink,” says Steel.

“JeanJean is a relatively new supplier to WTBS, keen to take on the New World, with a very exciting range that includes five different regional propositions for the French category,” she continues. “Having visited all of their wineries in July, I am convinced they will help us further grow the French category, a trend that their counterparts in Burgundy and the Loire have already started within WTBS.” 

Heeding the statistics

For the statistically minded, the picture in France is mixed in the off-trade, according to the latest ACNielsen figures. Overall in the year to 17/06/06 (ACNielsen GB off-trade light wine), France’s share of the UK off-trade by volume has dropped a little further, from 16.7% to 15.9%; this figure was 18.9% in mid-2004. Value share is also down from 19.9% in the year to June 19, 2004, to 17.9% (MAT to 18/06/05), to 17.3% mid-way through 2006. The US is currently bigger than the UK in terms of volume at 17.2%, but still just behind in value at 17.1%.

While there is no getting away from the fact that 87% of the wine sold in the UK off-trade retails at £5.01 or under (and that percentage rises to 90.1% in the grocers), France has a 23.8% volume share of this part of the market, and although it is up from 22.8% in the previous 12 months, it is still quite a bit below Australia’s 32.7% share, although that is falling (down from 34.1%).

In many ways, the next two price bands (£5-£6 and £6-£7) represent more important, and potentially more profitable, territory for France. The former accounts for just 7.6% of UK off-trade sales in terms of volume, and France has a 15.3% slice, up from 14.1% in the previous 12 months. This compares with Australia’s 38.1% share of this £5-£6 price band, though happily from a French perspective, that too is falling, down from 40.2%.

One pound up in price, a sector that accounts for just 2.6% of UK off-trade sales by volume, and France has increased its share from 23.6% to 26.4%, which compares with Australia’s tiny improvement from 30.7 to 30.9%. This is the sector where France appears to be doing best currently, with 9-litre case sales up from 426,000 to 548,000 compared to Australia’s improvement of 555,000 up to 642,000.

The view from Sopexa

Sopexa’s managing director (UK, Ireland, Benelux) Charles Collard had the following to say about the challenges facing France. “The main problem for France is that we have not been properly market-orientated – not only in terms of consumers, but also in terms of the trade. France has to change its international business models in order to start to deliver what is necessary to succeed where product, marketing and margin are concerned.

“The French category has been squeezed between the decline in our own-label business, where we were traditionally very strong, and the growth of powerful brands in other categories. In addition to this, we are not strong enough at the most successful price points. France is very strong at £3 or less, where it is no longer possible to make money, and at £7 and over, which is interesting in terms of value but not enough to solve our problems.

“The market requirements have not been enough of a priority for producers: we need to concentrate on the diversity of our offer and segment that offer to suit the different sectors of the market. I am pretty sure we have all the right products, but we have to communicate them properly and help the trade to look at the wine shelf differently when it comes to the French offer.

“Terroir is still a strength for France. Provenance and traceability are now in the consumer psyche, and we need to exploit that opportunity. France has to renovate its image capital. We are strong at the top end but we have not looked at the more mass-market end or built mid-range brands.

“There is no doubt now that the French know what to do. We’ve spent long enough talking about it and now we have to act at every level to start to rejuvenate our image.”

© db September 2006