ON-TRADE BRAND BUILDING: Going the extra mile

Gaining distribution and building brand recognition in the on-trade takes time and travel. But distancing yourself from the mulitple grocers can be sensible, as one wine from Rioja proves

If you think about it, there are plenty of drinks brands which have achieved widespread recognition without placing their precious punts on a supermarket shelf. Usually they have decades of heritage behind them, and inaccessible price points. But the point is, you don’t need to be in Tesco, Sainsbury’s, Morrisons, M&S or Waitrose to build a brand. And with the pressure on margins, not forgetting the volume demands of major multiples, many are focusing their efforts on everything but the big players; in other words, the independent sector and on-trade.

These two areas of retail behave in a similar manner – they can’t compete on price so they must offer something different, which usually includes both exclusive labels and a high level of service. They are also both fragmented industries, making it difficult for a drinks brand owner to gain widespread distribution quickly. For example, the UK on-trade is made up of over 130,000 outlets – three times as many as there are in the off-trade – despite the fact more than 80% of wine volumes pass through the latter. And within the off-trade, while there are 6,347 multiple grocery outlets, as many as 24,070 independents exist (ACNielsen 09.0.9.06).

Getting into these sectors takes time, a lot of travelling and good contacts, but certain brands already seem to have mastered these areas of the industry. Take Marqués de Cáceres, which has almost exclusively targeted the bar and restaurant sector in the UK, and managed to develop a reputation through it. As Anne Vallejo, PR director, at the Rioja-based company says, “The building of a brand calls for a long term commercial policy.”

Interestingly, this Spanish company has chosen not one, but several importers to target the UK trade. “The initial idea of distributing through various importers rather than one exclusive importer was, at that time, to ensure an adequate coverage throughout the whole of the UK (one importer in Scotland, another in Northern Ireland, another in Wales, one in The Channel Islands, various throughout England, etc.). Nowadays, several of our importers offer national coverage.”

Range and choice
Nevertheless, a number of importers alone won’t ensure success in the on-trade. “The key is to have a varied range of wines and prices,” explains Vallejo. “Over the years, we have created a complete range of wines, which without being too extensive, offers a wine for every occasion within various price ranges where the quality of the wines is strictly maintained.

“Within the restaurant sector, it is important to offer wines that suit the style and category of the on-trade establishments. For example, young white and rosé and crianza style reds are more suited to busy establishments with everyday business lunches. Whereas gran reservas and ‘high expression’ wines, such as Gaudium, are likely to sell more easily in more exclusive establishments where consumers who are willing to pay more for food are usually on the look-out for more special wines. Then, there are middle-priced establishments where it is important to have a range of wines and prices on offer, for consumers may choose a white or crianza red one day and then a reserva or gran reserva the next day.”

Pub potential
So which type of UK on-trade venue currently offers the most potential for wine? Looking at a breakdown of those 130,000-plus outlets, over 30,000 are owned by pub companies, a consolidating sector, while the other 100,000 outlets are independent (one third of these are small hotels and restaurants, another third are clubs and the rest is made up of hotels, bars and independent pubs). The largest increases are coming from the pub chains as they improve the presentation and serving of wine.

Spain’s performance in the UK on-trade does rather lag that in the off-trade. In the latter, it has a 7% market share (ACNielsen 09.09.06), while Spain has a 4% slice of the on-premise market. According to Nieslen figures from earlier in the year (MAT to May 2006), Spain’s volume sales in the on-trade were increasing by 5%, shifting some 758,000 cases. However, the likes of Chile, Italy, South Africa and the US are not only selling more through the on-trade, they are growing at a faster rate.

Spain will of course have to work hard at this sector to retain share, and Vallejo in particular is confident of the country’s ability to sell wines through this channel. She notes both the numbers of Brits who holiday in Spain as an important factor, as well as “a growing interest towards Spain and its cultures”.

She adds, “We have focused on the on-trade, for we see this as an important sector for the development and consolidation of good value and higher priced quality Riojas, whereas the majority of sales in the off-trade are channelled through the supermarkets that are price-driven.”

And as the drinks business’ Spanish Report highlights, the multiple off-trade for Spanish wine in the UK is dominated by low-priced brands and supermarket exclusives. Marqués de Cáceres, and other brands that target the independent and on trade, have perhaps been sensible to distance themselves from this price-driven sector.

© db November 2006