UK RETAIL EMERGING BRANDS: Small beginnings

In an overcrowded and price-driven marketplace, creating a successful new wine in the UK is no easy task. Ben Grant traces the developmental stages of nurturing a healthy newborn brand

The wine aisle is certainly not a very comfortable place for claustrophobics. Overcrowded to the verge of bursting point, the shelves groan under the weight of a myriad of SKUs fiercely competing for our attention and our wallets. So why is it that some brands manage to etch their names on our brains and become a regular feature in our shopping basket, while the vast majority launch in a blaze of glory, but soon fall by the wayside?

First, however, an advisory warning: the contents of this article may grossly offend some of our more traditional readers.

Speaking to a host of companies who have overseen the development of brands that are well on the way to establishing themselves in the challenging UK market, there is one theme that is repeated again and again: consumer focus. The traditional model in wine has been resolutely product focused, individuals producing the kind of wine that they believe is best. But in the current climate, catering to an ever more savvy and demanding consumer base, such a strategy simply will not work. The customer is king, and if you want your emerging brand to succeed, you’d better treat him as such.

“In the past we’ve been very quick to dismiss the consumer,” says Brand Phoenix director Greg Wilkins, “but the consumer is the only person who’s important in the equation.” Once upon a time it was possible – normal, even – for a wine producer to dream up an idea, put it into practice and take the product to market. But such recklessness simply isn’t possible anymore. “You’ve got to spend time and money understanding exactly what people want, it’s essential that you get it right up front,” says Thierry’s marketing manager Sara Chilton. “If you don’t do the preparation beforehand, the chances of failure are much, much higher.” It’s a sentiment that Bottle Green marketing director Richard Hitchcock certainly agrees with: “You need to get your homework right… having a good idea just isn’t good enough.”

Market research

The first stage in the brand’s lifecycle must therefore be a thorough examination of the market. It’s a time intensive but critical process; understanding what factors are affecting the marketplace, what consumers are looking for or motivated by, and how these needs are being served by the current offer on the shelves. A comprehensive review of what’s already available on shelf is key, as this will enable you to “see where the retailers have a gap in their portfolio”, according to Johann Hewitt business development manager at The Company of Wine People.

If you imagine for a moment the sheer number of products that the average buyer is confronted with, you can understand what McGuigan Simeon’s regional director for Europe, Paul Schaafsma, means when he stresses that, “The first thing is to make sure your product will be genuinely compelling for the buyer.” Or, as Ehrmann’s marketing manager, Keith Lay, puts it, “You must create a job description for the brand.”

This may sound like a case of stating the obvious, but any buyer will tell you that it’s a factor that all too many suppliers overlook. Engaging in dialogue with the buyers can also reap rich rewards. “They have incredible knowledge about wine, and about their consumer base,” says EJ Gallo marketing manager Jane Hunter. “They see the trends emerging, so it’s great if you can cross-pollinate ideas.”

But the trade is by no means the only area you need to study while coming up with the initial concept. To properly understand what makes the consumer tick it’s necessary to look beyond the confines of wine and see what wider “mega trends” are driving the market. It can also be a shrewd move to involve your sales team in the development stage. As Hitchcock explains: “They must have total conviction in the product before going out into a tough environment, so we make sure they’re on board with what we’re developing to ensure they’re passionate about the product.” Spending so much time out in the field, they are also likely to have plenty of insight into the market, which could be an invaluable resource.

Be brutally honest
Once you’ve taken a long hard look at the marketplace, the next stage is to benchmark your offer: does it actually meet a need that is not already catered for? (Or, if your objective is to be a me-too brand, is the quality there? And can you afford to go up against the competition?) These are difficult questions but, according to Lay, it’s absolutely essential that you are “brutally honest” in your appraisal of your product before you invest the resources in taking it any further. But assuming it passes this test, it’s the time to conduct a little market research. This is, of course, a pretty expensive process, so for companies that can’t afford to throw money around it’s necessary to be rather prudent about when to invest in market research. Hitchcock explains that “budgets are tight” at Bottle Green, so the company has introduced another stage in the process before deciding to invest in external research. The company convenes its own focus groups – usually consisting of family and friends – to “check our own instincts”. NPD, by its very nature, is a hit and miss affair, but this strategy ensures that Bottle Green weeds out more of the misses without having to waste budget on market researchers.

Once the product is finalised and ready for roll out the time comes to make perhaps the most critical decision in the brand’s lifecycle – whether or not to go down the promotional route. The deep discounting that defines the UK market is the root cause of many a grey hair in the trade, and there’s a very compelling argument that the trade as a whole should move away from a business practice that cuts into everybody’s margins. But among the brand owners whose new products have been generating the most promising growth in recent years there is an almost unanimous agreement that promoting on price is a critical part of the formula. In fact, according to Brand Phoenix’s Wilkins, failure to acknowledge this is “incredibly foolish and commercially naïve”.

The price problem
In an ideal world it would be great news if brands could be launched and grown maintaining full price all the while. But, like it or not, this is simply not the case in the UK in particular, and those companies that fail to acknowledge the necessity of price mechanics will struggle to make an impression. “It’s unfortunate, but discounting is essential,” says Chilton. “In the UK we’re promotionally led, in every category. Price is at the top of the decision-making tree. Much more than our European counterparts, we are promotion junkies, it’s ingrained in our culture.”

Likewise, Dermot Magee, sales and marketing director at Fratelli Martini, says, “It simply isn’t possible to launch brands without promotions.” In other words, it would take some pretty intensive rehab to wean the UK’s promo junkies off their half-price fix.

While some may bemoan such a strategy, Wilkins has total confidence in the validity of such an approach, and is withering in his assessment of those in the trade who disapprove of the tactic (that Brand Phoenix has used so effectively to catapult First Cape into the Nielsen Top 20). “Many people in the trade are critical, but this is what’s driving the industry. There’s enough challenges from outside, without our industry attacking itself.” However, he is quick to point out that deep discounting must not be the sole tool in the brand armoury – there must be a balance of hard and soft promotions. These play a crucial role in initially exposing the consumer to the brand, but are also important in maintaining loyalty at a later date, he argues. “You have to continue interacting with the consumer. Look at Coca Cola – it’s one of the biggest brands in the world, but is still sometimes available at half price.”

Hitchcock explains: “Price offs have to built into the mix – it’s foolish to think it can’t be. It takes time for the product to be able to command full price, so you have to be in for the full term.” Lay, meanwhile, acknowledges that there is a need to sell at cut price, saying “you need to play within the rules”. However, he urges caution and advises brand owners to make sure they are not overly reliant on the tactic. “The key,” he argues, “is to understand the implications of price promotions on the brand, and to manage it.”

There are some pretty ingrained rules about marketing FMCG products – price offs during the roll out being one of the most fundamental. But the main area of disagreement between the brand owners is whether or not these principles are applicable to wine. Chilton is in no doubt that “wine is a consumer product like any other, it’s bought in the same way, just like nappies or toilet tissue. Yes, there’s a challenge as a marketer because there’s so much competition, but in marketing terms the principles are exactly the same”.

Hunter disagrees with this theory, arguing that the industry is too fragmented to rely on standard tactics to launch a new wine. To get a high level of unprompted awareness takes some time, she says, “making it much more challenging for wine than soft drinks”, for example. Raisin Social managing director Simon Halliday agrees with her sentiment, stressing “wine is one of the most risky and variable commodity bases of any drinks category”.  Hunter believes that the classic FMCG model – supporting the brand with heavy above-the-line investment – is appropriate for an established brand (Gallo springs to mind), but for newcomers she advises a more focused approach. The best method, she says, is to concentrate on point-of-purchase marketing – from shelf barkers and instore promos to adverts in the supermarket carpark or magazine – and only to distribute the brand as widely as you can afford to support it in this way. “The marketing investment should be spent where the product can be bought immediately.” Hewitt agrees, saying “it’s important to increase visibility at the point of purchase, so it definitely makes sense to spend the budget instore.”

Getting your message heard
Developing a communication strategy outside of the retail environment is another area that poses massive challenges to companies looking to build their brands. With relatively limited budgets to play with it’s essential, says Chilton, “to ensure that you’re getting the maximum bang for your buck”, and the consensus seems to be that effective public relations is the best way to guarantee this. You can shout about the quality of your brand until you’re blue in the face, but it is infinitely more effective to be backed up by third-party endorsement.

The most obvious direction to consider here would appear to be targeting the journalists who pen the wine columns in the weekend nationals. However, while it’s clearly important to have contact with these leading opinion formers, they are by no means the be all and end all (and if you consider the number of samples and press releases that the likes of Jancis Robinson are bombarded with each day, you can see that a certain degree of luck is required to make it through the crowd). Chilton explains that Thierry’s looks outside of the wine world when it is formulating a PR strategy. “We work out who’s buying the wine and think about what type of media they are consuming – if it’s a mainstream wine brand they’re definitely not reading the technical wine s.”

Again, having a consumer-focused approach is the key. Hunter concurs – pointing towards the likes of Good Housekeeping as an example of the kind of medium where a wine brand can reach a massive – and receptive – audience. As well as mainstream consumer magazines, local and regional press can play an important role – according to Hunter they are particularly keen on relevant food and wine pairing ideas. In order to maximise the potential of these journalists it’s important to recognise that they are consumers too, so education and relationship building are critical. It’s not simply a case of sending out press releases.

Bottle Green’s Hitchcock explains that effective PR also includes establishing an effective working relationship with the trade press (and before you ask, no, the following comments were not extracted under duress). “Getting exposure in the trade media is very important in creating credibility with the trade. It sets a marker in the sand and demonstrates that you have conviction and confidence in your product.” (Thanks very much Mr Hitchcock, your cheque is in the post.)

The wine aisle is an incredibly crowded place, jam-packed with a huge number of fiercely competitive brands. In such an environment there is, of course, no one-size-fits-all solution – and life would be rather boring if there was.

Building a brand requires the alchemist’s touch, combining a wealth of research and hard work with just a little pinch of luck. But there’s one final factor that simply must be right to stand any chance of success: if the wine itself isn’t up to scratch, then the rest of the process is an utter waste of time.

© db August 2007