PROSECCO: Italian sparkle

With its fresh, approachable style, sophisticated image and affordable price structure, industry experts reckon Prosecco could have a bubbling future in the UK. Fionnuala Synnott reports

Just when you thought it wasn’t possible to see any more of Paris Hilton, she launches her own wine. The wine in question is a Prosecco in a can, targeted at ladies (or at least female consumers) about town. Billed as the perfect “starter drink for your night or a special pleasure”, the most interesting thing about Rich Prosecco (for those of you bored of seeing Paris in the nude) has been the reaction of the Prosecco producers, who are concerned about the image this product will create for their wine.
According to Andrew Firth, MD of Playford Ros, this reaction is symptomatic of changing attitudes towards Prosecco. “A year ago, Prosecco producers would have been delighted to be associated with a young, funky ad campaign. But, nowadays, this is not the image producers want to portray – they want to be seen as serious winemakers. They don’t want to be too gimmicky and run the risk of being replaced by the next trend.”
This change in attitude stems from the category’s growing commercial success. Global growth is estimated at 35% and, in the past five years, the UK’s market share of Prosecco exports has doubled from 4% to 8%, making it the fourth most important export market for the wine. Prosecco is also popular in Germany (24%), Switzerland (25%) and the US (8.5%) – the top three export markets. But Prosecco is not only popular in Europe, consumption is also growing in the emerging markets: “Mexico and Brazil consume 100 containers of Prosecco a year alone and Australia is buying huge amounts of it,” says Alex Canneti, sales & marketing director, Moreno Wines.

Italian importer For the Love of Wine has listed Prosecco for the last 10 years. Robert Steel, director,   observes: “At first, no one would touch it but it has grown steadily year on year. So much so that I wondered if some TV chef had been using it.” Tiziana Cagnina, co-marketing manager, Mondial Wine, has also noticed sales of Prosecco going up over the last decade: “The increase has become more visible, in particular over the past five years. This is especially true for upper-end Proseccos.” But Damian Carrington, marketing director, Enotria, is more measured: “Although the category has seen double-digit growth it is a growth curve, not a massive spike.”
Prosecco has always been popular domestically, with Italians consuming 68% of all Prosecco produced, but, until now, it has been relatively obscure in the UK. According to Canneti, the growth of Prosecco is due to a combination of factors, one of which is provenance. “It’s the old Italian style thing – it looks pretty and is easily identifiable. All Italian delis sell Prosecco, particularly the one with the string done by hand.” Carrington agrees: “There is a certain amount of fashion involved. All things Italian are still popular. Prosecco has benefited from this trend and because of pricing it is seen as accessible.” Firth adds: “Before, you could either afford Champagne or you couldn’t. The alternatives were French sparkling or cava, then cava spoiled its image. Prosecco is a little bit sexy, it’s interesting and comes from Venice.”
Prosecco’s soft style also makes it attractive. Pierpaolo Petrassi, senior product development manager for Italy at Tesco, explains: “Prosecco is stylistically appropriate for UK consumers who are not looking for more structured, (usually) drier and more premium-priced Champagne.” Meanwhile, Steel thinks it competes well against cava: “Prosecco can be easier to get into than cava, which can come across as very dry and acidic. It is traditionally served without food and is fresh in style, which makes it appealing to British consumers.”

Prosecco has also benefited from the growth of the sparkling wine category. “Sparkling wines have become part of the consumer’s weekly repertoire. They have been booming and are up by 9% MAT,” says Lindsay Talas, deputy buying director, Thierry’s.

The right price
Although Prosecco has a lot going for it, there is no doubt that its greatest appeal is its accessible price. Carrington says: “At the moment, Prosecco is sitting in a healthy position. It is below Champagne but is not in the cheap, traded position of cava. It appears to work well in the casual dining sector, where people are confident buying sparkling wine but don’t want the expense of Champagne.” Douglas Wregg, director of sales and marketing at Les Caves de Pyrene, also thinks Prosecco is perceived as good value. “I think it is seen as superior to cava, for example, and perhaps has a trendier image than the non-Champagne sparkling French wines.”
With consumption of sparkling wine at an all-time high and easy-drinking wine styles becoming increasingly popular, Prosecco appears to be in a strong position to grow its sales. But last year’s harvest led to a diminished supply of grapes from the Veneto and other costs, such as the glass used to make the bottles, have also risen. This makes it very likely that Prosecco producers will have to put their prices up, so as not to absorb all of the costs themselves. Firth thinks this is bad news for the category: “Price is a real problem. Prosecco is just getting going, largely due to the fact that it is in a good price brand. Putting prices up will cause problems for the category. Producers are playing a dangerous game. They should have taken a longer view and hoped for a better harvest next year rather than reacting to a bad one.”

But Canneti feels producers are managing the situation as best they can. “The Italians are very commercial and don’t want to pass on all of the price increase to their customers. Producers are absorbing quite a lot of the price rise and are cutting their margins to help. This said, they will have to put their prices up otherwise they will go bust. I could see the price going up by 14% in actual bottle cost.” But Petrassi thinks more could be done to stabilise pricing: “The trick that needs to be learnt by many European producers is the longer-term management of price points to smooth out the RRP ‘bumps’. Changing RRPs on an annual basis just serves to further confuse consumers.”  
There is no doubt that, if growth of the category is to continue, Prosecco producers have to be realistic about their pricing. But it is difficult to say what price Prosecco should sit at as it depends on where it is listed. “Prosecco has to continue to offer value for money”, says Carrington. “The key is to have enough of a price differential between Champagne and Prosecco.” Petrassi, meanwhile, thinks the ideal would be to foster some sort of longer-term stability “that allows consumers to try Prosecco and then ‘nurtures’ the brand to keep loyal consumers rather than losing them as value for money becomes eroded”. But, according to Wregg, it all depends on quality: “The less expensive Prosecco should retail for £5.50-£6 ex VAT so as to obtain the entry-level sparkling position on restaurant lists.” Steel, meanwhile thinks it should sit below £10 in the off-trade and below £20 in the on-trade. “Producers should get more restaurants to serve Prosecco by the glass as this will drive bottle sales in the off-trade,” he adds.

According to Firth, Prosecco is currently rising by around 10-15% in the on-trade, while in the off-trade, Sainsbury’s sparkling wine buyer, Melissa Draycott, has seen Prosecco prices rise by £1 a bottle, at retail price. Although she describes this cost increase as “quite steep”, she does not find it unreasonable. “They [Prosecco producers] have got a good trend going, I don’t blame them for trying to push it.”
Whether this price hike will affect sales is hard to tell but as prices rise, so does the risk of alienating consumers from the category. Tesco’s Petrassi comments: “As with everything, there is a key link between RRP and sales. Prosecco fills a gap between £5 and £10 and the closer it gets to the latter figure, the harder things get and the more comparable it is with premium cavas and entry-level Champagnes on promotion.” Draycott agrees: “There is always a risk that customers can be turned off but I hope to be able to promote it.”
Carrington, however, doesn’t think that a price rise will have a major impact as most wine categories will have to put their prices up this year. “Prosecco pricing does not operate in isolation. Pricing everywhere is going up across the board.” Talas doesn’t see price rises having an effect either: “Provided that producers take a long-term view and maintain sensible price increases, price rises shouldn’t dampen the growth of the category. After all, Pinot Grigio price increases have done nothing to dampen the British consumer’s love of the category.” Meanwhile, Steel thinks pricing is relative to other sparkling categories: “Champagne and cava will also go up in price so the price gap will stay the same. Even if there is a battle between producers slashing prices, it won’t affect Prosecco’s popularity.”

Perceived value for money is an obvious driver for sales in the category and producers should be cautious when raising prices, but Prosecco is (rather fortunately) not as price sensitive as, say, cava. Moreno’s Canneti says: “Prosecco is sold at between £5.99 and £8.99 in the supermarket, while delis will sell it all the way up to £12.”
The fact that consumers do not yet associate Prosecco with a certain price point is important for the future growth of the category as it allows producers room for manoeuvre; something that cava producers do not have. As Canneti puts it: “It is difficult to promote down from £5.99 but you can do it if the wine is priced at £8.99.”
According to Canneti, this price flexibility is due to slow retail support for the category, particularly from the supermarkets. He explains: “Prosecco is still very new to retailers. Asda has one listed and Sainsbury’s has a rosé, but Morrisons has yet to learn about it.” However, Talas thinks buyers are supportive of Prosecco as a category: “It hasn’t been commoditised like own-label, generic cava, which has painful margins for retailers. As a retailer, it must be great to have a sparkling wine that’s in growth.”
UK retailers do appear to be sympathetic towards Prosecco. The category already has the might of Tesco and Sainsbury’s behind it. Petrassi explains: “We are fundamentally keen on anything that is unique, good quality and good value for money. We are already promoting several of our range of Proseccos on a regular basis.” At Sainsbury’s, Draycott has listed two extra Proseccos since she took the job two years ago, taking the total number of Proseccos on shelf to three – all of which, she says, ”are holding their own”.

Style over substance
Producers clearly have high ambitions for the category, but will Prosecco ever build a premium image for itself? Petrassi thinks not: “Ultimately, the Prosecco variety does not really have the quality potential or longevity of the classics like Chardonnay or Pinot Noir to justify much higher price points.” Steel agrees: “Although it can be a good quality wine, I wouldn’t send it to Robert Parker. It is for sharing with family and friends.”
Draycott, meanwhile, thinks it is too early to tell whether consumers are ready for premium Prosecco. “We need to see if the customer continues to buy Prosecco at these inflated prices.”
When it comes to Prosecco’s image, Thierry’s Talas doesn’t think it has suffered as much in the UK as it has elsewhere. “Prosecco’s image in the UK is higher than it is in Germany, where sales of IGT frizzante have led to a price war.” In fact consumers here prefer the DOC style to IGT. She adds: “Latest figures show that DOC spumante outsells IGT spumante”. Firth thinks merchants will be divided by style. “The independents will stock DOC Prosecco, while the supermarkets will stock the rest.”
Mondial Wine’s Cagnina thinks Prosecco has a bright future as long as good marketing strategies are put in place to overcome competition from Champagne. “There will be a steady increase [in sales] as connoisseurs start spreading the word that Italian bubbles can be just as good, and in some cases, better, than French bubbles, especially from a cost-quality perspective.”
Thanks to its light, refreshing style and playful but relatively sophisticated image, Prosecco is currently proving popular in the UK. As long as producers do not panic and misjudge how much consumers are prepared to pay for their wines, future demand for Prosecco seems assured, at least until the popularity of sparkling wine wanes. Canneti adds: “We’ve all been looking for the new Pinot Grigio. We’ve found it – only it’s sparkling.”

© db MARCH 2008