FRANCE: In freefall

The only way is down currently for France’s UK off-trade sales. Patrick Schmitt reports on this traditional winemaking nation’s efforts to claw back market share from the New World.

There was little to laugh about at this year’s WSTA conference in London’s Piccadilly, but one of the only lines to elicit a brief, slightly awkward chuckle was at France’s expense.

Looking at the country’s dwindling market share in the UK off-trade, and the likelihood Italy would knock France into fourth place in British retail by the end of the year, Nielsen’s Stewart Blunt said, “Looks at though we’re in for another emotional crisis on the other side of the Channel.”

Unfortunate joke aside, the message was serious. “France – and Germany – are seeing an erosion [in market share] because they lack mass-market brands,” explained Blunt, noting French wine’s 13% volume decline to a 13.1% share, as well as Germany’s more than 16% drop.

Chile and South Africa are both on the rise, as is Italy, up 7% to a 13% share, just 0.1% behind France.

Expanding on the French predicament, Blunt showed how certain current trends in the UK market hinder France. For instance, the UK’s top 20 brands, which now account for 39.5% of off-trade sales, are up 6%, and almost all are from the New World. In fact, non-European wine now makes up almost 61% of total retail wine sales, an increase of 7%, while losing ground are own-label offerings, down 6%, and European wines as a whole, down 3% (all figures are sales by volume, MAT to w/e 08.08.09).

As Matthew Dickinson, commercial director at Thierry’s, said, “Things are a bit grim. As a French and South African wine specialists I have been thinking, thank goodness for South Africa.”

Lack of mass appeal

Essentially it seems French wine sales have suffered significantly at the mainstream retail end of the spectrum. Yes, the lack of mass-market brands are one problem, while other long-term drawbacks include the persistence of “frankly poor quality wine at the wrong price”, according to Dickinson as well as, he adds, “the lack of a generic campaign for France”.

Lower bulk wine prices and increased promotional activity among French competitors has exacerbated the problem. Olivier Legrand, export marketing manager at Inter Rhône, reports: “The wines that are experiencing the most positive increase in sales [in the UK] are those that have increased the amount of wines on promotion to the greatest extent (South Africa, Chile, Italy, white wines from New Zealand), or where the FOB price has fallen considerably – the average price per bottle in e/litre for South African wines has fallen by 21% for the 12 months May 2008-May 2009, from e2.29 to e1.80, while the average price of bulk shipments of New Zealand wine has fallen by 26% from e2.20 to e1.63.”

In contrast, this year specifically, France has suffered from the strength of the euro versus the pound, as well as a small harvest in 2008, ensuring grape price increases from almost all parts of the country. Fellow eurozone country Italy, however, has enjoyed “a good harvest with lots of cheap Pinot Grigio”, Dickinson says.

“While we are saying in the UK that cost and tax increases have reduced margins, the French are saying, ‘yes, but we’ve had a short harvest’. We are lucky to work with creative producers who are looking for long-term value, not short-term profit.”

On the other hand, Dickinson adds, “If no-one is making any margin at £3.99 then our view is let’s replace it.”

Certainly a reduced harvest and other cost-increasing issues have pushed France out of the reach of the cash-strapped UK consumer. As Blunt also pointed out in his WSTA presentation, while the average price of a bottle of wine in UK retail is £4.41, France has gone up from £4.74 to £5.05 (MAT to w/e 08.08.09).

On a more positive note, however, the demand for more expensive French wines does tend to take place later in the year, and Blunt added that, last year, “a surge in Christmas sales levelled out France’s 2008 sales, otherwise they looked poor”.

But to return to the subject of vintage conditions, in 2008 white wines were hit particularly hard by frost in the Loire valley. On average, yields dropped by over 20%, but Muscadet saw its crop cut in half. This has hindered France’s ability to benefit from the increasing popularity of lighter styles of wine – evidenced by the rise of white and rosé in the UK where total whites are up 2% to almost 46% share of the off-trade and rosé is up 12% to a 12.1% share.

Such was the dearth of Muscadet in the 2008 vintage British supermarket Waitrose had to come up with an entirely new label to replace its Muscadet sur lie. This was launched as Cademus, almost an anagram of Muscadet, and hit the shelves as a vin de table from the Loire.

It is described on the retailer’s website as “a fresh and crisp French white made from a blend of Sauvignon Blanc, Grenache and Chardonnay. Easy-drinking and a bit reminiscent of a Muscadet with soft citrus notes.”

While the 2009 vintage in the Loire is back up to average quantities and reputedly high quality, the issue of future small harvests will, it is thought, be mitigated by the new EU regulations, which come into force from this vintage (see box, above top). In particular, the changes will allow vintage and grape variety to be listed on the label of table wines – allowing France to produce and label varietal wines sourced from a range of regions.

“We are planning to move to some of our vin de pays wines to ones without geographic origin,” begins Tim North, UK director at Les Grands Chais de France. “This will allow us to blend from different regions in particular whites such as Sauvignon Blanc from the Loire with wines from Gascony or further south.” Why? “It will give better balanced wines and help us avoid vintage variation – for example, warm years when the wines can be too flabby, or other times when whites are too acidic.”

Already, from the 2008 vintage, the company’s Kiwi Cuvée Sauvignon Blanc moved from a vin de pays de Jardin de la France to a cross-regional blend called Vin de Pays Vignobles de France, which as North says, “Is a bit bureaucratic – you have to go through the rigmarole of declaring the wine as a vin de pays in each region you source from.”

Rule changes bode well

In the future, he says, “French whites are still short and a drought in France [during August] has reduced the quantity expected putting pressure on price.” For this reason Les Grands Chais will move some of its JP Chenet range into the new vin de table category, which will most likely be called Vin de France. For example, its JP Chenet Chardonnay/Colombard Vin de Pays des Côtes de Gascogne will soon use Chardonnay from different regions.

Essentially, it is hoped the new rules will help France increase its presence in the growing branded mass-market sector using varietally labelled pan-regional blends. However, bearing in mind the fragmented nature of the French wine industry only the largest companies, or those with operations in several regions, such as Les Grands Chais de France, are expected to benefit.

“The EU changes are really great for brands,” says Dickinson, “and France traditionally has not done mass-market brands very well. If it can get into the production space of, for example, wine from Australia – the best fruit for the best price – then it frees up France, adds flexibility, and it’s a consumer-friendly initiative.” His concern, however, centres on those who may lose out due to the new regulations. “If a brand owner can buy fruit from anywhere there will be parts of the country which can’t sell wine in certain years, and that will lead to casualties.”

Overall, the changes favour mass-market brand building – and it is wine brands that are, as noted at the outset, taking a greater share of the UK off-trade. Noting this trend, North concludes: “We are grabbing a larger share of a smaller market using brands, and bringing some of the New World promotional techniques to the French category, like trade drivers, because unless France is on gondola ends it will continue to lose share – you need to introduce promotional products from France to win back share.”

Interestingly, North also believes buyer attitudes towards France are shifting. “Retailers are more prepared to look at trade drivers from France – before they put the country on a pedestal and weren’t as receptive to the idea.”

On the other hand, France’s advantage appears at the other end of the vinous spectrum: upmarket labels from diverse sources. Its strongest regional brands attract consumers, particularly at Christmas, despite high starting prices. As Dickinson concludes, “France should play to its strengths – it’s not the best place for very cheap wine – and the underlying trend towards France’s higher value aspect is a great long-term build. It’s almost self selecting.”

Patrick Schmitt, October 2009