Top 14 UK retailers: multiple opportunities

Retailers are battling not just each other, but also a 2% fall in wine volume sales in the UK. Arabella Mileham looks at how the top 10 store chains are coping.

NO ONE enjoys the weekly shop. Whether it’s topping up on your way home or an organised planned weekly outing, it can be catatonically dull and we can all think of things we would rather be doing.

Choosing wine should be a far more exciting prospect than picking up a tin of baked beans in the supermarket, and after a tumultuous 18 months of range consolidation and change, the retailers are starting to respond with ideas to make sure it is, instead of relying on pure pricing.

Own label appears more prominently in these new initiatives, a canny move when many agree price rises are inevitable in the wake of the Brexit referendum

Although positive news on the retail front in the past few weeks has calmed fears of an economic Brexit-apocalypse, it is still a fiercely competitive and tough market. Wine volume sales have fallen by around 2%, Nielsen’s MAT to 18 June 2016 shows, with values down 1.5% over the same period. This is largely due to a contraction in the entry-level £4-£5 bracket, which makes up 35.6% of the market, and the £5-£6 bracket, down nearly 7%. So far, the 2.9% growth of the smaller £6-£8 bracket has failed to offset these wider losses, but it is a promising sign for the future.

The year started well, but Andy Crossan, consumer insight director at Kantar Worldpanel, says growth slowed across the category, and, despite falling prices, household penetration dipped below 70% for the first time since December 2014. But not all retailers are equal: Crossan points to Aldi, Waitrose and Marks & Spencer, who have all reported gains in penetration over the past year.

Simon Doyle, general manager at CYT UK, argues that the evolution over the past 18 months was “painful but with the right objectives.” He says: “Shoppers were finding the wine category confusing and difficult to navigate. Fewer SKUs and more facings make navigation easier and present fewer availability challenges for suppliers. But the jury is still out on how that will eventually pan out.”

Retailers are looking to make the choice for customers more straightforward in terms of how they set up and communicate the fixture. But Nielsen analyst Marc Aston argues that one problem is that with every-day low pricing (EDLP), consumers do not understand the value so clearly.

“Before, consumers said they didn’t know how much they were getting off a bottle as it was always half-price, but almost the opposite has happened now.

“People who aren’t educated in wine go in looking for the mark-down as the indication of value, and aren’t getting that in EDLP, which makes it difficult for them.”

Which is, perhaps, why retailers are working hard to make the consumers’ task easier, and increasingly looking beyond the wine aisle for inspiration to better connect with customers and reinvigorate the category.

‘Experiential’ merchandising is on the rise, as evidenced by Lidl’s pop-up shop in Shoreditch, east London to promote its online wine range, Tesco’s Soho pop-up wine bar, Waitrose’s first consumer two-day wine festival and a new tasting club that has recently rolled out at Majestic.

14. Oddbins
Stores: 48 (30 in London, inc a dedicated beer store)
Buyers: Two
Range: c. 700 skus (30% refreshed each year) specialising in “under-represented” wines with a story
Average bottle price: £10
Volume wine sales: 2.3m bottles a year
Annual turnover: £14.1m

Enjoying a unique position in the market means customers expect Oddbins to be “a bit left-field” when it comes to its range, buyer Ana Sapungiu says – helping boost its average price to around £10.

Although top-sellers include “safe” wines (Prosecco and New Zealand Sauvignon Blanc,) what follows is less predictable, coming from across the breadth of the range and belying the retail truism that 30% of skus deliver 70% of sales.

“We sell from across the board, whether that is Portugal, Romania or Greece – but we’ve worked hard at that, as we don’t have price promotions which encourages people to look,” Sapungiu argues.

Around 30% of the 700-strong range is rotated through the year – sub-£25 Burgundies were boosted to bridge the gap between the generic blends and “unaffordable” top-tier, while Australia, Chile and Argentina have also been refreshed. Fine Wine has also grown after the range grew from 20 to 60 lines, to encompass wines beyond Bordeaux and Burgundy such as “daring” £30+ Portuguese wines, small parcels and magnums of German chardonnay.

Marketing concentrates on consumers engagement and “disruptive” campaigns (its visible Christmas Fox campaign punched above its weight) and the demographic is “evolving”, attracting an equal share of female customers. Although market share is small, last year saw sales up 13% on the previous year, and the retailer has long cherished ‘organic’ growth of the estate.

9. MARKS & SPENCER
Stores: 852
Buyers: three buyers, three winemakers
Range: 650 wines, 250 spirits 250 and 300 beers.
BWS market share: 3.4% vs 3.3% grocery, (index 103%), value yoy +10.2%

M&S has seen interesting sales growth in the past year, and BWS trading manager Garry Brooking says wine market share rose a full percentage point over the past 12 months to 5.5%.

“Our strength is balancing customer favourites with exciting innovation across the range with newness and range extensions,” Brooking says, describing M&S’s credentials as its breadth of offer, exciting innovation, hero wine producers and its “unique way of buying and creating wine” through its three winemakers.

The range remains 650-strong, but 20% is refreshed each year to drive interest, ranging from Mexican wines to “trendier” mid-priced French options. Customers have also been excited by the fine wine parcels, Brooking says, and M&S is planning to accelerate the expansion programme. Its Italian, Australian and South African ranges also provide M&S with a hit.

The retailer’s new-look and new-feel “wine shop”, aimed at “bringing to life our wine credentials”, is now live in 20 stores, with a further 40 planned by the end of the financial year.

8. LIDL
Stores: 600+
Buyers: One wine, one spirits, one beer
Range: 75 core, with 48 bottle Wine Cellar events run every two months
BWS market share: 4.1% vs 3.6% grocery, (index 113.9%) value yoy: +12%

Lidl combines its considerable international buying power with a certain fleetness of foot, in what it describes as a “transitional” year.

April saw the departure of hot-shot buyer Ben Hulme to the mothership in Germany, leaving buyer Anna Krettmann in charge, aided by the three MWs who “bullet-proof” the range via ratings and have an increasing role in buying.

Although the core range has been boosted from 60 to 80, it is the MWbacked Wine Cellar promotions, now increased from quarterly to every other month, that grab attention and act as a halo for Lidl. Its wine market share is 4.4%, against its wider grocery share of 3.5% (Kantar, June 2016), but Krettmann sees potential for further growth.

Classic France is a stronghold: in 2014 the retailer bought around 5% of Bordeaux’s red production. But it is now broadening the focus, with a less “Bordeaux-heavy” range that embraces regional France, as well as boosting its New World offering.

Krettmann says: “We don’t have masses of space, but all offer more range and variety within the limited space we have,” pointing to Hungary’s native grapes “flying off the shelves” and the “star” Canadian ice-wine rolled out last Christmas.

7. ALDI
Stores: 620+

Buyers: Two wine, one spirits and beer
Range: c.80 in-store, 117 online
Average bottle price: below £5
Volume wine sales: 90m bottles, + 6.5% by volume and +6.2% by value in the last 12 months, it says
BWS market share: 5.3% vs 4.7% grocery, (index 112.8%) value yoy +5.8%

Aldi has continued to disrupt the market, launching its wine-by-the-case website in January and making others retailers rethink their pricing strategy. Its £4 and under price point for wine is its key strength and an area where it has gained further ground this year, with the price bracket now accounting for just under 15% of take-home sales, according to KantarWorldpanel.

Wine buying director Mike James oversees a tight core range of around 80 wines where every product has to earn its place. Online gives flexibility for different wines: for example its Châteauneuf-du- Pape Cuvée 13 was added to the 117- strong portfolio. Although the average price of a bottle remains below £5, the Lot Series was launched in 2015 to cater for the increase of ABC1 customers and sold out within eight weeks (the Pézenas sold 10,000 bottles in the first week), prompting further seasonal launches.

“It provides us with a halo with which to showcase the provenance, artisan nature and quality of our wines that we sell,” says James. Meanwhile its premium tier Exquisite sells on average 100,000 bottles a week.

Clever promotion is boosting its profile as a serious wine retailer. Its sponsorship of London Wine Week and futuristic pop-up store helped make its wines more visible in the key South East. Nearly a third of its online customers are based in London and online sales rose 41% as a result. Boosting its estate by around 83 stores within the M25 is a canny move to push market share even higher.

6. WAITROSE
Stores: 350, inc 67 convenience
Buyers: seven wine, one beer, one spirits
Range: 1,200 including online exclusive
Average bottle price: Around £7.50
BWS market share: 6.6% vs 4.9% grocery, (index 134.7%) value yoy: +15.2%

As others cut their ranges, Waitrose says it remains committed to offering choice, quality and variety – and as its average price is around £2 higher than the market, it seems to be working.

Other merchandising initiatives have seen new point of sale formats such as the Showcase, featuring a streamlined selection outside the main wine aisle to tempt consumers to buy wines, and greater use of in-store tastings.

Range-wise, it continues to build in interest, such as promoting regionality in Australia and boosting its flagging Burgundy section. It saw shopper uplift on the back of its Italian offers, and fine wine has also gone more upmarket, with £12-£15 wines “demoted’ into its core lines and a higher percentage of wines priced at the £25 bracket added, because of customer demand.

Waitrose was one of the first to get behind English sparkling wine (it now lists more than 100), and England was its fastest growing sparkling wine category last year, the chain said, with Austria, the Loire and Rhône also showing strong sales.

5. MORRISONS
Stores: 490+
Buyers: four wine buyers, two sourcing managers
Range: 550 (60 online exclusives) with a 25% target for own-label
BWS market share: 9% vs 10.2% grocery, index 88.2%, yoy value +0.8%

Although Morrisons still under-trades in wine, the retailer has scooped some major awards, helping to boost its profile with press and consumers alike.

Last year saw a “reset” of the wine aisle, with 5 to 10% of the range cut and £10m spent on remerchandising – a move credited with boosting post-Christmas quarterly sales.

This saw it remerchandised by colour and country, with better descriptors on shelf to help consumers navigate more easily, and a greater focus on the entrylevel chalk-board range. Spain and South America also benefited from a revamp.

But the price crunch rolled out in February and May largely passed the BWS category by.

It now plans to build on its range and “refocus” on wines, raising the level of cross-merchandising across the store (a wine/meat cross promotion is soon to roll out, for example). But it hasn’t only been about bricks and mortar. Its tie-in with Amazon Fresh, which includes a high proportion of own-label wines, also came out of left field this year.

4. THE CO-OPERATIVE
Stores: 2,802 (pending the sale of 298 smaller stores in November), ranged by cluster.
Buyers: four wine buyers, two beer, one spirits
Range: 344 SKUs, with a core of 160 and the rest ranged by cluster group. Average bottle price: £5.49 Volume wine sales: 90m bottles

BWS market share: 9.4% vs 5.1% grocery, (index 184.3%) value yoy: 7.1%

Wine is a key area for the chain, and the Co-op enjoys a bigger over-trade than any other retailer – around 9.7%, versus 6.7% grocery share, BWS boss Simon Cairns says, which he attributes to a strong reputation for sourcing among the customer-base, as well as the rise of convenience retailing.

The team is enjoying the bounce from the Co-op’s recent range event, which “finessed” the range and introduced cluster ranging to make it work harder.

So the core 160-wine range is supplemented with 25% from the wider portfolio tailored by store type and demographic, ensuring the “right wines go into the right stores”.

Progressive stores now stock more “esoteric” wines, and Cairns is encouraged by growth in France (+15%), Spain (+15%), Italy (+5%) and Fair Trade (+28%), when historically the Co-op’s key strength has been in Australia, South Africa and Argentina.

Moving to EDLP has boosted volumes (+3.6%), away from high/low promotion, with values up 2.3%, with 44% of sales generated by own-label wines.

“We are growing considerably ahead of the market, which gives me confidence that the range is doing what I wanted it to do,” he says.

3. ASDA
Stores: 525 stores
Buyers: 10 buyers and two wine advisers
Range: 800, broad-based
BWS market share: 13.3% vs 14% grocery, (index 95%) value yoy: 1.8%

As Asda sees falling sales generally, its wine business has been performing strongly, wine buying manager Ed Bests argues, keeping sales level and holding both its market share and average selling price despite the “fiercely competitive market”. But wine is still an area of under-trade.

Since last May’s big review, in which 8% of the range was cut, there have not been any drastic revisions, but Betts described it as the “first step”, with duplication and space allocation to be looked at further: “We will be looking at what Project Renewal means for wine over the course of this year, but at this stage, it’s too early to say what these will be.”

But he argues that the project has enabled Asda to focus on what the consumer wants: better value and a clearer customer proposition. Sauvignon Blanc, Malbec and traditional France are doing well, along with the Extra Special and exclusives wines, which contribute around 50% of sales.

Its La Moneda Reserve Malbec went stratospheric in June after being named best red variety under £15, seeing a more than tenfold increase in sales and prompting a 247% halo affect across the La Moneda range, and a 75% boost to Malbec.

There have also been notable alterations to the team with the departure of Philippa Carr MW, who was instrumental in the launch of the Wine Atlas range, and senior buyer of wine Ed Ashley.

2. J SAINSBURY
Stores: 1,200+
Buyers: five wine, one winemaker and one new product developer
Range: 700+ wines (estimate)
BWS market share: 17.8% vs 14.6% grocery, (index 121.9%) value yoy: -0.6%

Sainsbury’s has kept a remarkably low profile over the past year under its elusive new BWS boss, Elizabeth Newman.

Although it over-trades in wine compared to its wider grocery share, value in the category during 2015 fell 0.6% in the past year, Nielsen says.

However the retailer has committed itself to EDLP, rolling out “round-pound” pricing, and made headline news when it promised to phase out multi-buy promotions. A notable exception is its periodic 25% off six bottle deals, which the BWS team admits encourages consumers to trade up. Some savvy customers used a combination of deals to snag themselves bottles of Prosecco for under £3, until Sainsbury’s briefly put a stop to it in early June.

Range-wise there has been little recent news. It has avoided the range slashing others have indulged in, but product development has been thin on the ground, though more is expected in the autumn. Rosé was a recent focus a new Taste the Difference Crémant de Loire followed the popular Pignoletto.

1. TESCO
Stores: 3,500 (inc around 1,800+ Express & Metro)
Wine team: five, plus one spirits, one beer buyer and a category format manager Range: 660 (down from 950 wines last year), 40-45% are own label/exclusive
BWS market share: 25.7% vs 25.3% vs grocery (index: 101.6%) value: yoy +1.7

The BWS aisles has been through a tumultuous year at Tesco, with “Project Reset” which slashed nearly 30% of the range, stripped out 270 lines, embraced simpler EDLP pricing and saw the closure of its popular wine community. Only its customer wine fairs survived.

It is not yet obvious how successful the move was, after an initial fall in sales, Nielsen analyst Marc Aston says: “I’m not sure if they have recovered: wine yield is down anyway by around 2% so it certainly wasn’t the shot in the arm the wine category hoped. But it’s too early to say whether it has been a success.”

According to some suppliers, there are concerns the cuts were too savage and alienated a swathe of Tesco’s affluent middle-class customers, and corrective premiumisation is rumoured to be “imminent”.

But the Tesco team remains bullish, buoyed by last month’s well-received Tesco finest* pop-up bar in Soho, which shows the UK’s largest wine retailer can think beyond the confines of the supermarket aisle. db