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Slideshow
‘Significant step change’ takes place in wine prices
The average price of still wine in UK retailers is moving up at speed as supermarkets focus on expanding ranges over £7.
A bottle of wine now costs £5.45 on average in the UK off-trade
According to in-depth research by Concha y Toro UK, there has been a “significant step change” in the price of wine since the start of December 2016, with IRI data showing a 17 pence price rise in the past 24 weeks.
Such an increase means that a bottle of wine now costs £5.45 on average in the UK off-trade for the 24-week period from mid-December to mid-May, up from £5.28 for the same length of time from mid-July to mid-December 2016.
Explaining the reason for the move upwards in average wine bottle prices, general manager of Concha y Toro UK, Simon Doyle, told the drinks business on Friday last week that it was due to an expansion in the number of more upmarket wines on supermarkets’ shelves.
“The average price of still wine is accelerating, driven by range changes,” he said.
“We are seeing value growth across all channels in the medium term… and while there has been a lot of rationalisation in the supermarkets, the range architecture is now probably better than it has ever been – less is more,” he added, recording less duplication at lower prices, and a broadening of ranges in times of price, with more products being listed at higher prices.
He also attributed price rises to exchange rates.
“All channels are seeing price growth accelerate from December 2016, and that’s because, after Brexit, a lot of wine companies had hedged against changes in exchange rates up to the end of 2016, but not beyond, so the big jump is December,” he said.
“I don’t think there will be another time when we see such an enormous shift from discounting to EDLP,” believes Simon Doyle
“But, price growth has been sustained after that – so, whereas shoppers often trade up on wine for Christmas and then trade down again afterwards, we have seen that prices are being sustained, and that’s because there hasn’t just been price increases on existing products, but also an introduction of new wines at higher prices,” he continued, echoing his earlier point.
So, while retailers have for the most part reduced their ranges over the past couple of years, meaning that the number of wines priced below £6 have fallen, there have been more products added to the shelves around £8 and above.
“It’s easier to sell a new product at a higher price than put up the price on an existing product,” he said, explaining the change, although he added that there has also been widespread price increases on private label wines because the suppliers of such products have had to pass on the impact of exchange rates due to the very low margins in this area of the trade.
And, while the IRI data he shared with db doesn’t include the discounters – primarily Aldi and Lidl – he said that these retailers have also “done a lot of premium development” in terms of their wine offer in the UK.
A final and further reason for the rise in average wine prices concerns a change in promotional approach by the retailers.
“The amount of discount when wine is on promotion is dropping substantially,” said Doyle.
“Not only has the number of weeks that wines are on deals fallen, but the discount is more likely to be 10-20%, rather than 20% or more,” he said.
Concluding he stated, “I don’t think there will be another time when we see such an enormous shift from discounting to EDLP [every day low prices]; there has been a major move away from half-price led sales.”
The key changes observed by Concha y Toro UK:
• Average wine prices are growing in UK retailers with prices up 3.5% in the past 12 weeks
• All channels are seeing price growth accelerate in the medium and short term, particularly ‘convenience multiples’, which are smaller high-street outlets from the supermarkets.
• There’s been a significant step change in average bottle price since the beginning of December 2016, with the latest 24 weeks seeing an increase of £0.17 compared to the previous 24 week period.
• There’s a clear move towards more premium new listings and, where ranges are shrinking, the focus is on the low- to mid-priced areas of the wine category. For example, the number of SKUs for wine in the £6-7 price band has fallen by 86, while the number of SKUs over £8 has risen by 43.
• More SKUs have seen base price increases than have seen price go down – with those seeing decreases being driven by the introduction of EDLP pricing strategies.
• The number of weeks on deal are down overall for wine, and there’s been a clear move away from deep discounting, with a clear shift towards 10%-20% price cuts from 20%-30%.
• Overall feature space for wine is down by 1.6%, with the pressure coming on the ‘gondola end feature’. So-called ‘event space’, such as temporary fixtures for Easter or Halloween, is the only area to see growth for still wine.
For more detailed information on wine prices, supermarket wine ranges, and discounting trends, see the following pages.
(All data has been supplied by Concha y Toro UK).
The growth in the average price of a bottle of wine is accelerating and helping to drive value growth across the wine category in the UK off-trade, according to Concha y Toro UK.
Source: IRI data to 20 May 2017, commissioned by Concha y Toro UK
All channels are seeing price growth accelerate in the medium and short term, according to Concha y Toro UK.
Source: IRI data to 20 May 2017, commissioned by Concha y Toro UK
There’s been a significant step change in average bottle price of wine since the beginning of December 2016, according to Concha y Toro UK.
Source: IRI data to 20 May 2017, commissioned by Concha y Toro UK
Still some range ‘churn’ evident, and the expectation is that Asda’s wine range will shrink over the next few months, according to Concha y Toro UK.
Source: IRI data to 20 May 2017, commissioned by Concha y Toro UK
There’s a clear move towards more premium new listings and where ranges are shrinking the focus is on the low to mid areas of the wine category, according to Concha y Toro UK.
Source: Knowledge Gaps data to 23 May 2017, commissioned by Concha y Toro UK
The number of weeks on deal are down overall for wine, and there’s a clear move away from deep discounting, with a shift towards a 10%-20% price drop from 20%-30% cut, according to Concha y Toro UK.
Source: Knowledge Gaps, commissioned by Concha y Toro UK
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Given that the exchange rate shift and duty hike more than account for this average increase, how much of this ‘premiumisation’ is simply the same wines at a higher price?