‘No need to discount wine during lockdown’ says CyT

In a webinar hosted by the UK arm of Concha y Toro (CyT) on Tuesday this week, the major global wine business stressed that such is the strength of wine demand during the coronavirus lockdown, there’s no need for extensive discounting, citing an opportunity to add value to the category during the crisis.

Promotional levels in UK retailers have dipped to their lowest level for the past five years

The group, which owns leading wine brands Casillero del Diablo and Cono Sur from Chile along with Trivento from Argentina, pointed out that Nielsen data that tracks wine sales in UK retailers had already shown a sharp rise in turnover since the coronavirus lockdowns began, which CyT attributed to a sudden switch to at-home consumption, but also a huge drop off in the amount of promotions in retailers – both because consumers no longer require price-cutting as a reason to stock up on drinks, and supermarkets are attempting to manage supply.

Speaking on Tuesday, CyT UK commercial director Clare Griffiths said, “In the current situation there is no need to discount heavily, because the demand is there.”

Continuing she stressed, “There is an opportunity to add value, particularly with brands with equity and awareness.”

Indeed, her colleague, CyT UK’s category and insights controller, Alexandra Price, recorded that promotional levels in UK retailers had dipped to their lowest level for the past five years.

“The average is 40% in grocery [for the amount of goods sold on promotion], and now it is around 25%,” she said, adding, “It has taken a tumble as retailers look to manage supply, and don’t need to promote at the moment.”

Commenting specifically on wine, she said that the latest Nielsen figures showed that 33% of wine is sold on some form of discount, compared to 55% at the same time last year.

“Retailers and wine brands don’t need to do deep discounting,” she stated.

However, Griffiths commented that there may be a greater benefit to multi-buy promotional offers on wine than in the recent past as shoppers choose to make fewer trips to supermarkets – because of “the risk” of catching Covid-19 – but purchase more wine they do go to major grocery retailers.

Comparing the situation to the recessionary period in 2008 and 2009 at the height of the global financial crisis, Griffiths said that there had been a reduction in “multi-buy activities to manage budgets”, but currently, with shoppers “making fewer trips but buying more, then a multi buy could do more”.

In other words, as people remain fearful of catching Covid-19, and therefore continue to choose to dine at home, and make infrequent shopping trips, the drinks trade could benefit from shallower price cuts on wine, but more multi-buy promotions.

Highlighting the fact that strong brands perform best during anxious times, and when promotional price offers are reduced, Griffiths showed that CyT brands were outperforming the total UK retail wine market at the moment – see bar graph below.

Explaining why this might be the case, head of marketing for CyT UK, Emma Ashton, said that brands provide comfort for consumers.

“During the 2008 recession we saw that branded wine sales were sustained and stable, and it’s the same pattern now,” she said.

Continuing she said, “The key reason for buying brands during a crisis is stability; people look for reassurance… and a study in 2007 showed that if you remove brands, it removes a sense of stability.”

CyT UK performance versus the total wine category. Source: Nielsen Scantrack Data to WE 16.05.20