Growing the grape
It's boom time for wine as drinkers are paying more than ever for a bottle. Nigel Huddleston picks out the trends to follow to keep growth going
You would be forgiven for thinking that the on-trade was in the middle of a wine-drinking boom. With high-street pubs' blackboards offering an ever-widening selection and back bars festooned with bottles from their ranges, it seems the trade has finally jumped on the UK's wine bandwagon, which has been steadily rolling through the take-home market for the past
20 years.
It might be surprising then to learn that Nielsen figures show that in the year to May, British pub-goers actually consumed 3% less wine in the previous 12 months than they had a year earlier, with volume sales at 181 million litres.
The pub trade's generally increasing difficulty in hanging on to customers in the face of supermarket pricing and the competitive pressure of other leisure activities accounts for some of the fall in volumes, as do moves by more progressive and responsible on-trade
retailers to move away from 25cl glasses and aggressive volume upsells.
The great news for pubs is that, while volumes may be down, the value of sales over the same period increased by 5% to just short of £3.4bn, in line with growth in the off-trade, showing that pubs are successfully charging more for the wine they're selling.
Danny Spencer, on-trade sales director for forward-thinking French wine specialist Boutinot, says: "Retail prices generally have risen over the last five years and the £15
barrier has now, in reality, been taken to £20.
"When house wines were £11 to £12 five years ago, other wines up to £15 would sell comfortably before a general tailing off in volumes.
"As house wine prices have risen to around £13 to £14, so the broader spectrum of sales has increased to include almost anything up to a £20 price point."
On-trade versus take-home
Of course, the on-trade has long been selling wine at higher prices than take-home and that's reflected in the relative volume and value share of the total market taken by the sector; take-home accounts for 84% of the wine market by volume, but just 62% by value, Nielsen figures show.
The really big win for the on-trade in the year to May was in Champagne, where sales grew 24% in volume and 39% in value, to £327m.
Champagne accounts for 9.6% of on-trade wine sales by value, and growth is considerably ahead of the off-trade, which was up by just 8% in the latest available take-home figures, for the year to 11 August. The on-trade accounts for a third of all UK Champagne sales by volume and 48% by value.
Other sparkling wines are faring less well in the on-premises market, with sales down by 13% in both volume and value over the year. Cheaper fizz has only around 3% of the total on-trade wine market.
Still wines remain by far the biggest contributor to overall wine sales, with a 91.7% share of on-trade sales by volume and 83.7% by value.
A 2006 report from Key Note estimated that pubs' share of the total on-trade wine market had risen from around a third in the late 1990s to 45.6% by last year.
While prices are holding up well, there's evidence that the range of wines on sale in pubs is becoming closer in character to the off-trade, with many big brands making large share gains on the back of distribution drives by brand owners chasing value in the face of off-trade price cuts.
New entrants to the on-trade exclusives market, such as Jack Rabbit from Constellation, Gallo's Dancing Bull and Oliver & Greg's from WaverleyTBS, are also among those making gains. Naturally, big brand owners talk up their products, but there's still a split in the trade about the best approach to take.
Adrian Atkinson, wine development director at Jacob's Creek firm Pernod Ricard UK, says: "Until recently the on-trade has not been seen to be brand driven.
"But it is beginning to recognise the benefit of introducing iconic brand champions to wine lists, in order to enable consumers to navigate their way with greater ease."
Alexander Meaney, wine development manager at Harvey Miller Wine & Spirit Agencies - whose brands include the more esoteric Lancers from Portugal and Bodegas Darien from Rioja - says pubs should still try to fly the flag for difference in the marketplace.
"Avoid mass-produced brands which are all over the supermarkets," he says. "The vast majority offer very poor value for money.
"But don't turn down brands just because they happen to be listed on the high street -
if they are good value and properly promoted (and never in bargain basement bins) they will be recognised as good quality."
Californian wine brand Sutter Home withdrew from the UK off-trade to leave Blossom Hill and Gallo to slug it out. It means Sutter Home won't be on offer at £3.99 in supermarkets at the same time it's carrying a premium price in a pub down the road.
Julian Drake, on-trade sales manager for UK distributor PLB, says: "You're going to see more and more exclusive labels in the on-trade for that reason. Pub operators are looking for something that can offer consumers the reassurance of a brand but without sacrificing their own credibility."
Target according to market
But it's essential that pubs take a horses-for-courses approach and don't alienate their core audience by cutting out brands all together, says Gary Greenfield, managing director of South African supplier Distell Europe, whose range includes the on-trade exclusive Drostdy-Hof.
"It would be important to look at the outlet and consumers and then target accordingly," Greenfield says.
"For example, with a busy gastropub you would expect consumers to have more money to spend, and this is where the role of brands would be important, as sometimes they can offer consumers reassurance."
Within the still wine category, rosé continues to be the star performer, as it has been for the last few years.
Neil Bruce, WaverleyTBS's wine category director, says rosé "performs a vital role within the wine category as it is recruiting drinkers, especially younger women, into wine from lager".
Rosé has become a marketing focus for some of the main players in recent times,
including what Meaney describes as attempts to "do a Magners", led by Gallo's work on
over-ice serves.
Meaney says: "[Over ice] is a young trend and so far unproven.
"It is only involving a few brands, but as one of these is Gallo it could prove influential -
especially in the pub sector. But there will be a very substantial part of the on-trade that will have no interest in adopting this trend."
Jane Hunter, western European marketing director for Gallo, says innovation is important in wine.
She adds: "The trade needs to innovate to keep wine at the forefront of customers' minds when they walk into an on-trade outlet, and to keep up with the ever-evolving beer and cider categories."
Bill Rolfe, director of wine importer 10 International, says pubs have been relatively slow on the uptake.
"Pubs are a little behind the bars and restaurants," he says, "and definitely behind the off-trade, where rosé is growing at close to 30% year on year."
Rolfe's company is putting a lot of energy into Pink Elephant, a rosé created as a specific match for spicy food, and he says the brand is backing in-venue theme nights to promote the link.
Lynn Murray, marketing director at Hatch Mansfield - whose agency brands include
Errazuriz from Chile and Villa Maria from New Zealand - also forecasts further rosé growth in the next 12 months.
She adds: "California is clearly the leader but rosés from Chile, New Zealand and France are all finding spaces in lists."
Spencer at Boutinot agrees that rosé from a broader range of sources is becoming prevalent on pub lists. "A premium rosé category has developed which simply did not exist three or four years ago," he says.
"Pinot Grigio rosé has been a key factor, but also a raising of awareness among consumers has
