Champagne and prosecco are selling well, but other wines are facing slower growth. Will premiumisation, promotions and innovations make a difference? Simon Creasey reports
At first glance, the wine and Champagne category looks to have had a vintage year.
Value sales have risen 5.2%, with still wine showing solid growth of 5.6% and Champagne bouncing back strongly with value sales up 7.2% [Kantar]. But retailers and suppliers shouldn't reach for the celebratory bottle of fizz just yet.
Volume sales of still wine are only up 0.4% and much of the value growth has been fuelled by higher prices, with shoppers paying about 30p more per litre last year as a result chiefly of duty rises. As for Champagne, it may have dragged itself out of a two-year slump, posting volume growth of 11.7%, but this was driven by premium bottles the mid-tier is struggling to return to pre-recession levels.
So what do the coming months hold for the sector and what are suppliers and retailers doing to try and reignite underperforming sub-categories?
For still wine, the short-term prognosis doesn't look too good. With per capita consumption starting to flatten out and a sharp fall-off in promotional activity, sales will continue to grow, but not as fast as they used to, according to research published earlier this year by Wine Intelligence.
But there are opportunities to inject genuine long-term value into the category, believe winemakers. White wines and rosés are already outperforming the rest of the still wine sector (white up 8% in value and 2.5% in volume and rosé 6.3% and 3.5%). Indeed, whites are threatening to catch up with reds, which account for £1.9bn of the total market compared with £1.7bn for whites, but are growing at just 3.2%, while volume sales have actually fallen 2.1%.
Their success can be attributed largely to the introduction of new grape varieties and a focus on lower-alcohol wines. "Chardonnay is still the most asked-for varietal but sauvignon blanc is increasing in popularity and so is pinot grigio," confirms John Fergusson Cooper, trading controller at Landmark Wholesale.
He identifies lower-alcohol wines as a key potential growth area this year, echoing a recent study into the wine drinking habits of UK consumers by Constellation Wines (which will change its name to Accolade Wines in July), which estimated the light wine market could be worth £200m. Keen to capitalise, a number of companies have launched lower-abv wines in recent months and not just whites. In February, E&J Gallo unveiled a chilled red wine called Summer Red, which has an abv of 10.5%.
Waitrose wine buyer Dee Blackstock can see such wines taking off. "As many white wine drinkers are turning to red wine as an aperitif, they are looking for fruity, supple reds that respond well to a light chilling," she says. "Beaujolais, pinot noir, Valpolicella, grenache and many New World reds fall into this camp."
Light and chilled won't be the only big stories this year. Wine makers and retailers alike are also hoping to inject fresh value into the commoditised category by encouraging consumers to trade up to more expensive wines.
A number of mid-tier brands have unveiled new premium extensions recently. This month, Blossom Hill launched a range of premium blended wines called the Vineyard Collection and relaunched its Winemakers Reserve range with a 26% higher price and a "higher quality perception", according to Joanne Morgan, brand manager for Blossom Hill Communications.
"The Vineyard Collection is the biggest innovation project from Blossom Hill and will create a premium blended wines sector," she claims.
More work will need to be done educating consumers about the merits of fine wines if they are to trade up, stress winemakers. "Engagement around the country of origin, wine regions and grape varieties is key to encouraging consumers to trade up and think premium at the point of purchase in the off-trade," says Lee James, commercial director for wines at Pernod Ricard UK, which recently launched Jacob's Creek Regional Reserves with an rsp of £9.99.
Retailers, however, are relying more heavily on the tried and tested tactic of promotions to generate interest. While the number of three-bottles-for-£10 deals appears to have waned, many retailers are running half-price deals on pricier wines and the likes of Sainsbury's are offering two-for-£10 deals on more expensive bottles some of which would usually cost more than £10 each.
Such deals perpetuate the consumer's "promo-hunting" mindset, according to Kantar analyst Ross Smith, who would prefer to see the industry focus on "education and continued scope in terms of occasionality". However, he concedes, they do encourage trial and encourage consumers to broaden their horizons.
And this is something that consumers are keener than ever to do in these straitened times as demonstrated by the success of prosecco, the strongest performer of the past 12 months. Although it has a relatively small market value at the moment £28m it has grown 52.5% in value and 50.4% in volume [Kantar] as supermarkets have expanded their ranges, merchandised them more prominently and promoted more heavily.
Cava, on the other hand, has seen sales slump 9.2% in value and 10.7% in volume. It will always be this sort of fizz, rather than Champagne, that prosecco hits the hardest, says Blackstock. "Champagne is still seen as something very different and hard to imitate and is kept for special occasions more and more, with prosecco gaining ground as an anytime fizz," she says. "Prosecco poses more of a threat to other sparkling wines, particularly the New World-branded fizz."
Yesterday's Royal Wedding will have added fizz to sales of all sparkling wines, says Dan Townsend, general manager UK and Ireland for Treasury Wine Estates. "It's likely to have led consumers to trade up from still to sparkling wine," he says. "Sparkling wine is increasingly seen as an attractive and cost-effective alternative Champagne."
The hope is that the new wave of proseccos, light wines, chilled reds and premium wines will also add some fizz to the category as a whole.
Focus On Wine & Champagne
At first glance, the wine and Champagne category looks to have had a vintage year.
Value sales have risen 5.2%, with still wine showing solid growth of 5.6% and Champagne bouncing back strongly with value sales up 7.2% [Kantar]. But retailers and suppliers shouldn't reach for the celebratory bottle of fizz just yet.
Volume sales of still wine are only up 0.4% and much of the value growth has been fuelled by higher prices, with shoppers paying about 30p more per litre last year as a result chiefly of duty rises. As for Champagne, it may have dragged itself out of a two-year slump, posting volume growth of 11.7%, but this was driven by premium bottles the mid-tier is struggling to return to pre-recession levels.
So what do the coming months hold for the sector and what are suppliers and retailers doing to try and reignite underperforming sub-categories?
For still wine, the short-term prognosis doesn't look too good. With per capita consumption starting to flatten out and a sharp fall-off in promotional activity, sales will continue to grow, but not as fast as they used to, according to research published earlier this year by Wine Intelligence.
But there are opportunities to inject genuine long-term value into the category, believe winemakers. White wines and rosés are already outperforming the rest of the still wine sector (white up 8% in value and 2.5% in volume and rosé 6.3% and 3.5%). Indeed, whites are threatening to catch up with reds, which account for £1.9bn of the total market compared with £1.7bn for whites, but are growing at just 3.2%, while volume sales have actually fallen 2.1%.
Their success can be attributed largely to the introduction of new grape varieties and a focus on lower-alcohol wines. "Chardonnay is still the most asked-for varietal but sauvignon blanc is increasing in popularity and so is pinot grigio," confirms John Fergusson Cooper, trading controller at Landmark Wholesale.
He identifies lower-alcohol wines as a key potential growth area this year, echoing a recent study into the wine drinking habits of UK consumers by Constellation Wines (which will change its name to Accolade Wines in July), which estimated the light wine market could be worth £200m. Keen to capitalise, a number of companies have launched lower-abv wines in recent months and not just whites. In February, E&J Gallo unveiled a chilled red wine called Summer Red, which has an abv of 10.5%.
Waitrose wine buyer Dee Blackstock can see such wines taking off. "As many white wine drinkers are turning to red wine as an aperitif, they are looking for fruity, supple reds that respond well to a light chilling," she says. "Beaujolais, pinot noir, Valpolicella, grenache and many New World reds fall into this camp."
Light and chilled won't be the only big stories this year. Wine makers and retailers alike are also hoping to inject fresh value into the commoditised category by encouraging consumers to trade up to more expensive wines.
A number of mid-tier brands have unveiled new premium extensions recently. This month, Blossom Hill launched a range of premium blended wines called the Vineyard Collection and relaunched its Winemakers Reserve range with a 26% higher price and a "higher quality perception", according to Joanne Morgan, brand manager for Blossom Hill Communications.
"The Vineyard Collection is the biggest innovation project from Blossom Hill and will create a premium blended wines sector," she claims.
More work will need to be done educating consumers about the merits of fine wines if they are to trade up, stress winemakers. "Engagement around the country of origin, wine regions and grape varieties is key to encouraging consumers to trade up and think premium at the point of purchase in the off-trade," says Lee James, commercial director for wines at Pernod Ricard UK, which recently launched Jacob's Creek Regional Reserves with an rsp of £9.99.
Retailers, however, are relying more heavily on the tried and tested tactic of promotions to generate interest. While the number of three-bottles-for-£10 deals appears to have waned, many retailers are running half-price deals on pricier wines and the likes of Sainsbury's are offering two-for-£10 deals on more expensive bottles some of which would usually cost more than £10 each.
Such deals perpetuate the consumer's "promo-hunting" mindset, according to Kantar analyst Ross Smith, who would prefer to see the industry focus on "education and continued scope in terms of occasionality". However, he concedes, they do encourage trial and encourage consumers to broaden their horizons.
And this is something that consumers are keener than ever to do in these straitened times as demonstrated by the success of prosecco, the strongest performer of the past 12 months. Although it has a relatively small market value at the moment £28m it has grown 52.5% in value and 50.4% in volume [Kantar] as supermarkets have expanded their ranges, merchandised them more prominently and promoted more heavily.
Cava, on the other hand, has seen sales slump 9.2% in value and 10.7% in volume. It will always be this sort of fizz, rather than Champagne, that prosecco hits the hardest, says Blackstock. "Champagne is still seen as something very different and hard to imitate and is kept for special occasions more and more, with prosecco gaining ground as an anytime fizz," she says. "Prosecco poses more of a threat to other sparkling wines, particularly the New World-branded fizz."
Yesterday's Royal Wedding will have added fizz to sales of all sparkling wines, says Dan Townsend, general manager UK and Ireland for Treasury Wine Estates. "It's likely to have led consumers to trade up from still to sparkling wine," he says. "Sparkling wine is increasingly seen as an attractive and cost-effective alternative Champagne."
The hope is that the new wave of proseccos, light wines, chilled reds and premium wines will also add some fizz to the category as a whole.
Focus On Wine & Champagne
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