IBWSS London: how data, consumer insights and private label are the future of bulk wine
By Richard Siddle
If you sat down the average wine trade professional, who is not directly involved in the buying or selling of bulk wine, and asked them to explain what the industry was all about, then chances are they would immediately describe a sector fixated on the price of wine per litre in different countries, dictated to by the size of the latest harvest and local currency rate.
What you would not expect them to describe is an industry increasingly focused on the changing needs of the end consumer, where all buying decisions are driven by what wines, brands or private label are going to end up on supermarket shelves and restaurant wine lists.
But that was very much the chief conclusion you would take away listening to speaker after speaker at this week’s inaugural International Bulk Wine & Spirits Show in London, organised by the Beverage Trade Network.
Here the focus was not on the fact the industry is having to navigate its way through the smallest global harvest of wine since 1961. That’s a given. A fact the sector has been grappling with for months.
Instead it was about the huge changes taking place, both in the supply of bulk wine, including which countries it comes from, and how traditional wine agencies, importers, distributors and bottlers are adapting their business models to be so much more than simply a supplier of large volumes of wine.
Businesses that have become new product and brand development agencies in their own right, companies that are creating consumer specific, market driven wines for their customers where bulk wine is the tool they use to deliver bespoke wines, rather than it being simply the wine they choose to trade in.
All of which is being powered by the insatiable demand from the major supermarkets, and increasingly large on-trade groups and online players, to create brands of their own that can act as compelling alternatives to the branded offer they have always had available to them.
As Clive Donaldson, chief wine sourcing manager for the Morrisons supermarket chain in the UK, made clear. Bulk wine is “helping to facilitate the growth in private label” goods.
“Private label is all about managing the full process. Where we can choose every element about the wine,” he explained.
“For me it’s like getting a tailored suit. It’s the perfect fit for me and my retail environment.”
That debate between private label and branded goods and what’s right for a particular retailer, or any of its products or categories, is at the heart of the overall grocery industry and its wider battle with the private label-dominated hard discounters, Aldi and Lidl.
Clem Yates MW of Off Piste Wines pointed out that own label now makes up of 19% of the ranges of the top six UK retailers, from just over, 3500 SKUs.
It means their buyers are far more aware of the true cost of shipping and production that their suppliers can offer.
Private label is only going to become even more important for supermarkets as it is how different categories within the chains fight to win more space by creating better selling and award winning private label products, she explained.
It is a very clear threat to the future of wine brands per se, and although category leaders can expect to maintain their place on the market, smaller and medium sized brands will increasingly be taken over by private label.
For Donaldson it is not just about creating a supermarket own brands, it’s about developing a wine that is just right for the Morrisons consumer. It’s that subtle difference that bulk wine providers need to understand and come up with the right solutions for them.
Don’t just see pleasing him as your number one goal. “What I think is irrelevant,” said. “It’s what my customers think that is important.”
Leading players
Leading the way in this field are the specialist bottlers and brand developers that, in an industry where the traditional specialist wine importers are seeing flat or stagnated growth, are each showing enormous growth of tens of millions of pounds over the last five years.
Noticeably the key message from a debate between three such companies, Broadland Wineries, Kingsland Drinks and Copestick Murray, all kept coming back to concentrating their efforts on what the consumer thinks.
How future wine trends are not just going to be about who has the biggest volume of cheapest wine available, but which styles of wine are what their customers are going to want to drink.
When they were asked how they would invest a gift of £1m into their businesses they all turned to better digital systems and processes to help them understand their customers’ end consumer.
Wider market
There was further food for thought for those who dismiss bulk wine as being just big volume, lowest common denominator wines for the major retailers.
Increasingly it is being seen as a way to help smaller independent wine specialists and regional wholesalers to grow and strengthen their position by sourcing wines that they can ship in volume to help bring much needed margin and cash flow at the same time.
Ted Sandbach, managing director of the Oxford Wine Company, explained how it is now working with similar non-competing independent players in other parts of the UK to source exclusive wines they can collectively ship in bulk to the UK, in one instance through Boutinot, and sell to their respective customers.
Something that simply was not possible just a few years ago as distributors and bottlers did not have the capacity, or inclination to offer their services to those wanting to move what by comparison to their normal business is such small volumes of wine.
Not only does it allow Sandbach to ship and sell ever more exclusive wines it provides him with a potentially higher margin that he can sell either in his stores or his on-trade customers.
“I am taking a risk bringing this wine over in a container so need that re-assurance,” he said.
A move that reflects both the growing significance of the independent and specialist wine sector, but also the ability of the bulk sector to now source and ship increasingly premium wines.
Neil Anderson, marketing director, at Kingsland Drinks said it was now regularly shipping and bottling wines that retail at £12 or more.
Donaldson said some of the most expensive wines in the Morrisons range were bottled in the UK, including an old vine Shiraz from the McLaren Valley.
Sourcing troubles
It is one thing having the desire and drive to use bulk wine to make ever ambitious and innovative wines, but you still need the juice and the producers to supply them. Which in such a turbulent growing year as 2017/2018 has proved particularly taxing.
Here the repeated message was all about partnerships and producers and suppliers working together over a period of time to ensure they still have enough wine to supply each other.
Easier, perhaps, to say than do, particularly as there is now so much more competition and demand for that wine from new markets around the world.
IBWSS London heard how the increasing globalisation of the bulk wine market was good for the sector as a whole, but it added more competition to the mature markets and increased options to producers to find the right buyers and partners to work with.
Robin Copestick, managing director of Copestick Murray, said it was having to look at new and emerging markets to help source wine for its I Heart varietal brand that is now in 25 plus countries around the world.
A search that is taking it deeper into Eastern Europe and countries like Moldova as well as working even more with long standing producer partner, like Carmele Recas in Romania.
Getting it right
It was clear from the two-day conference that bulk wine means different things to different folks.
But if you are supplier operating in the sector then you have to add value, and you have to get things right, said Dr Arabella Woodrow of Broadland Wineries. Which means managing your customers’ expectations, keeping on top of where a wine might be in the supply chain, and “ironing out problems” as and when they come up.
“It is up to us to go the extra mile so the retailer does not have to.”
Here’s what you missed...
Often with these sorts of events it is interesting to see which companies were not there as well as reporting on those that were.
It was noticeable, for example, how few of the more traditional wine agency, importer and distributor businesses were absent. Companies that have, some more forcibly than others, made it quite clear that bulk wine is not for them and that they are all about finding specialist, bottled wine from producers that can tell and share a story.
If they had taken the time to come they may not have been convinced that bulk wine is the right solution for them. But they would equally have raised their eyebrows at the huge rises in turnover, sales and profitability of the previously traditional wine companies that have embraced bulk wine with both hands.
Growth figures that are a lot harder for them to find or match in the traditional wine distribution sector.
The businesses that have changed their trading models to become closer partners and suppliers of major multiples and other major customers who are increasingly looking for exclusive lines and private label brands.
Organisations that are on the front foot, investing in shopper and consumer insights and using marketing teams, brand developers, designers and creative agencies to produce brands, in different formats, that are taking up increasing space and share of supermarket wine ranges and restaurant wine lists.
It will be interesting to see if they dare stay away again next year.