Why we need a cultural change in the UK Wine Trade.
Some years ago now, a group of Australian cattle farmers became increasingly concerned about declining sales of beef. After some discussion, they decided to employ a swanky advertising agency, and the “Sydney suits” duly arrived in the outback to receive the brief.
But it didn’t take long for the farmers to become frustrated by all the talk about long-term image building, the development of a clear brand positioning statement and all that related marketing “guff”, as they no doubt put it, though almost certainly less politely.
So the suits were sent back to Sydney without the contract, and the farmers decided to come up with a campaign themselves. Not long afterwards, the following strapline was seen on billboards, T-shirts and car stickers: “Eat More Beef You Bastards”.
The story may well be apocryphal, but either way I somehow doubt that the campaign would have paid off. It certainly gets full marks as a call to action, but zero out of ten for giving consumers any reason to increase consumption.
This comes to mind occasionally whenever I’m involved in a debate between the short-term need for sales, and the longer term need to preserve brand values or develop brand propositions.
As a generalisation it seems to me that those in favour of longer-term options have the cards stacked against them, because the benefits are usually far less clear cut. This would apply to those arguing for, say, the proposed rail link between London and Birmingham just as much as it would to a discussion about whether a wine brand should be discounted.
Wine marketers may well argue strongly about the risk of debasing brand values over time. Indeed the conventional wisdom is all on their side. But there is no proof that this will happen, let alone any formula that can point to when returns will actually start to diminish. It is not possible to convince the unbelievers – who generally inhabit the sales department but also occasionally lurk in finance – with facts. On the other side of the argument, however, the sales person can often point to guaranteed orders from the customer and therefore a definite return.
The decision is generally not that difficult when a company is under short-term profit pressure (as I know only too well), and I accept that much of the wine industry is currently in that position. However I would suggest the problem is exacerbated in the UK distributor sector because of the tendency to be sales, as opposed to marketing, oriented.
The reasons for this may well be the subject of a future post. Suffice it to say here that a surprising number of distributors achieved great success until fairly recently without significant investment in marketing resource, and certainly without developing their own brands. In fact the lack of a marketing culture, which this implies, arguably only really became an obvious disadvantage during the last decade with worsening macro-economics and the onset of the recession.
Those supplying the major retailers, in particular, suffered given a lack of owned brands inevitably meant they had less control over their destiny. They were at the mercy of their principals, or too beholden to their own-label contracts. It also meant that, having nothing to export, they were totally reliant on the UK market.
Marketing is king – or should be
But I think there’s a deeper issue. In my view, marketing oriented companies tend to have clearer strategies and more balanced commercial operating frameworks. These facilitate a more robust attitude to pricing, less reliance on discounting, and more confidence generally in the product portfolio. Such companies also generally have a better grasp of the opportunities provided by new technology and are more innovative.
A buyer once told me that when spirits suppliers presented to him, they focused on the brand, and only mentioned the price at the very end. Wine suppliers, on the other hand, tended to kick off with the price. An over-simplification, I’m sure, but there you have the essence of the difference between a sector within which marketing is king and one in which a sales culture is paramount.
We need urgently to change our culture. When we come out of recession, the companies that thrive will be those who have learnt one of the key lessons of the past five years. The traditional sales driven distributor model has surely had its day. Owning one’s own brands, whilst obviously hugely advantageous, may not in all cases be essential, particularly for on-trade suppliers, but certainly without a marketing culture the tendency will be to continue to focus on volume, and discounting will likely remain the default promotional mechanic.
In my ideal company, sales teams should have to persuade marketers of the need to discount, as opposed to marketers having to persuade sales that there are other options. It may sound a subtle change but, in my experience, it’s fundamental.
Discounting, as well as absorbing cost increases, can become so ingrained in the culture of the company that it becomes a habit. And it surely stands to reason that this is more likely to occur in sales-oriented companies.
More broadly, the lack of innovation in our category and our failure to persuade enough consumers to trade into areas where we can make a return is, I quite accept, partly down to factors outside the control of individual companies. However it is also to some extent a product of our culture and that can be changed.
To exaggerate the point, if one is as suspicious as those Australian cattle farmers were of the benefits of taking a long-term view, and of properly joined-up marketing thinking, then the best we are likely to achieve in our quest to trade the consumer up is the strapline: “Drink More Expensive Wine You Bastards”.
When I was a younger marketer in charge of the marketing side of a famous premium beer in NZ, I’d watch supermarkets discount the 12 pack below $20 at Xmas time. The sales team was under strict orders not to drop their pants so it was the supermarkets that took the hit (though aisle ends and competitions were our support).
The surge in sales was maddening. I describe it to what taking heroin must be like. A surge of pleasure as sales skyrocketed but afterwards you knew (& eventually tracked) that your brand had just become a little less premium in customer’s eyes. You then felt a little disgusted as you knew your job as brand builder had just been undercut.
Discounting is like heroin for a premium brand, pleasurable in the short term, destructive in the long.
Not for large mainstream wine brands though (and there only a few of those vs the large number of SME wineries). It’d just say beware that numbers generally don’t work (volume increase vs margin decrease).
You make a very point here, Bruce, about feeling a little disgusted when one discounts a brand. It is crucial I think one feels that way otherwise it suggests one isn’t aware of what is being risked. As you also imply volume can become addictive.
For volume players in the UK market selling to the off trade discounting is clearly essential.The key though is to think about it strategically as opposed to tactically. At Western Wines, for example, we developed ‘sacrificial lamb’ brands in both the South African and Chilean sectors. These had no pretensions to brand equity and existed merely to protect our core brands, Kumala and Cono Sur, together with our category status with key customers.
This worked pretty well for some time but there is no perfect strategy if you need to grow your profits and are reliant on big mainstream brands for this growth.You can if you are not careful find yourself running faster and faster just to stand still and devaluing your brand in the process.