Some thoughts on the way forward for Independent Wine Merchants.
Whenever I read the results of a survey about the wine business there are always answers that surprise me, or follow up questions I’d like to ask. The recent reader survey in Wine Merchant, the publication which goes to some 700 independent wine merchants in the UK, proved to be no exception.
How viable is an exclusive range?
The first point that intrigued me was this. Is it really the case that only 34% of respondents thought it ‘very important’ to be certain that suppliers are not selling the same wines to nearby rivals or trespassing on their wholesale business? To be fair a further 40% thought it fairly important, but this still implies that 26% weren’t that bothered. If I was running a regional Wine Merchant my ideal would be to have a range that was unique to myself, excepting perhaps at the super premium end, and only deal with suppliers who didn’t embarrass my retailing or wholesaling activities.
Maybe this is a naive aspiration? When it comes down to it is this ideal compromised by the realities of the marketplace: the lack of suppliers perhaps who can offer exclusivity in addition to other key elements of the business mix? Or does it simply depend more fundamentally on the strength of one’s finances or the absence of time to go direct to some producers? Perhaps there is something else going on here that I don’t understand?
Too many producers are over-reliant on generic or varietal success.
Ask anyone in the UK wine trade to name a success story of the last decade and the chances are that Prosecco and New Zealand Sauvignon Blanc would be close to the top of their list.
There is no doubt that both have made a significant impact. There is no arguing with their percentage growth in terms of volume or consumer awareness levels: they are both now major categories in the wine sector. In addition, New Zealand Sauvignon has established itself at well above average prices, whilst Prosecco has achieved a higher status than Cava and is regarded by many as an acceptable alternative to Champagne. No mean achievements.
What intrigues me, however, is whether producers in these regions regard themselves as successful in the UK. Producers, of course, define success in many different ways: one of the fascinations of the wine business being the extent of the variation in people’s success criteria. For example, it is far from being all about money. I entirely accept therefore that one has to be careful when discussing success to define what one means by the word.
However let us make the assumption for the purposes of this piece that financial return (long or short-term) is somewhere near the top of producers’ success criteria. This in turn implies that marketing success must be aligned largely with financial success. After all producers don’t (or at least shouldn’t) indulge in marketing activity which bears little relation to their success criteria. The whole point of marketing is for it to be integral to a producer’s efforts to create or add value, not be some kind of peripheral puff.
Common mistakes made by wine producers when considering their export strategy
In a recent post, “The Quest for the Holy Grail”, I considered the potential for wine producers cutting out the middleman and selling direct to consumers in international markets. My conclusion was that while the potential was significant it was not yet a serious possibility for the vast majority.
Assuming such companies have also ruled out the possibility of appointing subsidiaries in key markets (and for most small to medium-sized producers the costs of doing so are likely to be prohibitive) then this implies that, in the main, they will continue to work through agents and distributors.
As a consultant I have spent a fair amount of time helping producers with their route-to-market strategy in the UK, and I would argue that it is the most complex and least understood element of the marketing mix. Seven common mistakes, or omissions, come to mind.
Ladder branding in the wine business
Back in the mists of time when BMW launched the 3 Series, I can remember reading an article suggesting that this was a serious mistake. By making BMWs more widely available, the argument went, their image of exclusivity would be irrevocably damaged, an image that had taken years to establish.
This came to mind as I read of the launch of Margaux de Chateau Margaux, which represents the third of four rungs in the ladder; below Pavillon Rouge and Chateau Margaux itself and above Margaux AOC. I’ve heard criticism in the trade about this move: some implying they are cashing in on the value of the parent brand, others suggesting that it represents a devaluation of Chateau Margaux’s brand equity.
One thing is clear: neither BMW nor Chateau Margaux will have taken the decision lightly. In the end, the decision on whether to cash in on exclusivity depends on the company’s long-term goals and financial position. Some companies’ success criteria may be satisfied by selling broadly similar volumes every year at high prices; others may decide that their goals can only be achieved by broadening their customer base, even if this means that their premium image is put at risk.