The UK remains high on wine companies agenda

The UK remains high on wine companies' agenda

Is it time to put a cork in the UK wine market and seek a fortune in The Orient? just-drinks' State of the Nation debate at this week's London International Wine Fair sought answers from some of the wine industry's leading lights.

Rose-tinted spectacles are in increasingly short supply in the UK, it seems. For the first time, a majority of wine professionals surveyed by just-drinks ahead of this week's London International Wine Fair (LIWF) have said that the UK is no longer the world's most important wine market.

North America, Scandinavia, China and even Russia are generating more excitement among those faced with high duty tax, severe discounting and a fragile economy in the UK. But, is it really all so sour?

"It's tough," said Dan Townsend, the general manager for Treasury Wine Estates in the UK and Ireland. Talking about profitability in the UK at just-drinks' State of the Nation debate, he said: "We've gone from between average to low to somewhere between low and not very attractive at all. We can strip out all the costs and we are still left with a low margin environment."

Townsend said that duty gives him sleepless nights and that the UK's discount culture is a problem. "We're a nation of deal junkies," he told the audience.

Wines of Chile's UK chief, Michael Cox, would like to see more consumers made aware of just how much duty tax they are paying on wine. "Retailers should put on bottles how much they are paying in tax," he said.

The panel at just-drinks' State of the Nation debate at this week's LIWF
From left to right: Tim Wilson, Jamie Goode, Michael Cox, Dan Townsend, and editor Olly Wehring.

Cox is also big on improving communication with consumers. "We are not giving consumers enough reasons to pay more," he said. "We have many people in this building who are passionate about wine but who can't communicate that to consumers."

A show of hands at the debate revealed more optimists than pessimists in the audience, but only by a whisker.

Picking up on this sliver of hope, all on the panel highlighted that there are still positives in the UK. For one thing, there are a lot of people who drink wine, as wine writer and blogger Jamie Goode noted, by pointing out that total UK wine sales are worth around GBP10bn (US$16.2bn) per year. 

"There's still an opportunity here," said Cox. "Get the right importer and you can still make progress." Townsend said that he sees "encouraging signs in the premium category". Wines priced between GBP7 and GBP10 are in growth, albeit off a small base, he said.

Tim Wilson, who produces the Wilson Drinks Report, highlighted that sparkling wines are showing particular promise in the UK. "Sparkling wines are looking good for 2011 and I think that will continue," he said.

However, there remains some friction between the trade and multiple retailers. "Tactical brands should be made illegal," said Goode, referring to the alleged practice by which some retailers buy in cheap wine and inflate the initial selling price, before offering it on discount as a deal for consumers.

Outside of the debate, the view from the floor across LIWF was that, while the UK is tough, it remains an important place to be.

Grupo Codorniu's MD, Nick Mantella, took a tougher line. "A lot of people are scared of the UK or they think they can make more money elsewhere," he told just-drinks yesterday (19 May). "Yes, it is very competitive, but frankly it always has been. It's never been easy," he said.

Julio Martins, exports director at Sogrape Vinhos, said: "We complain, but we still understand that it's a very important market. Most of our innovations come to the UK."

There is, then, a will among many major players to make the UK work. But, the question of how to make it work better is proving more difficult to answer.