The Losh Cause
By Chris Losh | 23 January 2006
While some big wine brands have looked to build an on-trade presence in the last couple of years, the emphasis remains on gaining and retaining major supermarket listings. Chris Losh expects this to continue, which may mean big wine groups discarding some of their smaller labels over the next year.
News from Oz that the Foster's Group (and it still feels odd to use the F word when writing about wine) plans to get shot of a couple of wineries may have been pounced on by the press, yet it remains, as far as I can see, very much a non-story.
When Beringer Blass wolfed down Southcorp there was always likely to be some overlap of assets, and it makes sense to close a couple of production facilities if there are more modern alternatives nearby. There's little room for sentimentality in the wine industry these days, especially in Australia.
It would be more of an issue to see them binning a few labels. The company currently has five big names - Wolf Blass, Beringer, Rosemount, Penfolds and Lindemans - and about 15 small- to medium-sized labels. There's no sign yet of any rationalisation of the portfolio, but even though the Foster's Group wine list is pretty trim, I would still be amazed if all these labels were still around in two years' time.
If you want a reason why, it could be found in the just-drinks pages at the tail end of 2005. The demise of UK off-licence chain Unwins is proof that the glory days of the independent drinks retailer are gone. Majestic (considered by many the best of the lot) may have had a successful Christmas, but its growth was slower than for the same period the previous year, and the high street (or Hauptstrasse or Gran Via - this isn't a purely UK trend) remains a tough trading environment.
All of which means fewer places to sell, more pressure on small producers and more power to the vulpine supermarkets. It would be refreshing to see a winery follow the example of Grolsch and simply cease trading with a retailer who it thinks is attempting to grill its testicles and charge it for the privilege. But, depressingly, I can't see that happening.
Beer brands are far bigger and more global than wine labels, with correspondingly higher consumer recognition, and there are, of course, far fewer of them. If Grolsch disappears from the supermarket shelves, beer drinkers will notice. But even if a label the size of Gallo checked out of a major multiple grocer, I think the overwhelming majority of consumers would simply shift their attention to the nearest available BOGOF (buy-one-get-one-free), such is the disloyal wine culture that has been created by wineries' mania for listings at any price. In this culture, wineries are far better at complaining about the deal they have just signed up to than preventing it from happening in the first place.
And it's the attraction of better margins that has driven such a lot of talk over the last two or three years about 'cracking the on-trade'. Alas, most of the time, it remains just that - talk, borne out of disillusion with the off-trade, rather than any genuine commitment to the on-premise market.
And that's because most (particularly New World) wineries have grown on the back of big off-trade listings. Want to go from zero to half-a-million cases inside five years with a tiny sales staff? You won't do it by selling five cases a time to restaurants, but you can do it with two or three big off-trade accounts. And once you embark on that sales strategy, you're locked into it. You can't afford to lose a big listing because the chances are the wine will remain unsold.
Which is why it's very much to the credit of the Australians that they have spent the last couple of years not just talking about the need to build a broader on-trade base for their wines in the UK, but actually trying to implement it.
And on one level, their results have been impressive, with on-trade sales growing at around 20%. The trouble is, though, that the vast majority of this has been in bar and pub chains rather than in restaurants proper. And in such outlets the dynamic of 'high volume plus promotion' probably owes more to the supermarket than the sit-down eatery. Consumers at All Bar One want the same labels that they see in Sainsbury's, which means brands, rather than small producers they have never heard of.
More and more, it seems, the on-trade is simply an extension of the off-.
Which is why it wouldn't surprise me to see Foster's - and their various rivals for that matter - drop a few smaller labels inside the next 12 months. Whatever the trade might think, wine is a business, not a charity, and if the customers want more and more big brands, then that is what they will get.
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