Increased competition in the off-trade, the growing power of the world's supermarkets and an oversupply of wine in key producing regions are making the on-trade an increasingly attractive sales channel. just-drinks listened to speakers at this year's Wine Evolution conference highlight the opportunities and pitfalls in this high potential arena.

The UK still sells some 80% of its wine through the off-trade channels. However, the on-trade has been the focus of some significant activity in the last 12 months. Producers of the scale of Gallo, Southcorp and Lion Nathan have all reorganised their on-trade arrangements, with a renewed focus on the sector. A sales channel traditionally dominated by French and Italian products, it is suddenly the talk of the New World as salesman eye the potential volumes and margins on offer.

"The competition in the off-trade is so intense, that the on-trade is much sexier than a few years ago," said Hew Dalrymple, marketing and sales director of the UK's largest on-trade wine distributor Waverly, at the Wine Evolution conference in Paris earlier this month. "The move to New World is much slower in the on-trade; 70% of wine is still Old World, but the growth rates show the New World is catching up."

Much of this growth - and without doubt the growth which is exciting New World producers - is coming from a slow acceptance of brands in the on-premise market. However, it is a trend that still sits uneasily with many producers and retailers alike.

The position of brands within the on-trade is still massively under-developed. Only four or five years ago the on-trade, as a rule, was violently against any branded wine. But changes within the sector, in particular the emergence of managed chain-bars, have begun to alter that perception.

"There is no simple answer," said Dalrymple, on the position of brands in the on-trade. "Independent restaurants still want to select their own wines because they want a point of difference with the supermarkets. "In the middle, you have outlets with one or two brands to act as an anchor to nervous consumers."

He continued: "There is a role for brands in the on-trade and each outlet has to make up its mind. We will see more brands in the future."

That said, Dalrymple urged the industry to look to trends within the off-trade - where brands now dominate. "To understand the on-trade, look to the off-trade because that is what the consumer is used to. Brands should be better represented because they reassure consumers."

The reluctance of many outlets to stock branded wine is but one of the hurdles producers need to cross before a level of success can be achieved. And though lessons can clearly be learnt from the off-trade, the speakers at Wine Evolution made it clear this is a very different animal.

Chief among the problems wine faces is the seemingly poor focus it receives from outlets themselves. "Not all Horeca outlets offer what consumers want," said Dalrymple. "Thirty percent are stocking only one or two wines, another third only five. Nearly half review their range only once a year. Australian wine is a bigger category than gin in the UK, but half the outlets don't stock it."

Furthermore, according to Waverly, of those outlets that do stock wine, 17% keep it out of sight, 16% display end on, two-thirds don't advertise their range and only a quarter offer a chance to trade-up.

Stéphane Rein, of the sales and marketing service provider, Skalli & Rein, concurred. "At the restaurant level, there are supply-linked hurdles," he says, which, according to Rein, include weak marketing strategies to foster wine consumption, a lack of waiter/consumer communication and poor wine knowledge by waiters.

However, he also went on to highlight problems elsewhere in the chain. "At the distribution level, despite large on-site sales forces and excellent logistics, distributors often have limited marketing budgets and have long focused on the off-trade.

"The on-trade market needs to be better analysed and communication between restaurants and customers needs to be fostered at a time when marketing budgets are only dedicated to the off-trade.

"In the off-trade, marketing services are provided by the chains and offered to the wineries in order to communicate with the final consumer. In the on-trade, however, marketing services come from the winery and target the restaurants directly, thus by-passing the consumer."

Marketing is such a key component in the off-trade, that it seems extraordinary that as a tool it is almost completely forgotten when selling to on-trade consumers.

"The distributor should not only be a relay, but also a marketing partner for wineries," said Rein. "To do so, distributors must deploy mixed marketing strategies: organise targeted communication campaigns to create brand visibility; better manage and regularly update restaurant wine lists, insert brand logos on wine lists; develop targeted programmes and innovate."

The possibilities, when producers, distributors and outlets work together, is demonstrated to a degree by the success of Italian wines in the US, where Italian restaurants have become standard bearers for the Italian category.

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Ettore Nicoletto, of the Santa Margherita Group of Italy, also addressed the conference and said: "Italian restaurants are widely spread in the world and have been used in the past as fine wine distributors. They can still be used as a driver for our success. In the US, Italy means good food and restaurants could be used as luxury showcases."

He added: "Most important was creating brand ambassadors for the wines. Restaurants and sommeliers cared about what they said about your wines while you weren't there."

In the end, though, it is the consumer who makes the final purchase and ultimately decides whether your business is a success or not. No matter how well developed your route to market is, like all FMCG categories, the needs of the consumers should be the primary focus. Unfortunately it is a level of marketing sophistication still lacking in much of the sector.

"Our range is built up around the understanding of the consumer," said Dalrymple. "We have identified six different types of consumer: the easily pleased; the enthusiast; the connoisseur; the adventurer; the entertainer; and the Chardonnay girl.

"Our experience in the UK has shown that the starting point is the consumer, not the wine. Once you understand the different types of consumers, you can tailor your offer to the segment of the market that you are targeting. If you deliver an authentic experience in an easy way, you will grow your sales rapidly."