UK: A "bloody" Christmas in UK - Constellation Europe CEO

By | 1 October 2008

The CEO of Constellation Europe has warned that the alcoholic drinks market is facing a "bloody" Christmas in the UK.

Speaking exclusively to just-drinks last week, Troy Christensen said he felt the UK drinks market was approaching "an inflection point", whereby both the on- and off-trade "are going to struggle with the existing business model in the next year or two".

Drinks producers operating in the UK have had a torrid year so far with duty increases hammering both the on- and off-trade, while the smoking ban has hurt the former and continued aggressive pricing by retailers affecting the latter.

"It's probably (approaching) an inflection point in the UK," Christensen told just-drinks. "We're going to see some of the weaker players fall out, in the on-trade in particular. You'll see people restructuring their businesses to accommodate the new market dynamics, and then we'll see what happens."

When asked about Christmas trading in the UK, Christensen warned that "it's going to be bloody".

"It'll be another very hard discounting Christmas. We (Constellation Europe) recognise that, but long-term, we're trying to figure out how to get the consumer more interested in GBP5 to GBP10 wines. I know the retailers would love that as well, but right now it's a battleground.

"Maybe the market's a little irrational, but markets can stay irrational a lot longer than you can stay solvent, so you have to play the game in the short-term.

"If the market continues the way it is, particularly in the on-trade, I think you will see people begin to question their business model and what else they can do to try to realign the business because, if this is the new world, you can't run things the way you did in the old world, because you're not going to make any money."

Since taking the helm at Constellation Europe at the beginning of last year, the unit of Constellation Brands has looked to emphasise its brands in the UK, veering away from its reputation as a brand-driven wine company.

"For us, we want to build brands more than we have in the past," Christensen said. "We understand there's a commercial reality and you have to play a little bit, but we're not going to play at the level that damages our brands. We think in the long-term that's what we're going to have to do."

Reflecting on the higher potential for wine in the US, Christensen said: "We can't just keep talking to everyone in the UK on price. If you're just driving on price, we're going to end up being like Germany, and not like the US."

Christensen was talking just-drinks at the sidelines of the Cape Wine trade event in South Africa last week.

Sectors: Wine

Companies: Constellation

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It is now more than a year and a half since Troy Christensen took the helm at Constellation Europe, the European division of the world’s biggest wine company. Given the current state of the European market, and the UK in particular, to call this a tough assignment would be something of an understatement. In this month’s just-drinks interview, Christensen spoke with Olly Wehring about how Constellation is addressing the most trying of market conditions.

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