UK: E&J Gallo cuts back on discounting to push value sales
Wine firm E&J Gallo has said that it expects to grow net sales in the UK in 2009 but will cut back on volumes by taking part in fewer wine discount offers by retailers.
Gallo said today (7 April) that it is confident of growing value sales in the UK this year, despite pressure on the wine market due to recession.
The California-based firm added that it has completed its restructuring programme in its European markets, which has resulted in around 50 job losses, predominantly in the UK.
Marketing director for Europe Iain Newell said that Europe "remains key" to Gallo's long-term business outside the US.
Nick Elkin, sales director for Gallo in the UK, its largest European market, said that the group is willing to sacrifice volumes in a drive for higher value, which will include selling more wine "outside of promotions" in the UK's multiple retailers.
Profit margin figures for the UK wine sector show clear advantages in moving to a price range above GBP5.99, even as consumer spending power drops, Elkin and Newell said at a presentation in London today.
Margin after duty, value added tax and retailers' cut on a bottle of GBP3.99 wine is around GBP0.86, while this rises to GBP2.68 on a bottle priced at GBP5.99.
Newell told just-drinks that Gallo will maintain marketing spend this year at 2008 levels. He declined to put a figure on the amount, but said that the firm will switch its focus to point-of-sale advertising, rather than television campaigns, such as the group's sponsorship of Gordon Ramsay's F Word show last year. The F Word deal reportedly cost Gallo GBP2.5m (US$3.7m).
Newell outlined a three-pronged attack on the UK market for this year. This will include continued support for the Gallo Family Vineyards brand, the promotion of Turning Leaf as a standalone brand and the introduction of Redwood Creek as a premium wine.
Redwood, which sells 2m cases in the US and has been available there for eight years, will carry a recommended retail price of GBP6.99.
Among other Gallo marketing campaigns set to run this year will be a roadshow bus tour, beginning at the end of spring.
A Christmas surge helped Gallo UK grow its core wine portfolio by 0.4% in volume and 2.4% in value last year, the group said in February.
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