Comment - Wine - Off-Trade a Turn-Off for the On-Trade

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The barrier between the on-trade and the off-trade for wine companies is so high as to be insurmountable. But, Chris Losh argues, its very presence is blocking a lucrative opportunity.

At the London International Wine Fair last month, I tasted a range of South African wines that were well-priced, interesting and food-friendly. They were, I suggested to the export manager, the kind of wines that restaurants would kill for.

"I agree," he sighed. "But we can’t find a way of getting them into the on-trade. We can’t get wholesalers to look at them because they also sell on the high street."

To be clear, these were not wines with a ubiquitously recognisable brand-name behind them. Nor, at GBP10 (US$15.50) to GBP15 on-shelf, were they lacking in prestige. But still, their very presence in the multiples was enough to rule them out of any listings in restaurants.

All of which made me think: Why exactly do restaurants have such an aversion to wines that are available in the off-trade? Is it a situation that’s likely to change? And what do the wine buying public think of it all?

On one level, the on-trade’s dislike of stocking widely-available wines is both obvious and logical. It’s not in a restaurant’s interest to draw attention to the fact that it has to make a profit of between 70% to 80% on each bottle of wine it sells. A shot of spirits might be more heavily marked up, but the unit cost is still relatively low. For wines bought by the bottle, the difference is large and obvious.

So far, so common sense. Yet paradoxes abound. 

Penfolds Grange, for instance, has been fairly widely-available in supermarkets over the last decade, yet this hasn’t affected its position as a favourite trophy wine on restaurant lists.

The same goes for pretty much every grande marque Champagne brand and a good number of Ports and Sherries as well.

The public aren’t stupid. They know that things cost more when they eat out, and it’s hard to see why they would have a problem with visible mark-ups on wine, but not on, say, fizz, Coca-Cola or steak.

The antipathy to off-trade wines, though, is not purely about pricing: it’s about differentiation, about identity.

"Why would you put a [supermarket-available] wine on your list?" says Gerard Steyn of the Malmaison group. "People can already drink it at home. You want to be unique."

It’s hard to argue with such logic, and Steyn’s viewpoint is widely held. Though, again, there are inconsistencies. 

While few eateries are prepared to stock ‘mass-market’ brands, many are happy to use the same one or two suppliers, meaning the same wines can appear in two very different outlets on the same street. Uniqueness, then, is important. But not always as important as convenience.

The other key issue is public perception. Most outlets with aspirations of quality feel uneasy about selling big-name brands in case they send the wrong message to diners. 

Steyn’s view that diners would ‘look down their nose’ at a recognisable off-trade brand on a wine list, is, again, a common one in the on-trade. But, perhaps surprisingly, it is not borne out by market research group, Wine Intelligence. 

According to their survey of around 1,000 regular wine drinkers last year, 91% were either positive about or unconcerned by the idea of seeing ‘wine brands that you recognise from shopping in the supermarket when ordering wine in a casual restaurant/bar/pub’.

The word ‘casual’ here is important. There’s clearly no place for Blossom Hill blush on the Ivy’s wine list, for instance. And it is possible that consumers are saying one thing in a survey, but acting differently in real life.

But it’s also possible that the on-trade is more worried about public perception (whether real or imagined) than it is in making life easy for its customers.

"The lack of recognisable names on a list disempowers consumers because they have no information on which to base their choice," says wine writer Jamie Goode.

The result? Customers gravitate to de facto ‘brands’ like Chablis, Sancerre, Pinot Grigio and Rioja; safe areas where restaurants habitually (some might say cynically) extract the highest margins.

It’s not, it has to be said, a situation that seems to be working in favour of the consumer.

There are, I would suggest, two problems here. 

One is that, although the on-trade is vast and wide-ranging (120,000 outlets covering everything from pub and bar chains through golf clubs and hotels to cocktail bars and Michelin-starred eateries), the approach to wine across this spectrum changes relatively little – and certainly less than it should.

The gatekeepers at a modest Italian trattoria or unprepossessing three-star hotel still talk about their wine offering as though they are pushing for a Michelin star, and about their customers as though they are wine experts.

The second problem (as I discovered while writing this column) is that there is a real dearth of research in this area, with the Wine Intelligence 2011 report something of a lone voice. 

Customers’ likes and dislikes across the on-trade’s myriad sectors remain largely opaque, and as a result, it’s perhaps no surprise that buying decisions tend to be based on empiricism and entrenched beliefs as much as hard fact.

It’s the reason why great wines such as the South Africans I tried last month, don’t get a look in, but a gazillion bottles of indifferent Chablis, Rioja and Pinot Grigio do. It’s a situation that does no-one any favours.

The on-trade needs more information. And it needs to have the courage to act on it if necessary.

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