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Our regular wine commentator, Chris Losh, is trapped under something heavy this month. Stepping into the void, however, is Richard Siddle, equally well-versed in all things wine. And, Richard has a thing or two to warn the traditional wine trade about.

If you were looking around the drinks industry for the most disruptive sectors, then wine wouldn't be up there as one of the bookies favourites. Indeed, the fact that many wine companies still see themselves as operating very much in a 'trade' rather than an 'industry', reflects how safe and traditional the sector is.

At least, that's how one half of the wine category sees itself, specifically, the identikit wine companies that have been sourcing, importing and selling wine to a largely-similar customer base for years. This includes the raft of wine agencies and distributors that serve a network of independent and specialist wine merchants and leading restaurants, bars and hotels. This is the wine trade that lives and breathes by hosting trade tastings, dinners and masterclasses; where business is done as much by who you know, where you have come from, and who you are connected to, rather than the harsh, commercial reality of how good your wine is and what it's in it for others to sell it for you.

There are simply too many safe, similar companies out there trying to sell wine

It's also the part of the wine industry - sorry, trade - that is in worrying decline, if only the companies themselves realised it. This is the sector that is haemorrhaging sales due to the fact that there are simply too many safe, similar companies out there trying to sell wine.

The backdrop to all this comprises wine consumers who prefer to use their local supermarket, discounter or favourite online price comparison app to stock up. All these channels are being supplied by a very different kind of wine company.

Whilst it is fast-becoming the worst of times for the traditional wine trade, it is conversely the best of times for the new, hip-and-happening wine industry that has emerged around it; one that is more in tune with the dynamics of the big-brand, FMCG, grocery and hospitality sectors. 

In the bellwether market of the UK, the wine businesses that are in serious growth are the ones helping to source, ship, and create wines for operators who all have one thing in common: An insatiable thirst for wines and wine-based drinks that these operators can put their own name to - wines that are not only exclusive to their businesses, but are 100% tailor-made to the needs and desires of their customers.

Private label is hardly a new concept, but what this half of the UK wine industry has been incredibly astute at offering are new. tertiary brands that look and feel like a household FMCG brand, but with a difference: They are actually owned by the retailer or restaurant group that has commissioned it. In a sector like wine, where brands are so less powerful and influential, retailers are taking the advantage.

Supermarket tertiary brands are dotted all over the UK's top 50 selling wines and make up half of the top ten in sparkling wine (Nielsen, 30/12/17). This latter stat, for example, is thanks to the lack of brand power in Prosecco that still dominate sales.

But, these are not wines that retailers have gone out and found themselves. Instead, they are working with their tried, tested and trusted 'A-Team' of suppliers to do that for them - suppliers that work so closely with supermarket wine departments they have dedicated members of staff per chain.

All of this has serious on-going ramifications for major wine brands. We have already seen how even the biggest drinks brands, be it Heineken or Casillero del Diablo, are not safe if a major supermarket thinks it can offer a viable, equally-compelling private label or tertiary brand alternative.

And, these wine businesses have not just been created overnight. They are mostly modernised versions of what were very different companies five or ten years ago. This time around, they have seen the light and realised the traditional way of doing things was heading for the nearest cliff.

If that was the bed-and-breakfast approach, they are now offering the full weekend break, complete with meals, spa and five-star service

Leading the way are the traditional bottling companies that used to act purely on a contract basis, packing different customers' wines - including supermarket own label - for them. If that was the bed-and-breakfast approach, they are now offering the full weekend break, complete with meals, spa and five-star service.

These are businesses that can source the wine, bring it from the other side of the world in bulk and then create the brand their customer wants, tailored to that customer's needs. They can help create and design an eye-catching, relevant label, pack it in whatever bottle, box or pouch the customer wants it in, and then send it out directly to stores, restaurants or hotels.

This is the new Motown approach to winemaking - where the same wine can be tweaked, remixed, reformatted, repackaged and released as a completely different wine to sit on another part of a retailer's shelf or restaurant's wine list. Rather than simply help promote and sell a major branded wine, retailers can now take their share of that business by creating brands of their own.

All of this is being driven by the huge advances over the last five years in the reliability and quality of the bulk wine that is at the heart of these operations: Wine that can be sent over in huge volumes, in flexitanks, and bottled when needed, in-market, in facilities close to the stores and restaurants where they will end up.

And, it's not just the big supermarkets and restaurant groups that are profiting from this new approach, but the wine businesses themselves. Look at the sales and growth figures of the big UK bottling and main supermarket suppliers. They have all at least doubled their sales and profit figures in the last few years.

This is the part of the wine industry that is booming. It's also the most disruptive, innovative and fast-changing. Because it has to be. It is where wine companies are actually paying for consumer insights and using it to make data-driven decisions.

It is the part of the industry that is bringing in new skills to a sector that has traditionally only looked to itself for answers. Yet, still, so many of the traditional wine trade companies look down their noses at those on the 'industry' side of the business.

Which makes their demise even more telling.


Sectors: Wine

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