After nearly 20 years of working in the beer and spirits categories, Andrew Carter pitched up at Treasury Wine Estates (TWE) last year charged with leading the group's Europe, Middle East and Asia region. Travel Retail also falls under his remit. So, how's he finding the challenge? just-drinks' deputy editor, James Wilmore, caught up with him at ProWein in late-March.

just-drinks: You've been in the job for around a year. What do you see as the differences between this role and your last job at Bacardi as travel retail MD? 

Andrew Carter: I did eight years of spirits and, from a business model, I see three big differences with wine. First is, wine is an agricultural business. There is a limited amount of supply and you need to manage that. Second is - from a consumer perspective - there are very few established brands. It's very fragmented, whereas spirits is increasingly consolidated around fewer brands. And then, third, the cost of producing wine is a lot higher, relative to the price you sell it. From a business model perspective, it leads to a different way of marketing brands. It's a very exciting industry, as it's so fragemented. 

j-d: In TWE's last set of results, volumes fell in your region. Why was that? 

AC: Yes, in the first half volumes were down 9%. The key reason for that is we took the decision to walk away from unprofitable volumes, in particular, in retailers across Europe, where brands were being sold on promotion and were ultimately loss-making. If you take out that volume, then we're in pretty strong growth. On a like-for-like basis, we grew in the UK by 9%. We have no desire to be in an unsustainable volume growth position. 

From a brand portfolio view within EMEA, we want to be the number one premium wine company. We want to in the GBP6-plus (US$9.30) bracket, in Europe EUR5-plus. That's where we want to play and that's the model we need to follow.

j-d: Do you think people are buying into the premiumisation strategy? 

AC: The reality is that a huge part of the volume, around 85%, is in the GBP4 to GBP6 bracket in the UK, and that's replicated in European markets. But, what we're increasingly seeing is the top part of the market is where the growth is coming from, and that's where we want to play.  

j-d: Is Europe your biggest concern?

AC: The UK market takes a lot of stick, but the reality is we are seeing a lot of growth in the UK. For us, it's a successful region, we have strong relationships with retail partners: Our 'Impulse' business is growing at 14%.

In Western Europe, we've seen tax changes, across Denmark and Netherlands, so we are seeing a readjustment there of price points and segments. But, Lindemans is still the number one brand in the Netherlands.

One of our challenges is in the Nordics. And the reason for that, we are seeing an Australian category that is currently in decline. 

j-d: Why is the Nordics region in decline?

AC: I think it hasn't had enough focus over a period of time, so it has translated to other countries of origin, in particular Chile is doing more and winning more listings. I don't think, in terms of share of voice, we have spent as much as we have needed to. We have an exciting programme going forward to address that across innovation and the work we're doing with Wine Australia.

j-d: How do you feel about the rest of your regions? 

AC: The central (Europe) and emerging markets are quite a small part of our business, we're only selling half-a-million cases across Central and Eastern Europe, so we need to start establishing key distributor relationships. It's a growth area going forward. Likewise, the Middle East and Gulf and parts of Africa. That's more a three- to 10-year play, but it's a growth play. 

j-d: Are you concerned about the UK's duty sitiuation in light of the recent Budget?

AC: Along with the (wine and spirits) industry, we think the whole duty escalator apporoach is the wrong one. I was surprised and disappointed that beer was singled out. I'm not entirely sure it's the right legal approach.

j-d: So, you think it could be illegal? 

AC: I think potentially, and that is something the Wine & Spirits Trade Assoication is currenty looking at. To single out beer, it's nonsensical. It feels like a political move rather than a move that's in the interest of the industry. It's a headline-grabber and that's what it achieved. 

j-d: Turning to Travel Retail, what did you learn at Bacardi that you have transferred to TWE?

AC: Travel retail for me is fascinating. It's a very exciting growth area. We talk about airports, but they're no longer airports, they are 'air towns'. They are retail for people on the move and are crucial for brand building and as windows for luxury products.

There's two reason for me why we're pushing at an open door with wine. At shopper level about 50% of shoppers buy for gifting. If you are giving someone the opportunity to buy a very good bottle of wine as a gift, you're already in a good place.

j-d: Where do you see the Australian category's status in the wine world? Is it a challenge still getting retailers excited? 

AC: To be honest, it's not a challenge. Australia is very important for a scale perspective - it's 10% of the UK wine market and is very vibrant in emerging markets. In more mature markets, Canda, US, the Nordics, we have to re-energise. Regions like Portugal, Chile, Argentina - they are doing a good job to promote their regions, so we have to do it at the same level. 

j-d: Are you looking at any innovations around packaging? 

AC: Yes. We constantly look at innovation around bag-in-box, particularly in the Nordics, where that's a big part of the market. We are loooking at innovations around bottles and the materials we use for labelling. Innovation is an area wine needs to do more of.

j-d: Do you expect more consolidation in the industry?

AC: Yes, I think consolidation is inevitable. Whenever you have the top eight players accounting for something like 10% of the global market, inevitably there will be more consolidation. From a TWE point of view, we are open to looking at that and looking at possibilities for future growth through acquisitions - that's something that's clearly on the agenda. 

j-d: What market is the biggest opportunity going forward in EMEA?

That's a tricky one. I think ultimately the UK remains the biggest volume opportunity. But, from a poinit of view of future growth across the region I think the biggest opportunity is to carry on growing the fine wine and luxury wine market. That's a very important part of our strategy.