Focus - UK: Pernod Ricard's plan to lift Jacob's Creek

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Jacob's Creek faces a crucial year in the UK as owner Pernod Ricard looks to arrest a sales decline and lift the brand to a more premium platform.

Fresh marketing campaigns, as yet unspecified, and planned product launches with more emphasis on regionality are set to make 2010 a critical year in Pernod Ricard's strategy to drive value on Jacob's Creek in the UK.

"We're looking to create a lot more noise around Jacob's Creek," Phil Laffer, Jacob's Creek head winemaker, told just-drinks during a visit to the UK this month.

Jacob's Creek exemplifies the story of Australian wine on the UK market as well as any brand.

It helped Australia rise to the top of the UK wine market with via the brand's lucrative sponsorship deal with UK screenings of 'Friends', the highly popular US sitcom.


But more recently, Jacob's Creek has followed its country of origin onto the sour side of the wine sales curve in the UK.

Stagnant results in Pernod's fiscal year to the end of June 2009 have been exacerbated by ongoing recession.

Global Sales of Jacob's Creek fell by 10% in volume in Pernod Ricard's fiscal half-year, the six months to the end of December. Like-for-like value sales fell 6%, as "sharp decline" in the UK offset growth in the US, Australia and China, Pernod said last week.   

Pernod's "value strategy" on Jacob's Creek involves launching and expanding ranges such as Jacob's Creek Reserve, Three Vines and Sparkling, while also refusing to participate in quite so many discount promotions in multiple retailers.

Laffer said that Jacob's Creek has evolved to more elegant styles, after the rush of big, heavy, oak-driven Australian wines in the previous decade. 

Success for Pernod will depend on how strongly wine consumers strive for premium price points.

In its UK wine market report, market research group Mintel said last year: "The main problem is that wine has not been able to achieve its goal of trading consumers up to better quality and more expensive wine, something which would off-set the slow decline in British drinking."

It put Jacob's Creek as the fifth largest wine brand in the UK off-trade, with a 2% value share, or GBP85m, of the market. Hardys, produced by Constellation, sat top with a 4% share, worth GBP190m.

There is growing consensus in the wine trade that supermarket discounting, wine duty tax rises totalling around 20% in the last two years and economic recession have made the UK a difficult place to make money.

A spate of job cuts in the UK, including 20 posts at Pernod Ricard's UK business in 2009, bear witness to this.

Mintel forecast that UK wine sales will fall by 2% in value up to the end of 2013, compared to a 4% rise in volume, due to the "inability to premiumise".

For Pernod's price plan, surely this presents a problem?

"It won't be easy, but what's the alternative," Laffer told just-drinks.

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