Deep discounting has ‘muddied water’ in UK10th March, 2014 by Lucy Shaw
UK wine distributor PLB’s new managing director John Osborne believes the deep discounting culture in supermarkets has “muddied the water” in the UK.
Speaking exclusively to the drinks business at the PLB tasting in London last week, Osborne said: “The need to be competitive has driven the discounting culture in the UK and has led consumers to be more confused than ever about wine.
“The stigma of shopping at a discount store no longer applies in the UK – people are proud to be getting a bargain – it’s fashionable to be frugal.
“But consumers equate quality with price so deep discounting in wine has muddied the water and has conditioned consumers to buy at half price.
“The trade has held onto the idea of selling wine at under £5 for too long. We’ve finally broken the £5 barrier in terms of the price of an average bottle of wine in the UK but the mentality remains.
“Over 50% of the wine we at PLB sell in the UK is under £5 – it’s a very important part of our business as 80% of our business is with supermarkets.”
Osborne was also vocal about the architecture of the UK wine market, labelling it “imbalanced” and said that the current duty model in Britain “wasn’t working.”
“With over 80% of wine sales coming from supermarkets coupled with the deep discounting culture that still prevails, there is too much focus on price at the moment.
“The current duty model isn’t working in the UK as it’s pushing wine away from being a value proposition. Deep discounting also needs to be phased out,” he said.
“The average consumer doesn’t understand duty – they have no idea that more than half the cost of a £5 bottle of wine goes on duty, nor should they,” he added.
One supermarket Osborne believes has got its wine offering right is Aldi.
“Aldi has done well in its business model as it has pushed the likes of Chablis Premier Cru and Barolo to create a strong image of “Brand Aldi’s” wine offering and has managed to attract more premium shoppers off the back of it,” he told db.
Hel also believes own-label wines have done a great job in encouraging consumers to trade up.
“The likes of Tesco Finest and Sainsbury’s Taste The Difference have given consumers the confidence to experiment with grapes they’ve never heard of.
“They’ll impress their friends by taking a Falanghina they have never tried to a dinner party because they trust the own-label brand behind it,” he said.
Osborne took the helm as managing director of PLB on 1 January, taking over from Peter Darbyshire, who remains on the board as a non-executive director.
Having joined PLB in 1997, Osborne has held a number of roles within the company, including supply chain co-ordinator, national account manager and, most recently, sales director.
Osborne told db that he was currently “reviewing how PLB’s competitors are positioning themselves within the market”, and that he is due to unveil his vision for the company in “a couple of months”.
In terms of Osborne’s aims as managing director, he will be focusing heavily on the on-trade this year and believes PLB needs to manage its brand better to get away from the image that it is a “large scale supplier of own-label brands to the supermarkets.” “There’s more than meets the eye,” he said.