UK retail goes upmarket

The UK retail market is moving away from the cut-price wine that was its benchmark for years, with supermarkets looking to entice consumers into buying more premium offerings instead. Arabella Mileham investigates.

Feature Findings

> The steady encroach of discounters such as Aldi and Lidl has prompted a reassessment by the established
retailers in terms of ranging, strategy and pricing.
> Australian Vintage’s Julian Dyer dismissed claims of discounters attracting consumers on price alone, saying: “In some cases it’s a strong value proposition – good quality wine at a very good price.”
> The Co-op has started to build up its overall range again following a big cutback last spring, and Oddbins is
taking a punt on natural wines.
> In the spring, Tesco and Sainsbury’s bolstered their premium own-label ranges as part of range reviews.
> New formats have become popular, with Aldi, for example, offering a Jeroboam of Prosecco.

In the past year, there have been seismic shifts in the UK retail scene, from the inexorable growth in market share of the discounters to the volatile exchange rates following June 2016’s Brexit bombshell.

Set against the well-rehearsed range changes over a number of years, big grocery retailers have been forced to evolve dramatically to meet the challenges of a shifting landscape.

The steady encroachment of the discounters has prompted a reassessment by the established retailers in terms of ranging, strategy and pricing. Helen Stares, client team manger at Nielsen, says all of the big four retailers – Tesco, Sainsbury’s, Asda and Morrisons – are losing market share overall as the discounters continue to drive sales.

Together, Aldi and Lidl now comprise around 12% of the overall grocery market (overtaking The Co-op and Waitrose to become the fifth- and seventh-biggest supermarkets respectively in the UK), with market analysts expecting this to increase even more over the next few years.

Both discounters have used headline-grabbing, time-limited wine offers to tempt customers into stores, and the launch of Aldi’s online wine platform in January 2016 has been used to tempt customers from outside of its core heartland as it looks to bump up its store estate.

As Aldi’s wine buyer, Mike James, points out: “Even if they are only window shopping, it gets the range from Aldi into the psyche more, and people who haven’t been in store will get the message anyway.”

According to Stares, the main challenge is price. “The big retailers struggle to compete here, and while shoppers know the discounters don’t have the breadth and depth of range that the big retailers have, they are willing to accept this in return for lower prices.”

Ayo Akintola of Oddbins

But is it just about price? Julian Dyer, general manager of Australian Vintage, argues that it does the discounters a disservice to dismiss the ranges as “just a cheaper value proposition and nothing else.

In some cases it’s a strong value proposition – good-quality wine at a very good price – and they have some very good buying teams. I certainly think it has forced the industry to reassess things,” he argues.

Drinks supplier Off-Piste’s co-founder, Paul Letheren, agrees. “Looking at the things Aldi and Lidl have done with parcels, as well as the middle of the range, I think they’ve been very adventurous – they’ve not been scared to push things through.

They are really making the main retailers work harder and be more adventurous to take them on, as they can see it’s a threat and isn’t going away.”

So what effect is this having on the wine ranges in other retailers, both the mainstream grocers and the specialists?

According to Robin Copestick of supplier and brand owner Copestick Murray, the changes to ranges and cuts have created a “much clearer”, tighter range definition in the UK, which is better for the retailers, suppliers and for shoppers.

“Retailers that are listing what they consider to be big brands that give added value, and then doing some tertiary listing and their own-label wines are driving the category,” he says.

“From a grocer’s point of view, it makes sense as there was lots of duplication before. Now it is a much simpler offering that suits the business the grocers are in. And wine specialists, who need a broader offering than, say, Tesco or Sainsbury’s, have also been improving their ranges.”

Asda, for example, slashed around 25% of its wine range last May to “rebalance” the portfolio and effect a “sea-change” in the shape of the revamped portfolio, completing a move started two years ago. Around 200 wines were stripped out, and more variety was included at the £7-£10 bracket.

By contrast, The Co-op has started to build up its overall range again following a big cutback last spring, with a greater emphasis on using sales data to define the range, as well as an increase of tailoring by cluster stores. Oddbins is taking a punt on natural wines – a move head buyer Ana Sapungui MW admitted was “sticking its neck out”, as well as revamping its Spanish collection with fresher styles, and boosting the number of sparkling wines and grower Champagnes. Marks & Spencer is boosting lesser-known Californian wines in its latest range refresh.

As Kantar Worldpanel’s data has shown, own-label, whose growth has been very well-choreographed in recent years, has been a strong performer in recent months, but its growth, (along with tertiary brands and private labels) has led to “a perception of dumbing down or a lack of choice”. But the perception doesn’t always match the reality, according to Dyer.

“There may have been a few years when that did happen, but I think there’s been, not so much an awakening, but a degree of knowledge that if you’re going to shorten the range, there is sufficient quality and choice for premiumisation, as people are prepared to pay more for that if you give them a good rationale to do so,” he says.

Majestic has also upped its focus on own-label range, adding an entry-level Majestic Loves range to sit underneath its existing Definition offering. Buying and merchandising director Richard Weaver told db last year that hopes that own- label sales will go from the current 4% of total sales to around 20% in due course. Kantar Worldpanel has recorded the premier own-label tiers as seeing the greatest growth in the big four, so while most agree that entry-level or own-label may have reached saturation point, there is still scope at the mid- to premium end.

Merchandising

Robin Copestick of Copestick Murray argues that in-store merchandising has improved significantly in recent years, although not everyone agrees.

“It is the retailers’ job to make the wine aisle as clear and understandable and unfrightening as it can possibly be. If you’ve got shelving, it is convenient to say ‘wall of wine’, but all the merchandising has been improved significantly with the retailers. Specialists such as Oddbins, Bargain Booze and Majestic are being very innovative in improving their merchandising – it’s their job to make wine exciting and interesting.”

He points to the Wine Rack in London’s Belsize Park, with its table and wine-café atmosphere, as an example of a specialist chain making wine more accessible to the local community who shops there, in a way more usually associated with the independents. Julian Dyer, general manager of Australian Vintage, agrees that while “heart is there”, he’s less sure suppliers will ever see “as much as we want to” in the UK, because of retailers having to justify the capital expenditure in only one area of the business, while dealing with potential legacy issues in-store.

“If you look at Australia, our home market, the level of business implementation and theatre is phenomenal,” he argues. “You only have to look at somewhere like [supermarket chain] Dan Murphy’s layout, display and the way it drives single bottles in terms of theatre and quality of staff. It’s very engaging and on a level beyond anything we see in the mainstream mass market in the UK.”

 

 

 

 

 

 

 

 

 

 

 

 

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