Meininger’s: How has the sparkling wine business developed for Henkell-Freixenet in recent months?
Brokemper: For us, it is made up of very different submarkets, both in terms of countries, markets and brand worlds. To generalise, we can say that in 2020 volume grew more strongly than value, thanks to a boom in sales. In the current year, the relationship is reversed. Sales volume decreased by one per cent in 2021 to date, while value increased by five per cent.
Meininger’s: How did different markets perform?
Brokemper: If we look at the German market, the sales situation is normalising with the easing of Covid 19 restrictions. People are going back to restaurants and going on holiday again. In countries like Spain and France, where sparkling wine is mainly drunk in restaurants, the decline in sales was stronger. In many other markets, however, sparkling wine consumption is on the rise. Henkell Freixenet is active in 150 countries.
Meininger’s: Which are the most important markets?
Brokemper: The pandemic has not changed this: We achieve a third of our turnover in Germany, Austria, and Switzerland, a third in the rest of Western Europe and another third in the rest of the world, including Eastern Europe and America.
Spain has suffered a severe setback. The country lives from tourism and the construction industry. With the recovery of tourism, sparkling wine consumption should also come back. In the UK, the market is growing dynamically. In the past, sparkling wine was only drunk when there was something to celebrate. That has changed. Sparkling wine and especially Prosecco have established themselves, which we can see especially clearly in our Freixenet Prosecco.
Consumption is also changing in France. It declined during Covid and is now recovering. A real ‘apero’ culture has developed with spritz and cocktails. The French are changing the way they drink sparkling wine.
Meininger’s: Is there a clear trend across all markets?
Brokemper: Prosecco continues to be the driver of the international sparkling wine business. Without it, the sector would have been in decline for the last few years. In the German market, people are spending more money for better quality. We benefit from this premiumisation with brands like Fürst von Metternich or Mionetto. Here, too, the pandemic seems to be reinforcing the trend.
The Prosecco brand Mionetto also belongs to Henkell-Freixenet's sparkling portfolio ...
Meininger’s: How does the sparkling wine sector define itself today, given the multitude of different categories it covers?
Brokemper: For us, sparkling wine is everything that is produced and equipped with first or second fermentation, 3.5 bar pressure a cage or alternative holding device for the cork and foiled bottle neck.
It is true that we had this insane boom of wine-based cocktails, fruit cocktails, spritz, Hugo (a low-alcohol blend of Prosecco, elderflower syrup sparkling waterand mint leaves, popular in Northern Italy, Germany, Austria and Switzerland and subsequently with all other fruit flavours.
The consumer has changed too. Younger Gen Z consumers are consuming better quality. Spritz, for example, is being made with Prosecco again [rather than cheaper alternatives]. The authentic is more important again, something that was also helped by the gin and tonic trend. There is a new demand for premium products.
Meininger’s: Younger consumers consume differently. Has sparkling wine lost its role as a festive drink over the years?
Brokemper: In the past, sparkling wine was an occasion-related drink for birthdays, weddings, anniversaries and generally induced by cultural occasions. That has changed. Today, consumption is determined by the consumer, with all the consequences that follow: If someone chooses when and how they are going to consume sparkling wine, they want higher quality. Consumers are freeing themselves from societal guidelines and making their own decisions.
Meininger’s: Especially in Germany, where sparkling wine is often made using very cheap foreign wines, shouldn't sparkling wine producers adapt and focus more on sparkling wines of origin as happens in other markets?
Brokemper: That is exactly what is happening. Markets are reinventing themselves: Cava, Prosecco, Crémant and German sparkling wine with many new initiatives are all redefining themselves. It’s a process of evolution.
Meininger’s: Even so, sparkling wine in Germany is still sold by retailers as a promotional item at rock bottom prices. Is sparkling wine being misused as a loss leader?
Brokemper: The decisive factor is the consumer, the quality they demand and price they are prepared to pay. In 1963, almost 60 years ago, the sparkling wine market was opened in Germany. Price fixing for sparkling wine was abolished, and since then the consumer has had the choice.
Of course, the price went down for a long time, but that is reversing. The premium market has been growing for years. Across the world, the consumer has a variety of regional products up to big categories like Champagne. With Fürst von Metternich, we offer the leading German sparkling wine made from German grapes and produced in Germany.
... as does the international brand I heart Wines with Chardonnay, Pinot Grigio and Merlot
Meininger’s: In Germany, as elsewhere, the battle is between branded wines and often very sophisticated private labels. How do you see this developing?
Brokemper: Through the alliance with Freixenet, the importance of branded wine in our group has once again increased significantly. Strong brands will still be meaningful in 20-25 years. Freixenet is a good example. We grew by five per cent with Freixenet even in the pandemic. Mionetto is also an extremely strong brand, with sales of around 40 million bottles.
Today, we sell over 100 million bottles of wine annually, the strongest brand being I heart Wines, followed by Freixenet. Under the Freixenet brand we offer various wines: Mederano, Mia and recently also Spanish and Italian still wines. The Freixenet brand stands for the highest quality. The broad portfolio follows the consumers' desire for greater variety.
Today, and presumably also in the future, wine is the grocery sector with the greatest variety. It is therefore more than understandable that retailers try out their own brands, concept wines and ideas. However, these private label or own-label brands - no matter how well they are made - have a limitation. They lack ubiquity. The customer does not find them everywhere, and certainly not in restaurants. In order to bind consumers to a brand in the long term, it is important to distribute in the on- and off-trade and online in equal measure.
Meininger’s: Are there brands that you have abandoned because they no longer have a role to play, and others that are indispensable despite smaller sales volumes?
Brokemper: Yes, for example, we have given up Carstens SC or Rüttgers Club. We have sold the Deinhard brand. In our ‘House of Brands’ we distinguish between international icons, which include Mionetto and Freixenet, regional brands such as Vodka Gorbatschow, Fürst von Metternich and the brands that work well in the important Eastern European markets.
The global stars such as I heart Wines or Batida de Coco have international significance and finally we have the international prestige brands which include Alfred Gratien Champagne and Gratien & Meyer Crémant.
Meininger’s: In the past, sparkling wine was generally to be found in mostly family- or owner-run single-brand companies,. Do these kinds of companies still have a chance?
Brokemper: Of course, there are quite positive developments in German sparkling wine companies. Even if you look abroad, Korbel in the USA and many crémant and Champagne producers in France provide examples of one-product companies. On the other hand, it has to be said that companies like Kupferberg could no longer exist today.
The Henkell Trocken brand is a classic in Germany
Meininger’s: And where does Henkell Trocken stand?
Brokemper: Henkell Trocken is very decisive and important for us. Especially on international markets, it is established as the German sparkling wine. We are stronger with the brand abroad than in Germany. In Austria, Henkell is the market leader in 2020. Sales are also growing in 2021, and we are also well placed in markets like Australia, Canada and more specialised markets like Japan.
Meininger’s: What importance do markets like Asia, the USA and Great Britain have for Henkell Brands?
Brokemper: The entry into the US market came for us with the acquisition of Mionetto in 2008. Mionetto USA was a small but dynamically growing importer that pioneered the Prosecco trend out of New York in the 90s. We continued to grow very quickly, winning several Hot Brand Awards and Importer of the Year in 2011. [The acquisition Freixenet added another strong importer and also Californian Champagne Gloria Ferrer, the first pure sparkling wine producer in Carneros.
Today, with Freixenet Mionetto USA, we are one of the USA’s leading sparkling wine importers and, with the Mionetto, Freixenet, Segura Viudas and Gloria Ferrer brands, we are the market leader in Cava, as well as second in Prosecco. After a brief dip during the pandemic, we are once again growing at a high double-digit rate this year.
The entry into the UK market came even later with the acquisition of Copestick Murray in 2012. At that time it was a strong partner for customers in all sectors and, with the I heart brand, one of the most innovative and agile companies in the UK. We then started to build the Mionetto brand. Then in 2019 we merged Freixenet and Copestick in the UK. Freixenet had launched Freixenet Prosecco and Freixenet Italian Rosé at the time. After the merger, both companies were able to continue their dynamic development. Today, we are the market leader in the sparkling wine market, with Freixenet Italian Rosé we have the best-selling rosé sparkling wine on the UK market and I heart was able to grow to over 30 million bottles. The UK is now the group's second strongest market after Germany and ahead of the USA.
In the far east, we have a dynamically growing business in China and other Asian markets on the one hand, and an established business in Japan on the other, where we work together with the most respected distribution companies. Unfortunately, the sparkling wine category is still underdeveloped in Asia, which is why the market there has a much lower sales significance [for us]. But we are convinced that these markets will continue to develop.
Meininger’s: How do you see the chances of steering customers towards higher quality.
Brokemper: You have to look at this in a more differentiated way, especially when you talk about international markets as a whole. Markets like the UK, US, Japan and even Russia already a more or less large Champagne market as a luxury category for historical reasons. However, only a few people can and want to afford Champagne in most countries. Therefore, domestic sparkling wine producers have emerged in all these markets, with very different methods and qualities.
Freixenet is not only succesful with its Cavas but also with still wine brands such as Mederaño
What has changed in recent decades is the categorisation of the market. First came Cava, the perfect sparkling wine for the smaller occasion especially in markets like the UK, US and many other countries. Then came Prosecco. In just two decades, Prosecco made it from a regional Italian speciality to the best-selling sparkling wine in the world, with sales of more than 500 million bottles. This led to consumers becoming more quality-conscious on the one hand, but also to them switching from Champagne to Prosecco, often consuming it as a wine substitute. Now Crémant is being added to the mix.
We are experiencing an increased quality awareness in all markets, a greater interest in the diversity of sparkling wine. And we want to serve that with our international portfolio. We have wines representing almost all of the regional categories, which makes us special.
Meininger’s: What influence do the price increases and inflationary tendencies have on the sparkling wine market?
Brokemper: We are seeing much greater volatility in the procurement markets. Climate change is probably one reason for this. There are noticeable price increase tendencies on the white wine markets. In some cases there are already shortages.
In some cases, there are also self-inflicted reasons. The introduction of Prosecco Rosé cost the market about 60 milion litres of Prosecco. We expect a shortage in the Prosecco market. In addition, we see price increases for glass, cartons and many other inputs. Essentially, these are still effects of the pandemic.
The thinking of a year ago is still determining what is happening today. One only has to think of the Champagne harvest and the artificial reduction of the harvest in the previous year. Today, one would be happy if the quantities were there. With all the talk about inflation, however, one must remember that there is a subjective perceived inflation and an objective inflation. Many people focus on the rising price of petrol station, but that is not everything.
Meininger’s: What are the biggest opportunities for the future?
Brokemper: Sparkling wine will remain the focus for us in the future. We are the world market leader and are aiming for a 10 percent market share. Every tenth glass of sparkling wine in the world comes from one of our brands. That’s volume. In value terms, we want to be above that.
Retail remains our most important sales channel. It can reflect the breadth of our portfolio. The on-trade remains important, especially in countries where the majority of consumption takes place in the that sector.
Online trade from the producer side is becoming increasingly important, especially in connection with direct sales ex winery. We have over a million visitors in our wineries worldwide and have created visit and experience programmes for them.
Thanks for the interview.