Although the UK market is being roiled by Brexit, it remains significant.
James Lawrence identifies the major wine retailers.
The UK is a competitive market in which to sell wine. In parallel with neighbouring EU countries, overall still wine consumption continues to fall, although the unprecedented success of the sparkling wine category has helped to keep (some) businesses profitable. Majestic Wine, Britain’s biggest specialist wine retailer, has been forced to re-evaluate its approach, due to stagnating sales and falling margins. Retailer Oddbins has also struggled.
Supermarkets are responsible for some 70% of off-trade sales in the UK, with fierce competition between the major players. The great success story of late has been the rise of the German hard discounters Aldi and Lidl, who have enjoyed impressive double-digit growth over the last three years. The business model of UK supermarkets is in line with other nations; products are sold by push marketing, with relatively small margins, discount-led promotions, and high volumes. Yet analysts also point to a rising premiumisation, partly buoyed by private label brands being introduced at higher price points. In the UK market, according to the IWSR, private label consumption rose 13.5% between 2014 and 2018, while branded consumption declined 2.4% in the same period.
Elsewhere, sales of wine in convenience outlets have been rising, with innovations in packaging and new formats helping to tempt younger consumers. British firm Greencroft Bottling invested in a large-scale wine canning line, which started production in November 2019. Smaller retailers and independents face tough trading conditions – a toxic mix of escalating overheads, shifting consumer priorities and competition from the supermarket sphere.
The online wine market is growing in value, with most specialist operators running a multi-channel approach where they combine their high street sales with an online offer. There are more than 800 independent wine retailers in the UK, with a growing number adopting the ‘hybrid model,’ blurring the lines between retail and on-trade. Whether it’s providing food on-site, wine dispensing machines, or simply offering a more tailored buying experience, the best of today’s independent retailers are giving customers a reason to shun their local supermarket. And while it’s perhaps too early to make precise predictions, all the evidence suggests that hybrid venues will be a defining feature of the retail scene in 2020 and beyond.
According to Nielsen, the price bracket showing the most growth in UK retail is the £8 ($10.50) to £9 tier, with sales rising 12.7%.
Corporate behemoth Tesco, whose 2018/2019 financial year revenue amounted to almost £52bn, has traditionally dominated the volume-led UK wine market, despite losing overall market share to discounters Aldi and Lidl. It offers a balanced mix of branded wines and private labels on its supermarket shelves. Yet despite a programme of product streamlining over the past five years, Tesco is increasingly committed to capturing a more premium slice of the market. In October 2019, the retailer expanded its upmarket range with the addition of around 40 new premium wines. These included English sparkling Hattingley Valley Reserve NV (RRP £29), while its own-label range was augmented with the addition of a new Tesco Finest Margaux (RRP £22).
Sainsbury’s is, like its peers, introducing more private label wines and reducing the number of branded wines. It is also chasing the convenience market (meaning smaller stores); in 2019, Sainsbury’s announced plans to open 110 new convenience stores and 10 new larger stores, in a shake-up that will also see the closure of up to 15 larger supermarkets and 40 of its current convenience sites. Wine buyer Elizabeth Newman is a powerful force in the industry – she was responsible for helping the supermarket grow sales by more than 25% with its ‘Taste the Difference’ range of private label wines.
Aldi is one of the UK’s major retail success stories. In September 2019, the German chain announced it was launching a 35-strong private label, premium wine range that would be available exclusively online. This move has increased the number of buyer-own-brands sold online by Aldi by around a third, while the majority of branded wines sold by the retailer are regularly discounted and marketed at under £10. Range rationalisation is another factor in Aldi’s success, with market research suggesting that consumers feel “overwhelmed” by excessive choices.
Waitrose takes a different approach to its competitors. The chain offers the largest range of premium and super-premium wines in supermarket retail, targeting wealthier shoppers with an extensive range of branded wines such as top-end Bordeaux and Burgundy labels, and a healthy selection of Champagne. Their online channel has seen turnover increase in recent times; Waitrose is an innovator, championing new formats such as canned wines, smaller bottle sizes, alcohol-free wines and upmarket private labels. “Sales of our own label wines are doing well. We launched additional wines into our new-look premium range, Waitrose & Partners No.1, in 2019 to great success,” says consumer communications manager Bethan Davies. As a result, Waitrose overtrades in wine compared to its share of the grocery market.
In 2017, Asda slashed 25% of its wine range, citing consumer fatigue and a backlash against “excessive and confusing retail wine choices”. Today, the supermarket offers a tighter, more concise offering, with a stronger emphasis – hardly unique to Asda – on premium options in both the branded and private label segments. Asda’s ‘Extra Special’ range has been increasing steadily in both quality and quantity since 2017, winning awards from UK publications for the value on offer.
Berry Bros. & Rudd
Established in 1698, BBR is a historic and iconic part of London’s wine retail sector, acting as agents and importers for some of the world’s most expensive and lauded brands. Yet the independent retailer is also noted for its excellent value, private label range – particularly its own-label claret and Champagne. Their online marketplace, BBX, has also proven to be enormously popular, allowing members to buy/sell wines from their own portfolio, with the buyer posting bids which can then be accepted by the seller after a determinate amount of time has passed. A healthy mix of innovation and tradition is ensuring that BBR thrives in a tough and saturated marketplace.
The Wine Society
Arguably the UK’s most important online retailer, The Wine Society announced in 2019 that its annual turnover had reached an excess of £100m for the first time in the firm’s history. The secret to its success? Offering value at every price point and maintaining a sophisticated portfolio which caters to a wide range of consumers, with over 500 branded labels sold in addition to their immensely popular buyers-own-brand label wines. “Sales of our private label wines grew 5% over the past 12 months,” says Pierre Mansour, head of wine.
Founded in 2008 by South African investor Rowan Gormley, who stepped down at the end of 2019, Naked Wines is one of the most important e-commerce wine companies operating today. Its keenly priced and marketed range – sold at self-described “wholesale prices” – is put together by head buyer Ray O’Connor, by working directly with producers. Customers pay a defining role in Naked Wines, with questionnaires determining whether the firm continues to offer a particular wine or delists it in favour of alternatives. “For each purchase, whether a new listing or a stalwart range, we ask a simple question: Would you buy this wine again?” explains O’Connor. “This result drives the percentage rating of the wine and steers us in what works and what doesn’t – almost a bit like Netflix.”
Vagabond Wines founder Stephen Finch has led the way in adopting the hybrid model of doing business, fitting his seven London outlets (another branch is opening in 2020), with wine dispensing machines where customers can enjoy more than 100 different wines by the bottle, glass or sample. And, of course, the wines are accompanied by a selection of profitable small plates and tapas. “The blended margin from operating a hybrid model is so much higher than a standard retail outlet,” says Finch. “Not only do those enhanced margins make for a healthier business, but they make it financially easier for operators to carry wines that they’d otherwise find prohibitive.” The firm sells a concise range of branded wines, catering to every price point and segment.
For many years, Majestic Wine was the UK’s most important specialist wine retail chain. However, in 2019 the firm suffered financial difficulties, and it was widely believed that 140 stores earmarked for closure would stop trading at the end of 2019. Yet following its acquisition by Fortress Investment Group LLC for £95m, Majestic Wine got a new lease on life. Their marketing strategy has already involved contacting its customer base and enquiring which wines consumers want to see on shelves. The appointment of buying & merchandising director Rob Cooke, formerly of Tesco, can only strengthen its position.
Described as “an off-licence for hedge fund managers,” Hedonism Wines is London’s premier address for fine and rare wine. Hedonism boasts the largest portfolio of Bordeaux and Burgundy wines on retail shelves in London, with an astounding collection of Champagne, including rare vintages of Krug, Cristal and Dom Perignon. Their range is diverse, with a large volume of branded wines from the New World, typically at price points in excess of £20. Hedonism panders to wealthy professionals and collectors with few financial limitations.
This article first appeared in Issue 1, 2020 of Meininger's Wine Business International magazine, available by subscription in print or digital.