Les 5 du Vin

5 journalistes parlent du vin

Why would you want to export wine to the UK?

16 Commentaires

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A national addiction to bargains

There was a time, not that long ago, when the UK was seen as the world’s most important wine market. A market that everyone or almost everyone wanted to get into. This is now no longer the case.

The UK used to be known for its sense of adventure – the place to come to see the range of wine at a range of price and quality from all over the world. This has changed the UK has become very price driven – addicted to unlikely sub £5 bargains. With duty now at £2 a 75cl bottle and VAT (sales tax) at 20% there is only around 0.80p worth of wine in a £5 bottle of wine. The average retail price of a bottle of wine is now £5.03 mainly pushed up by substantial increases in duty since 2008.

Surfing special offers this afternoon on the Tesco site I could buy six bottles of Tesco Reka Valley Bulgarian Merlot for £20.34 for a case of six (the equivalent to £3.39 a bottle). Take away the £2 duty and around £0.68 in VAT, leaves just 0.71p for all the other costs –  bottle, closure, transport not forgetting profit margins. How much is left for the wine? Does £3.39 really cover all the costs or is this wine being sold below cost price?

Since I started writing about wine in 1988 the supermarkets have become ever more dominant. In 2011 the supermarkets held 92% of the retail market, which accounts (Source: Evaluation of CAP Measures Applied to the Wine Sector.)

Back in 1988 there were large wine merchant chains like Victoria Wine, Threshers and Oddbins along with regional chains like Unwins and Fullers. All, with the exception of a small rump of Oddbins and the Nicolas chain, have now gone – some collapsing with substantial debts.

The contrasting fortunes of Prowein and the London Wine Trade Fair reflects, in part, the declining attraction of the UK. The 2013 edition of Prowein attracted over 44,000 visitors – 40% from outside Germany. The 2012 edition of the London fair had 14,000 visitors.

There is an interesting and revealing exchange of letters between journalist Tim Atkin MW and Dan Jago, UK and Group wine director at Tesco plc, on Tim’s site (http://www.timatkin.com/articles?915) . The exchange follows an article Tim wrote at the height of the horsemeat furore (http://www.timatkin.com/articles?892).

Tim Atkin:

The price wars between Tesco, Asda and the genuine discounters have created a culture of false cheapness in the UK wine trade. These retailers see wine deals as a way to entice shoppers into their stores, with ludicrous “half-price offers” that are nothing of the sort. Tesco and the like often argue that they are listening to their consumers, but they are leading them too. And in reality, the people who have their ears are their shareholders, not their suppliers or shoppers.

The UK’s low prices have already driven many wine producers to other markets and helped to send a number of importers to the wall. Look at the mass defections from the London Wine Trade Fair to Prowein this year, but also look at the dwindling ranges on most supermarket shelves and their lack of quality and innovation. With the exception of Marks & Spencer, no one is taking risks.’

There is no doubt that Dan Jago is right that Tesco has some long-term relationships with its suppliers. But it is not a relationship of equals. A few years ago I was involved in producing the Tesco wine magazine. This involved a number of visits to Tesco headquarters in Cheshunt on the north- east outskirts of London. Visitors gathered in the reception area, which included a café. It was like watched bands of supplicants waiting for their turn to have an audience with a mighty medieval potentate.

I must have had close on a dozen meetings at Cheshunt. Never once do I remember being offered anything to drink – not even a glass of water. This was before the arrival of Dan Jago, so this may have changed.

The UK is still the world’s second largest importer of wine with a market worth just under £11.9 billion in 2011 and forecast to rise slightly to £12.7 bn by 2016. Despite the supermarkets’ dominance it does have a vibrant collection of small independent wine merchants – many with long-term relationships with their suppliers. However, if you are a producer who can sell everything you make in countries other than the UK, why would you want to break into the UK market?

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Unwins – one of the casualties

Shirt4s

Auteur : Les 5 du Vin

Journalistes en vin

16 réflexions sur “Why would you want to export wine to the UK?

  1. Jim, I guess you wrote this (would be great if all the posts were ‘signed’ by the author, by the way) and you’ve distilled the facts exactly as they are, no question.

    For a long time I’ve said to producers in Jura and Savoie who ask me, don’t bother with the UK, best to try the USA or elsewhere first, but many of them really do want to be in the UK specifically. Why? Well partly because it is close and easier on the paperwork than exporting to elsewhere, but also because despite everything, for a producer to be able to say "I sell to the UK" has a certain amount of weight and prestige, which in turn allows them to sell better in their own market and in other markets, especially if they can get a listing at a top, well-known restaurant and shop (Harrods, despite everything still retains its reputation among foreigners).

    But there’s another thing. you acknowledge "it does have a vibrant collection of small independent wine merchants – many with long-term relationships with their suppliers." and yes I know the sales/profit figures that have come out from these indies are not that positive, but in London things seem vibrant among the indie merchants as well as wine bars and restaurants of course. In London, there are hundreds of thousands of French, Americans and others living there who are prepared to spend much more on French and other wines than British Londoners. London is increasingly a different country for wine than the rest of the UK and it is certainly worth bothering with in my view.

    Good luck to the 27 Jura producers who are holding their first trade and press tasting in London on May 14th – many of them looking for importers.

  2. Wink. Many thanks for your comment. The post is actually signed but with a shirt rather than a name. Yes there are certainly some very exciting small independents but they represent a tiny part of the market. I acknowledge that the situation is more nuanced than my post would imply but it was designed to provoke, in which it has clearly been of limited success as you are so far the only person who has commented, although there have been some retweets etc.

    The UK may have some residual prestige but this is surely in decline.

    • Ah, the shirt, missed that!

      Yes overall the country’s prestige as the leader for wine is in decline, I agree. However, I still think that London has the potential all on its own to provide both a shopfront and sales for wines from small and eclectic wine regions, in a similar (if not so great) way as New York does over there.

      Perhaps the reason that others haven’t commented yet is that with the predominantly French (or certainly non-British) readership of this blog (I presume) no-one can really dispute what you said, and it’s hard to provoke when these are hard, cruel facts!

  3. No, no, no, no please Londoners and UKers^^ : don’t buy our Jura wine !
    We don’t want the prices to rise !

    (is it a good comment ?^^. I am very honest here…)

  4. Wink. Point taken about London. Jim

  5. I have reposted on my FB page Jim and am interested to see if I get any comments there. The independents can be a much more interesting proposition for growers – they are more prepared to pay a fair price and generally have close relationships with their suppliers in a way that is not possible with the big boys. The problem for producers is that many of them do not how to identify them and how to go about selling to them. The big supermarkets offer volume which on the face of it can be tempting but they do squeeze the life blood out of their suppliers in an attempt to keep prices lower for the consumer. It can take around 10 independent merchants to equate to the volume offered by one of the large supermarkets. Independent merchants are passionate and can sell wines that would otherwise just sit on a shelf gathering dust. I wouldn’t say that London is the only place worth considering – there are great independents in Surrey, Hampshire, Oxfordshire and Cambridgeshire that I know of and probably many more that have sprung up after the decline of high street merchants.

  6. Hi all ! I’m afraid France & it’s wine market is on the same roads as you are… Everybody, not only the big supermarket chains, are buying with the simple idea that prices must go down and down. Even the small "cavistes" are on the way to lowering wine prices. All we have to do is work on new export schemes, towards Asia, perhaps ? Future will say.

    • Well dear Michel, as a wine buyer and drinker I don’t have the feeling (and my purse either) that prices go down and down but up and up. In France (in every winegrowing regions) and elsewhere (Germany, Austria and Italy for what I know the best).
      Of course I am not talking about "the villageoise" but about the 8/18€ segment. Sure the quality must have improved and there is a very wide range of offers.
      Without even talking about Asia, the european world of wine is changing fast and the way of buying/selling wine as well. One thing is that there are more and more wines bought/sold by internet wine sellers. It might be good for a consumer to have access to wines from everywhere (I can easily buy my Jura wine in Bordeaux) but it’s a strong concurrence for traditionnal "cavistes".

      In many regions a wine grower used to sell to customers from his area. Now, he (or she) can sell to the world. If in his area there used to be 1000 people ready to pay 20€ for his wine, he can now find 5000 through the world ready to buy the same bottle 30€ (or even 21€).
      That’s also why price go up.

      Prices in France are anyway always difficult to understand. They (supermarket chains / "cavistes" / "cavistes online") never make any sales when in a country like Germany (which has developed into a very interesting wine market – the success of prowein being maybe a consequence) prices are relatively more flexible (there are often discounts or sales – and I am still not talking about "the villageoise").

      Then it’s all about education (meaning : learning to discover and enjoy -good- wine). In France and elsewhere. Many people ask themselves why they would buy a bottle for 15€. When they understand it’s worth they’ll do it. Until then, the danger is that the stretch of prices will worsen : the villageoise will always be cheap and the Bourgogne always expensive (but soon out of reach for many lovers) but the "average+" wines will get more and more expensive…

      I am a pessimistic consumer and yes I didn’t even talk about the rise of the taxes, VAT and others, that will sooner or later occur thanks to our wonderful Europeanunioncracy.

  7. Cher Pierre Sauvage, allez faire un tour à Monop, Casino, Carrefour Market et autres enseignes ayant pignon sur rues désormais dans nos centres villes et vous pourrez constater qu’il y a d’excellents vins de tous les jours dans la gamme 4 à 6 €. Chez Lidl un ami m’a assuré avoir trouvé un bon petit Côtes du Rhône à moins de 2 €. On y trouve même des Champagnes (beaucoup moins intéressants sur le plan qualitatif) autour de 10/12 €. Chez moi, les cavistes font de grosses ventes avec des vins autour de 4 €. Encore récemment, j’ai même trouvé un excellent 2011 noté 91 par RP à 11 € la bouteille table dans un bon restaurant sur et acheté par le restaurateur autour de 3 €. Des exceptions, peut-être mais qui confirment qu’à cause de la crise, les prix sont poussés à la baisse par les acheteurs.

    • Mais Mister Smith, quand je parle d’augmentation des prix (up, up) c’est pour des vins identifiés qui ont pris 1 à 2 euros la bouteille, voire plus, en 1 an. 10% d’augmentation au bas mot sur un an, c’est énorme !
      Et quand ça varie entre 5% et 10% chaque année, on peut parler d’une nette inflation (depuis 10 ans) dans le domaine du vin…
      (et je parle même pas des effets Parker sur Chateauneuf ou le Gigondas de Saint-Cosme et autres qui ont doublé…)

      En grande distribution, les prix bas (les entrées de gamme) ne signifient pas forcément "baisse". Ils sont bas (quoiqu’à 6€ on est à 40FF…) et l’ont toujours été. Eventuellement c’est la qualité qui a été améliorée (mouais), mais sinon je pense qu’au contraire ce qui devient difficile pour le distributeur c’est de conserver sa marge devant l’augmentation des prix et la baisse de possibilité financière/envie/besoin de l’acheteur final.

      Sinon je veux bien les adresses. Personnellement, j’ai vraiment du mal à trouver de "l’excellent vin de tous les jours" en dessous de 6€ (oui il y a quelques Rhône villages), pourtant je cherche…

      • @Pierre : je ne pense pas que notre ami Jim parlait des mêmes vins que vous quand il évoquait la valse des promos en matière de vins. Lui et moi parlons de bons vins quotidiens et non des grands vins de collection ou de caves d’amateurs très éclairés. Cela fait belle lurette que nous n’avons plus d’argent pour les stars du vignoble dont les prix, ici, comme en Italie et en Espagne, ne cessent de grimper.

  8. Dear Every body, I believe that Supermarket chains are roughly the same every where, except that some of them are more honest than others for their volume commitments. Basically, a good buyer in a supermarket chain is one that brings the most cash in. In a market where there is no inflation, tax increases, at the moment a good supermarket buyer is one that negociates price decreases. However, even though supermarkets are the biggest route to market, they are not the best route to sustainable wine sales. If you look closely, some high profile independants, that have a strong focus on quality, are a better choice for smaller producers and they can help build value on a domaine or a region. So let GCF negociate with Tesco, let them send out press releases about their quality quest, and let the small quality ones work together, in sweet harmony.

  9. While I agree with your position relative to 80% of the market, the sheering effects of the challenging economic conditions over the last 6 years has created opportunities that has resulted in a resurgence of the independent merchants.

    I agree with Wink on the importance of the UK market as an influencer on the global stage. I established New Horizon Wines to introduce fine wines of Virginia that are of a style that are much appreciated in the UK. Virginia winemakers have been honing their craft over the last 40 years and there are some truly excellent wines produced. Over the last 4 years I have led the way to build a reputation on the international stage. To try and establish global recognition from Virginia would have been an impossible task. To sell into major cities in the US, while increasing sales, would not have increased global visibility. Through establishing a presence and reputation in London and the UK it resonates across all markets.

    Richard Leahy wrote an interesting book, published in 2012 – "Beyond Jefferson’s Vines – The Evolution of Quality WIne in Virginia" One Chapter is titled, "How the British Feel About Virginia Wine – And Why it Matters"

    Richard states, "…it’s a discriminating and valuable market for wine-producing regions to cultivate. A majority of the world’s most respected wine writer’s and industry authorities are also based in London"…."Accordingly, for purposes of building a reputation in the international wine world, the UK – and especially London – is as Broadway is to musical theater: For a relatively unknown wine region, establishing a credible reputation there is vital."

    The UK is a very challenging and competitive market, but it is important to be there nevertheless.

    Thank you for starting this debate.

    Regards,

    Chris Parker
    New Horizon Wines

  10. Hi Jim et al

    I think the article slightly misses the point.
    1) The multiples are not the only route to market, in what is an incredibly diverse and often fragmented market with many opportunities for all sorts of producers – especially the smaller, quality ones. I accept that the multiples are a major route for those who want to sell volume – but they are not the only route.
    2) Calling the multiples on their behaviour is a little like saying sharks need to have teeth extracted in case they bite someone! Their role in life is to generate a return for their shareholders based on selling the most appropriate, safe and profitable products to their consumers – it is not to uphold principles, or to take a stand to defend a category, or to lead in any other sense apart from the retail one. They are what they are, and there are very few if any volume suppliers out there who don’t know what they’re getting into when they start supplying them. Those that don’t like it, or can’t make a profit, time to go elsewhere.
    3) I am very much of Chris’s view above that the UK remains a challenging market (as all mature markets are) but incredibly fulfilling if you can crack it – and many have (and will).
    I think it’s a shame that we spend our time talking down the UK to the extent that we do because of one narrow interpretation, when there is so much to go for. I for one plan to be investing my business and those of my clients in the UK for the long term, for two simple reasons. Firstly, it will never have scale production to speak of so will continue to import wines in large quantities. And two, the UK has one of the most open-minded and curious consumers on the planet. Just now, it’s difficult to persuade them to buy into great quality due to the obvious economic factors, but that is hardly likely to be a long term trend.
    The multiples are crying out for producers to bring them a fun. creative and profitable solution, and the less risk-averse amongst them are certainly open to finding a new way to retail wine to their customers – and I wish them luck.
    The exchange of letters between Tim Atkin and Dan Jago, both of whom I hold in enormous respect, concentrates on one unfortunate and temporary phenomenon, and one which we all accept is likely to end (or be massively curtailed) at some point either due to the lack of profit at one or either end of the supply chain, or legislation. So let’s focus on what makes the UK market so exciting, and put aside the difficult bits – which after all most world markets have anyway.
    All the best
    Matt

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