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Shaping the UK drinks trade

The Drinks Wholesaler Forum | 11 Suppliers: The Weakest Link | 12 Venus Wine and Spirit | 14

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OCTOBER 2017

Vol. 02 No. 03

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@drinkswholesale

Champagne and Sparkling Rum doings Grown up soft drinks On-trade Brexodus

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CONTENTS & COMMENT OCTOBER 2017 ISSUE 7 REGIONAL FOCUS ON THE SOUTH WEST INSIDE THE NEWS 5 Brand building: Creating quality tiers in a brave new world

6 Brexit Transition: Fudge or the way forward?

8 Wine shortfall: How the trade is underplaying a trump card

SPOTLIGHT 36 Boutinot: A multifaceted company with the passion of a holistic approach

REGIONAL FOCUS 38 The south west: Angela Mount takes a tour around this haven for tourists and second-homers

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DATA & INSIGHTS 12 Buyer shortcomings: Angela Mount gives suppliers the chance to respond to criticisms

INTERVIEW 14 Venus: Andrew Catchpole catches up with the people behind this growing merchant

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FEATURES

ON-TRADE INSIGHTS

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40

Mark-ups & margins: Tips on improving the bottom line

Brexit: How the hospitality industry is planning to combat the Brexit-triggered staff exodus

20 Sparkling wines: Offering plenty of scope for profitability

DOING BUSINESS

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Rum: This complex spirit is in growth and premium is the goal

Experiential marketing: Brands can use the wholesale channel to create immersive campaigns

28 Craft beer: With bigger players buying up small companies, do their credentials remain intact?

PROSPECTORS’ CORNER

30 Soft drinks: No longer an afterthought, there’s plenty of mileage in premium offers

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43 New restuarant openings: A round up of the best

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COMMENT

BUILDING THE ISSUE

TIMES ARE TOUGH, BUT IT’S NOT ALL DOOM AND GLOOM It almost seems too obvious to state that these are turbulent times. As we went to press with our spring issue of Drinks Wholesaler a snap election was in the offing, Brexit was climbing back up the news agenda and the fallout from sterling’s drop was beginning to bite. The drinks trade, however, was largely taking a pragmatic view that it would weather the immediate uncertainty and come out fighting, whatever the near future might offer. Fast-forward over summer and we are now living with a government that has lost its majority, appearing more divided by the day, and Brexit negotiations have made little discernible progress, with a transitional period now formally proposed, but seemingly very far from ratified. Meanwhile, foreign exchange remains a major issue for all those importing wines and spirits, and UK consumers appear to be feeling the pinch more than ever, with rising debt and falling spend the measure of the day. It’s a bit of a mess, and few would deny that the continuing uncertainty is a major headache for businesses, with company owners and directors privately telling the Drinks Wholesaler that they are holding off on investment and new initiatives at least until there is some semblance of a clear Brexit plan. The need for this clarity formed the overarching theme at the WSTA Annual Conference this year, as we report in these pages. We also examine the implication of reduced global wine supply and price rises across the drinks sector, with an eye on how suppliers and wholesalers can best protect margins and even edge sales upwards by pushing more premium lines. In line with that, our focus categories in this issue include four areas of growth – namely sparkling wines, rum, craft beer and adult soft drinks, each of which offers the opportunity to tap into positive areas of consumer interest. Times may be tough, but it’s not all doom and gloom for those operators nimble enough to embrace and drive sales by shifting emphasis to a drinks mix that better reflects the current mores and spend of the punter. And, as feedback from many quarters of the retail end of the trade suggests, there is still much room for improving and developing the drinks offer, which in turn should help buffer against what may be a bumpy road ahead for some time.

While there’s continuing uncertainty, there are key drinks categories ripe for growth

Andrew Catchpole, Editor

Follow me on Twitter @DrinksWholesale

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FOCUS & ANALYSIS TALKING BREXIT P6 VENUS RISING P14 MARGINAL RETURNS P16

BANKING ON BRANDS As we go to press with this issue of Drinks Wholesaler, Europe’s wine grape harvest has been arriving at the cellar doors, not only marking an incredibly early vintage in most regions, but also delivering a dramatic volume shortfall that compares with the entire output of the vineyards of California in a typical year. And, while there is unlikely to be a global shortage of wine any time soon, (although many big-name European appellations will suffer a shortfall of 2017 wines), this does come at a time when, as the recent Rabobank Q3 Wine Report highlighted, global supply has come into much better balance than at any time over the past couple of decades. Any likely impact, including rising prices and the need for buyers to look elsewhere, to the southern hemisphere, to source alternative juice to hit price points with certain varieties and styles of wine, will come a little way down the line. But Europe’s depleted cellars in 2017 can only compound the likelihood that the global supply of wine, described in that report as “balanced to slightly tight”, with global “bulk wine prices across most varietals stable or generally rising”, will impact on the industry. One of the more intriguing predicted

effects on the domestic trade in the UK – where the psychological £5 price barrier appears to have finally given way against an upward cocktail of pressures brought about by a 13.7% duty increase over the past five years and the more recent harsh impact of foreign exchange since the Brexit vote – is that brands and brandbuilding may actually benefit from this blend of tough conditions.

THE DRINKS WHOLESALER firstname.lastname@agilemedia.co.uk EDITORIAL Editor Andrew Catchpole 01293 590055 Contributors Jo Gilbert, Lisa Riley, Angela Mount, Nigel Huddleston, Jaq Bayles, Emily Kearns DESIGN Group Art Editor Christine Freeman Designer James Down

ADVERTISING & SALES Publisher Lee Sharkey 01293 558136 Commercial Director Samantha Halliday 01293 590053 Senior Account Manager Stuart Sadler 01293 590054 Account Manager Erica Stuart 01293 558132 Account Executive Thomas Wigmore 01293 558137

MOVING TOWARDS BALANCE

“We are definitely seeing the wine industry moving towards balance and even a little shortage, which will cause some pain with rising grape costs,” Stephen Rannekleiv, joint author of the report, told Drinks Wholesaler. “But, when thinking about the challenge to those building brands, with oversupply meaning that some could and probably would undercut you on price, it’s probably healthier for brand builders to have supply in balance or even a little tight.” The suggestion is that brands may well have a window of opportunity to reassert themselves in the face of an ongoing and growing challenge from buyers’ own-brands and private labels, as the source allowing such wines to compete on sharp price falls short.

ISTOCK.COM/MAX2611

RISING PRICES AND DIMINISHING SUPPLY MAY DELIVER A SILVER LINING FOR THOSE IN THE BUSINESS OF BACKING SUSTAINABLE BRANDS. ANDREW CATCHPOLE REPORTS

“IT’S This in turn may well be PROBABLY a good thing for the health HEALTHIER of the wine sector as whole, FOR BRAND allowing revitalised brands BUILDERS TO to compete more equally on HAVE SUPPLY shelf, while commanding a fair IN BALANCE OR and margin-delivering price as EVEN A LITTLE entry and near entry-level price TIGHT” expectation moves north. Those same wines can also provide a clear ladder to higher quality, allowing a path for trading up. And, in an environment where consumers are clearly spending less overall, but trading up when they do spend, this might just accelerate that nascent trend to look for real value, rather than treat the wine category as a hunting ground for the cheapest hit of fruity alcohol. Which, in turn, can only benefit the trade.

EVENTS MANAGER Sarah Stevens 01293590049 ACCOUNTS Annette O’Connell 01293 590051 Carol Cureton 01293 590045 AD PRODUCTION CC Media Group Kevin Porter 0207 216 6449 Mark Crinnion 0207 216 6407 MANAGING DIRECTOR Russell Dodd

SUBSCRIPTION The Drinks Wholesaler is available on annual subscription at the following rate (UK) £24 for 4 quarterly issues ENQUIRIES Email: Lee.sharkey@agilemedia.co.uk Address: Agile Media Ltd, Longley House, International Drive, Southgate Avenue, Crawley, West Sussex RH10 6AQ Drinks Wholesaler is published by Agile Media Ltd All rights reserved Printed by Stephens & George Cover image: iStock.com/Lacheev

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BREXIT TRANSITION: FUDGE OR THE WAY FORWARD?

ANDREW CATCHPOLE REPORTS FROM THE ANNUAL WSTA CONFERENCE, WHERE THE MAIN TOPIC OF DEBATE WAS THE ‘B’ WORD

he need for greater clarity over Brexit and the terms of a possible transition deal delivered some intense debate at the annual WSTA Conference, as panellists on both sides of the remain/leave divide responded to questioning from drinks industry leaders. With some 14 months having passed since the EU referendum, and six months since the two-year negotiating window was opened by the triggering of Article 50, Sir Simon Fraser, former head of the UK Foreign Office and Diplomatic Service, suggested that, despite a growing clamour from businesses leaders for greater clarity, little would now happen until after the forthcoming German election. “These are very complicated negotiations and the government didn’t have a plan after the referendum, so it has taken time to work out a plan, and they are still working it out,” he said. “I believe that negotiations will only get real after the German election on September 24, when the EU will be in a position to formulate its position more clearly, and we can then move forward.” In response to questions about a what a transition period could or should look like, Fraser argued: “Focus on transition is essentially a bit of a red herring – what is important for businesses is that they need clarity. Not in 2019, but as soon as possible because people are making contingency plans, but they need answers, to know the intentions of what a new partnership with the EU will be.” Miriam González Durántez, partner at Dechert LLP, where she is co-chair of the firm’s international trade and government regulation practice, focusing on EU trade law and policy, said that the real issue “is people can’t believe how slow it is”, referring to the apparent lack of progress by the government.

NEED FOR REAL ANSWERS

“Does anyone know what model the government is going for? No. But this is crucial for your businesses. So we need some real answers. How do you keep trade going without many more obstacles going forward? Having something that guarantees the status quo can continue, but that is a

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form of stopping the clock – a transitional period that is not complex, so if [negotiations beyond March 2019] take six months, one year, two years, you can continue to trade.” There was general agreement that negotiations would not be concluded by March 2019, so that the UK had a choice, as Durántez put it, of “leave just like that and do whatever it wants, or the other channel is extension of negotiations, but that requires more time – a kind of stopped clock situation or a fudge, continuing membership of the EU”. Tim Martin, owner of Wetherspoons and an ardent “leave” proponent, countered the call for a transition period, arguing that “we should leave in March 2019, whether we have a deal or not”, otherwise there will be “ongoing uncertainty for business”, which he suggested would be “worse than the alternative”.

The panel shares a lighter moment

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WSTA CONFERENCE

FOCUS & ANALYSIS

“There isn’t a need for a long-term trade agreement [with the EU], because we already trade with 90% of the world without free trade agreements. And the EU does a huge amount of trade without trade deals, with China, India, Australia, so trade goes on,” Martin added. Martin’s appeared to be a minority position in the room though, and Fraser, who voted remain, pointed out that any agreement with the EU post-Brexit would inevitably represent a deterioration from current trading conditions. He reminded the audience that the “EU is 45% of our trade, the BRICs 9% combined”, saying that while a loss of trade with the EU may be offset by increased international trade, this is by no means an easy path to follow. Fraser also warned that Brexit is “not a top preoccupation with the people or governments of Europe at the moment”, and that many European nations – in part because of recent history involving wars and dictatorships – have “a very different way of looking at the European Union”.

WTO TRADE RULES

With regard to a ‘hard Brexit’, with the UK crashing out of the EU without trade “THE LOGIC TO ME deals in place in March 2019, Durántez IS TO END UP WITH argued that there was little appetite to SOMETHING AS CLOSE embrace WTO trade rules in the UK. AS POSSIBLE TO WHAT “If the UK wants to trade on WTO WE HAD, BUT NO terms, that could be done over a week FORM OF BREXIT WILL and the best moment to do that would GIVE US THE SAME be now. So if the government is not ready ADVANTAGES WE HAD to do that, then it is not an option that is WITH THE EU” being considered,” she said. SIMON FRASER Fraser added: “And the reason this is not a good option… is because [WTO would be] very weak in covering services and the British economy is heavily reliant on services, [and] they are where you need the bilateral trade agreements. “There is nothing that compares with the regulatory cooperation we have in the European Union. People talk about a single market, but what the EU represents is a single regulatory space, which goes much deeper.” Fraser seemed to sum up the mood of many at the conference, saying: “The logic to me is to end up with something as close as possible to what we had, but no form of Brexit will give us the same advantages we had with the EU.” Those harbouring hopes that Brexit may be reversed, though, had cold water poured on the idea by Durántez, who suggested that “remainers” – many business leaders among them – are putting up a surprisingly tepid fight when it comes to any real action. “A point I’d make, not as a lawyer but as this is my country of adoption, is that [the UK] doesn’t look like a country fighting Brexit. I know the feelings of business, I see the numbers with my clients, but in public they don’t quite dare to speak out. So I would say this country is quite far away from reversing Brexit.” The concern for the drinks industry and businesses generally is that without clarity on a potential Brexit deal the respite of a transition period, while welcome to most, may simply be adding another layer of negotiation and uncertainty while pushing the bigger challenge and change further down the line. The message from both remainers and leavers is that business needs to know, and to know soon.

From top: Miriam González Durántez, Simon Fraser, Tim Martin

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FOCUS & ANALYSIS

WINE FALLS BEHIND

WINE

NEW RESEARCH SUGGESTS WINE ISN’T MAKING THE MOST OF OPPORTUNITIES OFFERED BY CASUAL DINING. JO GILBERT REPORTS

TAKING ADVANTAGE

The groundwork is already in place for wine producers, merchants and wholesalers to take advantage of the UK’s vibrant food culture, and not just for the potential for wine and food pairings. It is equally important because of its ability to get consumers away from the TV and out of the house. A growing shift towards drinking at home was highlighted by data from Touchpoints 2017, launched earlier this month, which showed that 52% of adults (26.6 million) now drink at home at least once a week. While this has only increased by 1% over two years, up from 51% of the population in 2015 (26 million people), it’s a good indicator of where those 611,000 pub and bar attendees might have gone. But despite 52% of wine drinkers drinking wine out of home on food-led occasions, and a further 42% drinking wine out of home on both food-led and drink-led occasions

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ISTOCK.COM/GIPI23

A national interest in culinary prowess – I refer you to the 9.46 million people who tuned in for the new series of Bake Off at the end of August – a thriving food scene and the national decline of retail outlets have all contributed to explosive growth in the on-trade in recent years, with restaurants popping up in retail fascias in town centres across the country. The new WSTA Q3 2017 report in conjunction with CGA goes some way to demonstrating this rapid rate of change, placing the percentage growth of UK restaurants since 2011 at 21%. The report also examines the ways in which the sector has changed, in particular, how casual dining outlets are overtaking the big high street chains as the dominant sector for branded drink sales. According to the report, 27% of all drink-led visits to branded outlets occur in casual dining outlets. Altogether, this should be good news for wine, says Sean Busby, senior client manager at CGA, since it is “so strongly linked to food-led occasions, there is a strong starting point for wine to take advantage of this opportunity”. However, the same research suggests that wine is failing to live up to the promise offered by the permutations in the restaurant sector and isn’t leveraging those opportunities in the same way as the food menu.

(CGA data), casual dining outlets could be underwhelming customers with their wine offer. Busby notes: “51% of consumers who visit casual dining brands drink wine out of home. However, just 14% of all main drinks at casual dining brands are wine (of any variety), suggesting that this opportunity is not being taken advantage of.” On top of this, evidence suggests that consumers are not satisfied with the current ranges on offer. Just 25% of consumers who drink (still) wine at casual dining brands rate the quality as “very good”, says CGA, and these low expectations are having an impact on the overall dining experience. “Our research shows that those who do rate wine quality as ‘very good’ are 3.1 times more likely to recommend the outlet than those not rating the wine quality on offer, while they are also more likely to revisit and be satisfied with the overall experience,” Busby observes. The other piece of the puzzle here is also wine sales in the on-trade, which have had a difficult time of late. According to CGA, in the 12 weeks to 17/6/17, volume was down -7% to 360,000 hls, while value fell by 2% to £773m. Figures for the year are similar. Still wine saw some of the biggest increases in average price per litre compared to other alcohol categories, however, coming in at over £21 both for the year and the last quarter. This was in line with expectations, the WSTA said, with the effect of Brexit on sterling and duty increases in March both contributing to higher bottle prices. Now is a delicate time. In many areas of the trade, consumers have shown a willingness to ride the price-hikes and stick with their favourite wines, and there is even the potential for Brexit to drive more appreciation and value in the wine category, if operators and suppliers can get the offer right.

Customers are not satisfied with the wine ranges on offer

“JUST 14% OF ALL MAIN DRINKS AT CASUAL DINING BRANDS ARE WINE”

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FORUM

FOCUS & ANALYSIS

BUILDING BUSINESS

DW OPENS THE DOORS ON OUR DRINKS WHOLESALER FORUM THIS AUTUMN, DELIVERING THE ONLY EVENT DEDICATED EXCLUSIVELY TO THOSE IN THE BUSINESS OF DRINKS WHOLESALE

Building on the successes of our popular regional Drinks Roadshow events, Drinks Wholesaler magazine is launching the Drinks Wholesaler Forum on Wednesday November 15 in central London. This unique event – the only one of its kind dedicated specifically to drinks wholesaling – is designed as a day dedicated to the business needs of all those involved in the sector. Drawing on experts and leading voices from both trade and beyond the industry, the Forum will cover a broad range of topics during a far-reaching programme of debates, seminars and interactive workshops. In addition to being a great opportunity to network with colleagues and likeminded peers in the trade, the Drinks Wholesaler Forum will address the challenges and opportunities facing the sector, bringing together wholesalers of every shape, size and speciality, with brand owners and those with experience in sectors relating to the successful running of your business. While this will be a content-led day, there will also be the opportunity to taste wines, spirits and beers from some of our key partners.

And, after a content-packed day spent dissecting, discussing and debating the industry, there will be a relaxed party to round off the Forum and mingle over a drink or two.

ON THE MENU The content on the day will include the following subjects during the discussions and workshops:

DEVELOPING AND GROWING YOUR WHOLESALE BUSINESS (PANEL-LED DISCUSSION)

Covering such topics as financing to grow, scaling up, collaborating with other wholesale partners and developing national distribution services, drawing on the expertise of a multi-disciplinary panel.

LABEL DEVELOPMENT CLINIC (WORKSHOP)

Against a backdrop of significant and ongoing growth in private and exclusive label, this session will bring in expertise from leading companies in the field, exploring the considerations, costs and benefits of creating an own-label range that satisfies the requirements of all in the supply chain.

TECHNOLOGY WORKSHOP

In today’s fast evolving world it has become increasingly crucial to keep apace and make the most of technological and online advances, which is where our panel comes in, offering insider advice and expertise on a range of topics salient to the running of your businesses.

CLEVER SELLING WORKSHOP

Gone are the days when a salesperson could simply present a wine, spirit or beer to an account, sit back and expect it to be listed. This session will explore what the modern account buyer is looking for. All in all, this promises to be an unmissable day for anyone involved in the business of drinks wholesaling. Admittance to the Drinks Wholesaler Forum will be free to all those operating as drinks wholesalers in the UK.

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If you want to reserve your (free) place at the Drinks Wholesaler Forum, please contact helen.heppell@agilemedia.co.uk For brand owners interested to get in front of the UK’s best drinks wholesalers, please contact stuart.sadler@agilemedia. co.uk The success of the Drinks Wholesaler Roadshows sparked the idea for the Forum

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INSIGHTS & DATA SUPPLIERS’ SHOUT

FIGHTING TALK

FOLLOWING OUR LAST ISSUE’S FEATURE EXPOSING BUYERS’ CRITICISMS OF ACCOUNT MANAGERS, ANGELA MOUNT OFFERS SUPPLIERS THE CHANCE TO RESPOND

or understandable reasons, many suppliers and distributors are only prepared to talk on condition of anonymity when it comes to responding to buyers’ criticisms of the service they offer. After all, sales are the lifeblood of a supplier’s business and voicing opinions about buyers, across any area of the business, is not going to endear them to their customers. However, just as buyers expressed strong views on their suppliers, equally strong views flow from the opposite direction, with suppliers frustrated about their own relationships with buyers. Business relationships need to work both ways, and with many suppliers that Drinks Wholesaler spoke to, certain common gripes and frustrations clearly emerge to counter those voiced by buyers. Those gripes begin with the seeming lack of understanding of the complexity and logistical demands of the supply chain itself, along with the realities of the bigger (global) commercial picture. “Sometimes buyers just aren’t aware of the whole chain of events and costs that goes “WE REALISED LAST towards putting a product on shelf,” says one YEAR WE NEEDED TO leading supplier. ”It’s not just about getting wine, be it bulk or bottled, on to a container and INVEST IN NOT JUST CLASSIC WSET TRAINING, shipped. It’s about all the other associated costs BUT COMMERCIAL – quality control, labelling, travel to go and TRAINING TO EQUIP OUR blend, especially at entry level”. TEAMS WITH Another supplier adds: “Everyone is getting THE TOOLS TO DO squeezed, no one is making any money, and THE JOB WELL” many of our producers are telling us that they want to focus on other markets – China and the ANDREW BEWES US – because they’re more viable. “Yet there is still this arrogance from UK buyers that they’re the most important and we have to play to their tune. And that’s the same from supermarkets to restaurants, who expect investment, even when based on tiny volumes.” But there is also an underlying acknowledgement from suppliers that many buyers, on-trade groups and retail included, are under huge pressure and having to follow the company line. “Of course we have sympathy with the buyers. We understand the pressures they are under, and never more so than today,” one sales director says. “It’s obvious on

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occasions that the buyers want to go in one direction, but have to obey the party line. They have ethics, but occasionally these are compromised.” With the current competition right across the market, the pressure comes from the top across the bigger buying groups – whether retail or on-trade – where wine is merely one commodity in an arsenal of weapons used to drive sales. The pressure to be competitive on price has never been greater. Another gripe is the immediacy of buyers’ demands, with accounts expecting near instant results from their suppliers. “Buyers across the industry, however big or small, just don’t understand how difficult it is to react at very short notice,” one supplier to a leading on-trade group complains. “We understand their pressures, but at the same time, being asked to set up account forms, fill in QA forms, fund events at short notice, or bring forward stock deliveries is a nightmare to deal with. This is normally due to a mess-up on their side, but causes far too many challenges.” Much of the criticism of account managers from buyers in our earlier feature came down to the calibre of their experience, training and knowledge. This is an area in which the larger businesses have been investing to a considerable degree, and are happy to speak openly about, as Andrew Bewes, managing director of Hallgarten Druitt & Novum Wines, makes clear. “We realised last year that we really needed to invest in this side of things – not just classic WSET training, but commercial training to equip our teams with the tools and techniques to do the job well,” he says. “The market is ever more competitive, and we need to keep that edge, to take the expertise of our sales team to a higher level.” All major distributors now have these programmes in place, but it does still come down to the skills of the individuals who are doing the work on the ground. Another criticism is that smaller wholesalers are perhaps less likely to focus resources on training focused on understanding buyers’ needs, rather than selling on their own agenda. But, in contrast, it is these same smaller businesses that are investing the time to become experts in their region, while building local relationships – a plus that buyers may fail to take into account when demanding 24/7, perfectly honed service and support.

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BUYER SHORTCOMINGS

LACK OF UNDERSTANDING

INSIGHTS & DATA

“SOMEONE WHO HAS JUST TRANSFERRED TO WINE FROM THE BAKERY DEPARTMENT IN RETAIL, OR THE FOOD SECTOR IN HOSPITALITY, HAS NO UNDERSTANDING OF THE COST PRESSURES WHICH ENSUE AS A RESULT OF POOR HARVESTS AND BAD FROSTS”

With the big on and off-trade groups, suppliers large and small have been highly critical of the lack of understanding and experience shown by some of those entrusted with the responsibility of buying wines and spirits – categories that are, after all, specialist, requiring a higher degree of knowledge than many others. Mitchells & Butlers, Fuller’s, Majestic, Waitrose, M&S, Morrisons, the Co-op and Aldi come in for praise, with teams imbued with a high degree of expertise, experience and knowledge at the helm. However, other notable operators incurred a barrage of criticism from suppliers across the board -– not for the product selection side of their businesses, but for the commercial buying aspect. There has always been a fine balance between bringing in wine experts, who may not be the most commercially astute people in the business, and commercial buyers from other categories, who do not understand the intricacies of the wine sector. “Someone who has just transferred to wine from the bakery department in retail, or the food sector in hospitality, has no understanding of the cost pressures which ensue as a result of poor harvests and bad frosts,” one distributor says. “They haven’t got a clue”. Such criticism reaches way beyond the multiple

retail and larger on-trade groups, also being directed at restaurants and some independents. There are two divergent trends at work, one operator suggests. “There are some really smart independent retail owners who know exactly what they are doing and are doing it brilliantly. They work out their strategy, evolve it, refine it. However, there are others who start up a business as a hobby, and rely too much on the chosen suppliers who influence them. That’s not a commercially successful model.” Another states: “It’s even worse in restaurants, with sommeliers and F&B managers who clearly have no idea (some by their own admission) of the cost implications of decisions they make, and who rely totally on their chosen suppliers for guidance. This puts total power with the chosen supplier and implicates the cost base for their business owners. “Too many restaurant owners empower their sommeliers to too high a degree. The majority of these buy on their own whims, without understanding the financial implications of the deals they are doing.” It’s a delicate balance. But the clear message is that both buyers and suppliers perhaps need first to look at their own approach to and demands on the other party before lobbing bricks across an ultimately damaging divide.

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Suppliers can be critical of buyers – but mostly don’t feel comfortable going public

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INTERVIEW:

ALISTAIR HARRISON & DAVID PROBERT VENUS WINE & SPIRIT MERCHANTS

ome companies shout their successes from the rooftops, while others prefer to operate more discreetly at street level, piling energies instead into driving relationships with existing and potential accounts. It’s fair to say that Venus Wine & Spirit Merchants falls firmly into the latter camp, with this family-run drinks wholesale and cash and carry business, run by second-generation chairman Laki Christoforou, tending to keep away from the limelight. Venus is a significant player, though, plying its trade from its Tottenham and Leeds depots to an ever-growing number of customers within and beyond its traditional London heartland, supplying an increasing mix of group and independent on-trade accounts. The acquisition of The Madison Drinks Company in 2016, “significantly expanded” its keg and packaged beer range in addition to its traditional strength in spirits. Bringing aboard premium accounts such as the Drake & Morgan group further bolstered Venus’s positioning as a one-stop-shop composite wholesaler. Put into numbers, Venus’s last published accounts in 2016 revealed a turnover of £85m, with a little probing suggesting that this figure is projected to grow well north of £90m this year – up from £50m just five years ago. And, as head of sales David Probert points out, taking into account the giant that is Conviviality (£1.4bn turnover), and large nationwide rival LWC (an estimated £300m turnover), Venus “probably sits in the top four or five wholesalers in the country”. Probert makes the point about size, he says, “to show the scale that we are – we are not a small player, but a quiet operator that prefers to get on with it”, suggesting that many in the wider trade are behind in their understanding of where Venus stands today. Spirits remain at the heart of the Venus portfolio, which runs to 4,000 lines, with a wealth of premium brands now joined by the newly boosted beer portfolio, plus an increasing range of wines. This is nudging 400 labels (with 600 on the cash and carry

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AS LONDON-BASED VENUS STEADILY GROWS ITS REACH, ANDREW CATCHPOLE CATCHES UP WITH A QUIETLY AMBITIOUS OPERATOR WITH ITS EYE ON THE PREMIUM

“WE CAN PUT TOGETHER A VERY DECENT 30-BIN LIST FOR A GASTROPUB, ALONG WITH OUR STRENGTHENED BEER OFFER, AND THIS IS ONE AREA OF GROWTH FOR US” DAVID PROBERT

VENUS RISING

Above: Probert Above right: Harrison

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ALISTAIR HARRISON AND DAVID PROBERT

shelves), now accounting for around 10% of wholesale sales, with wines such as Pewsey Vale Riesling and Antinori Chianti Classico peppering the higher end. And this shift from majority spirits focus to a broader, more encompassing portfolio has helped the growth of Venus, with the portfolio still evolving. “We can put together a very decent 30-bin list for a gastropub, along with our strengthened beer offer, and this is one area of growth for us, especially since we bought Madison’s,” says Probert, adding that the two companies still retain their identities and clients. “Our focus is to offer total drinks solutions for independent on-trade, so we don’t really deal with national accounts, but groups, including places such as Soho House, and hotels like the Dorchester and Berkeley, along with members’ clubs, nightclubs, plus bars, which are still really strong, such as Shoreditch Bar Group, which has 15 outlets.” And good old pubs – “proper boozers” – still make up a significant and important share of Venus’s business. But across all sectors of the market, Probert says that

“premiumisation” is the name of the game, with “people willing to pay for a good drink, with a lot of places doing well because they are offering good service, with quality products, and lots of venues are opening as well” – which he believes Venus is in a great position to supply, especially as the wholesale sector continues to consolidate.

PERSONALISED SERVICE

It’s a point that Venus’s chief operating officer, Alistair Harrison, picks up on, reasoning that while the biggest operators have scale on their side, it will be those that now focus on both premium and a personalised service that will best thrive in the current conditions. “There are changes in consumer behaviour in terms of them drinking in rather than out, so it means all are fighting for a smaller share. For some it’s going to be a race to the bottom and then a sorting out – only the fittest will survive and the cycle starts again,” says Harrison. “We are big enough with a lot of our key suppliers that we get good buying terms, so can pass those on to customers. But while we don’t have the scale of a

INTERVIEW

Bibendum or Matthew Clark, we also don’t have the pressure of reporting [to a board or shareholders], so can do things in a bit more of an entrepreneurial way, take decisions and react to the market quickly, so we are in a good position.” Being able to stay nimble in an ongoing wholesale climate of mergers and acquisitions is essential, says Harrison. This in turn means appealing to and approaching different customer segments in different ways. He also argues that, from both a wholesale and client perspective, the flexibility of not having any agencies is a plus. “What Venus do is about what our customer wants. Some of our competitors that have their own agency brands feel the need to push them, but the way we work is to have conversation with the customer and look for what they are looking for,” he says. “We will talk to them about what is right for their business, and will use our relationships with all of the brand owners. But it’s always about what the customer wants.” Staying ahead goes hand in hand with fighting talk, but both Harrison and Probert believe that they have the edge on competitors in the broader London/ southern catchment area, which for them extends as far afield as Oxford and Bristol, while also pointing to healthy growth elsewhere. From Leeds, Venus’s reach is growing in cities as diverse as Nottingham, Manchester, Liverpool, York and Newcastle, with the company continuing to pick up significant on-trade group accounts. Its strengths are growing in servicing the main conurbations, which Harrison says Venus can reach “as frequently as business dictates”, which is also being driven by the organic growth of existing accounts and, increasingly, bringing new customers into the fold. Probert concludes with a general comment on the broader trade, which seems to sum up the state of the market and reinforce the wisdom of the more sustainable path he says Venus is taking. “It’s just so aggressive out there and almost ridiculous at times, with people quoting for business knowing they can’t be making money – there almost seem to be a bit of desperation, and that’s all part of driving it down.” But Venus, it seems, is heading the other way.

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FEATURE MARK-UPS & MARGINS

WITH TRADING CONDITIONS TOUGH FOR RESTAURANTS AND BARS, ANDREW CATCHPOLE CANVASSES WHOLESALERS ON HOW THEY CAN BEST HELP ACCOUNTS UP THEIR BOTTOM LINE AND WHAT ADVICE THEY MIGHT OFFER

t’s frequently stated that the business relationship between supplier and account should be viewed as a partnership, and quite rightly, as it is in both parties’ interests to ensure the successful and profitable sale of any drinks passing down the supply chain to the consumer. In the current climate, where those same consumers are increasingly sensitive to mark-ups while businesses are facing pressure on margins, the importance of working together to protect and even boost the bottom line becomes increasingly clear. With this in mind, Drinks Wholesaler asked three very different

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MARGIN RETURN 28/09/2017 14:36


wholesaler/suppliers what advice they can give to accounts looking to stay ahead of the game. From cash versus percentage margins, gap analysis and market research, to competitive (and alternative) sourcing, pushing the top 20 and considering bespoke labels, the ideas are as comprehensive as they are far-reaching. Above all, though, it’s about keeping the drinks range fresh and relevant for the customer. And those that heed this advice are those most likely to win.

ANDY BAILEY, ON-TRADE NATIONAL ACCOUNT MANAGER, BROADLAND WINERIES

YAKOBCHUKOLENA/ISTOCK/THINKSTOCK.COM

“For wholesalers or retailers presented with price increases from their suppliers, they should always look to pass these across to their customers or it will obviously erode their own margin. In addition, and from past experiences, a Q. IN WHAT PRACTICAL WAYS CAN SUPPLIERS wholesaler (or a retailer) should look at BETTER ASSIST ACCOUNTS TO PROTECT AND EVEN its top 20 high margin products with a IMPROVE MARGINS ON DRINKS IN THE view to promoting them aggressively. FACE OF RISING PRICES AND OTHER This should enhance margin if carried INFLATIONARY PRESSURES? out effectively. “In addition, they should carry out a CHRISTOPHER PIPER, MANAGING DIRECTOR, full margin review on any low-margin CHRISTOPHER PIPER WINES or possibly zero-margin products and “We speak to a lot of restaurants about wine margins, then look to either increase the pricing or but also food margins, and a lot of imported and local remove the product from the business. stuff has gone up in the past six to seven months. A lot of “Wholesalers and retailers should also restaurateurs are very nervous. work with their suppliers and carry “In terms of margin, if a wine goes up from £10 to £11 out a gap analysis and market trends selling price to a hotel or restaurant, if it wants to maintain research and, where possible, fill these the margin, that £1 increase is likely to be £3 on the list, the gaps with higher-margin products. percentage margin goes up. But if it is just put up £2, the In addition, they should also look at cash margin increases, so a lot are saying cash margin is brand or product swapping to higherwhere it’s at, particularly if [the wine is] not margin brands and, where house wine level. appropriate, place these “THE USE OF HOTSPOTS products in a prominent “A surprising number of people are saying OR CUSTOMER they are making more money if there is less position in the outlet or TOUCH POINTS margin. So many people have slavishly been in their chosen form of WITH EFFECTIVE told by accountants and bean-counters that advertising materials. The PROMOTIONAL margin is everything – well it isn’t if you use of hotspots or customer MATERIALS IS AN are not going to sell anything. You can have touch points with effective IMPORTANT ELEMENT” Châteauneuf-du-Papes at [a high price], but promotional materials ANDY BAILEY ask how many bottles are is an important element. sold? None. For example, table talkers, “If you look at cheap wine between £4.50 noticeboards, price-point and £6 ex-Vat, you need to be careful with margins, but promotions or pre-prepared flyers or once above that you can apply cash margins fairly easily brochures to create awareness.” and you will sell more wine, which is why we are seeing MARK ROBERTS, HEAD OF improvement in sales at the mid-level.” SALES, LANCHESTER WINES “We have some restaurants that actually write on the “An intrinsic element of how wine list, in the introduction, that this is what they are doing, merchants, such as ourselves, enable and that is quite exciting. Others have introduced 50cl improved margins is through competitive carafes, to encourage people to drink up the list, keeping sourcing. We understand that harvest margins much more sensible and protecting them, while and global markets impact the price of encouraging people to trade up rather than buying the wine we purchase and our role is to ubiquitous house wine.” mitigate these factors, which may mean exploring new sourcing options in order to maintain both quality and price point. A clear winner in this over recent years is eastern Europe, with ourselves and other major wine importers sourcing parcels from Moldova, Romania, Hungary, etc. This approach hasn’t deterred the consumer, who tends to purchase on variety and then price. Rather it has enabled the venue operator to ensure a consistently priced product and maintained margins. “We also focus on offering wholesalers and outlets limited-edition parcels of wine which may be used as offers or a ‘manager’s special’. This not only creates an appealing offer for the customer, it enables the outlet to increase

INAL RNS

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FEATURE MARK-UPS & MARGINS

cash margin on a specific product without incurring any negative effect to the GPM of the wider wine list. “We’ve seen this approach work through our highly successful Vintrigue range of boutique bulk wines. Vintrigue combines leading wine sourcing and wine marketing with consumer trend forecasting and brand development to create a portfolio of premium, unique wine brands. “One thing to note for all venues – there is a growing awareness among restaurant-goers about wine prices thanks to the increasing number of wine search engines, smartphones and apps. Customers will undoubtedly include retail price within this research, which is why we create wines exclusive to one channel or the other.”

Q. ARE THERE ISSUES THAT ARE HOLDING ACCOUNTS BACK ON ANY OF THE ABOVE AND HOW BEST CAN A SUPPLIER ASSIST THEM IN OVERCOMING ANY STICKING POINTS?

“Owner-driven places have no problem doing things differently, but chains and groups – ‘money crunch’-led businesses – often can’t think outside the box, so there is an issue with them. We still have to fight against ‘accountant-led boss man’. There are some frightening margins going on in some group-led, so-called customeraware operations. “With putting prices up, it depends on what sort of relationship you have with customers as a wholesaler and importer. Our restaurant customers, when we put prices up due to foreign exchange, have put their prices up. But the average wine we sell has gone up by between 60p and £1 a bottle, not due to duty or inflation – people are actually buying better wines. “You can’t just go putting up prices willy-nilly because the concern is that you might have to put prices up again if the pound throws another wobbly. You have to be very straight and transparent with customers and, when things get better, drop those prices back, which we have done in the past.”

ANDY BAILEY, ON-TRADE NATIONAL ACCOUNT MANAGER, BROADLAND WINERIES

“The long lead times that some customers have can be an issue. With the way the market moves so fast it is difficult, due to time constraints, for wholesalers and retailers to always be up to date with the latest trends, especially if they run a two-monthly or quarterly promotion. Therefore the flow of information and market statistics the supplier can offer is very important. “Although social media is a big buzz phrase and a great tool for getting a message across, time constraints and abilities to be able to use these forms of media may be limited. “In respect of point-of-sale such as table talkers, this can also be limiting to an independent wholesaler or retailer due to design costs, printing costs and time limitations and experience in putting it together. But where a business is able to use this effectively, it can deliver results, including

18 The DRINKSWHOLESALER

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CHRISTOPHER PIPER, MANAGING DIRECTOR, CHRISTOPHER PIPER WINES

greater awareness of the products and services that the business has to offer.”

MARK ROBERTS, HEAD OF SALES, LANCHESTER WINES

“YOU CAN’T GO PUTTING UP PRICES WILLY-NILLY BECAUSE YOU MIGHT HAVE TO PUT PRICES UP AGAIN IF THE POUND THROWS ANOTHER WOBBLY” CHRISTOPHER PIPER

“This is where the expertise of the wine merchant comes to the fore. We must stay on top of global trends, finding efficient supply and keeping wine lists as relevant to the consumer as possible. Above all, the quality of the wine must be there. If it’s the right price but not the right quality, it simply won’t sell. “As the global market changes, outlets of all shapes and sizes must adapt – as must wine merchants. Initially we approached our move from Australian Pinot Grigio to Moldovan cautiously simply due to what we thought might be questions about the county of origin. However, we needn’t have worried as we’ve had a wholly positive reaction. We worked hard beforehand to ensure the juice was outstanding and at the right price point – feedback echoed by our customers. “Our learning from this experience is that the world of wine is ready to explore new sources and customers are ready to join them on that journey.”

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FEATURE SPARKLING WINE

AS TRADE AND CONSUMER THIRST FOR FIZZ CONTINUES TO GROW, THE DOOR IS EDGING OPEN FOR A WIDER AND MORE PROFITABLE REPERTOIRE OF SPARKLING WINES. ANDREW CATCHPOLE REPORTS

BUBBLING UP here is no doubt that sparkling wine sales are fizzing. So much so that it’s worth staying with us for a while as we crunch some figures to highlight the extent of the shifts in drinking habits that continue to shape this ever-more popular category, especially as signs are that tastes are beginning to broaden out beyond the poles of Prosecco and Champagne. Contrasted with a moribund background for UK still wine sales, which continue to stall (-1% volume and +1% value in the 12 months to June 26, 2017; Nielsen off-trade figs from WSTA Q3 report), consumption of sparkling wines rose by 12% in both value and volume during the same period, clearly announcing that the British love

20 The DRINKSWHOLESALER

affair with bubbles continues its roll. Champagne, admittedly, continues to fare less well, with off-trade volume and sales down -7% and -4% in the 12 months to June this year, although price paid per litre crept up 3%. To put the battle between often cheaper sparkling alternatives (overwhelmingly Prosecco) and Champagne into perspective, the former commanded a £816m share of the overall off-trade wine market, while Champagne sales came in at £316m. It is in the on-trade, though, where the real contrast between Champagne and other sparkling wines emerges, with figures revealing that in the 12 months to June 17, Champagne volumes and value dipped -9% and -5%, while sparkling wine grew by a whopping 33% and 27%

Glera vines in Valdobbiadene

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TOTAL UK OFFTRADE PROSECCO MARKET (NIELSEN 52 W/E JULY, 2017)

respectively (CGA, WSTA Q3 report). sitting it out on the sidelines, with English sparkling wine Prosecco, of course, heads up this charge, also now providing a wholly credible quality option at the in both on and off-trades, with year on year high end. double-digit growth delivering a further These ‘alternative’ fizzes in turn present an opportunity 17.6% rise in value off-trade sales to July for suppliers, wholesalers and retailers to up the ante and 2017 and 60.6% value growth in the on-trade to push more premium sparkling sales by dipping into the mid-June 2017 (see box). wealth of great quality and often good value sparking Prosecco is clearly here to stay, as a new staple of the wines that the world has to offer. British drinking repertoire, having almost single-handedly “[Prosecco] sales have already slackened a little and brought about the shift in perception of sparkling wine as in recent months prices and availability in Italy have an ‘any time’ – rather than special occasion – drink of choice. improved, which is resulting in parcels of wine being What is perhaps more insightful than the headline released on to the market at lower price. This will help growth figures, though, is that the average bottle price of to counteract the exchange rate problem and help to Prosecco has been falling slightly, down to £7 from £7.04 in keep prices retail prices down,” says Nick Tatham, wine the off-trade and down to £5.63 from £5.74 by the glass in development manager at Continental Wine & Food. the on-trade (see boxes). “PROSECCO IS SEEN ALTERNATIVES Such a small fall in value may seem almost “The market has, I believe, almost AS AN AFFORDABLE incidental, but set against a category that has reached saturation point though and INDULGENCE, SO IT no clear brand leaders and little ladder to guide some consumers, either because they HAS APPEAL AMONG consumers to the premium, it does suggest that have been disappointed with the AN UNUSUALLY WIDE Prosecco may be closer to plateauing, at least quality of some of the poorer wines or DEMOGRAPHIC OF in the value it can return to the trade in the CONSUMERS THAT STILL because they are merely bored with longer term. Prosecco, may well be taking a look at the WINE DOESN’T HAVE” Meanwhile, other sparkling categories, often alternatives, such as Cava.” TOBY SIGOUIN selling in the price range gap between Prosecco It’s a view echoed elsewhere in the and Champagne, are gaining ground after long trade, with Toby Sigouin, wine buyer at Inverarity Morton, adding: “Prosecco remains the biggest seller and is continuing to grow, although growth is starting to plateau. The biggest growth has probably come in sparkling wines such as premium Cava and Crémant. Champagne is performing steadily.” What Prosecco has done, according to Sigouin, is bring new people into contact with the wine category – people who, one presumes, can now be encouraged to further explore and trade up to other and different sparkling wines. “People who drink Prosecco aren’t necessarily wine drinkers,” continues Sigouin. “Prosecco is seen as an affordable indulgence, something that can be enjoyed any day of the week, so what this means is that is has appeal among an unusually wide demographic of consumers that still wine doesn’t have.” Laurent Delaunay at French sparkling TOTAL UK ONproducer Badet Clément is perhaps TRADE PROSECCO predictably more forthright in his opinion MARKET of the UKs favourite fizz, saying: “The CGA OPMS MAT TO MID-JUNE, 2017 problem with Prosecco is that the UK Value: up 60.6% to £297.5m market has been flooded with so much Volume: up 63.8% cheap Prosecco that now consumers can’t Average price per 175ml glass: see why they would need to spend more to down to £5.63 from £5.74 buy the more premium styles.” “So yes, it has reached a price ceiling, and I think this does open the door for other sparkling wines to step in and fill the large price gap between Prosecco and Champagne,” he adds. ”And France has a lot to offer here with some really top-quality regional sparkling wines such as Crémants de Bourgogne or Limoux, which are starting to gain in popularity as consumers look for other options and, being méthode

Value: up 17.6% to £579.2m Volume: up 18.3% Average price per bottle: down to £7 from £7.04

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OKFOTO/ISTOCK/THINKSTOCK.COM

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traditionnelle they offer really good quality at very good value prices.” At rival French producer and major French wine supplier to the UK, Les Grands Chais de France, managing director Mark Kears confirms that sales of fizz from just across the Channel – but not those bearing the word Champagne on the label – are experiencing something of a boom. “We have seen strong growth across the mix of channels, brands and styles [and] I think French sparkling “PREMIUM CAVA wines like Cremant are very OFFERS CONSUMERS reasonably priced and have A SCALE OF HIGH a good quality image, but the QUALITY ASSETS. WE challenge lies in communicating HAVE TO COMMUthis to consumers – there is NICATE THESE IN A definitely a lack of awareness SIMPLE AND INTERabout Cremant, but it needs ESTING WAY” investment and support to raise NICK MANTELLA awareness,” Kears continues. “There’s an opportunity to develop the craft concept around Cremant due to its regional diversity and to build consumer education around that. Cava producers have also been banging the “traditional method” drum, pointing to the benefits – such as extra depth of flavour and broader food compatibility – that sparkling wines made by the same method as Champagne can deliver. This is at the heart of Cava’s leading quality producers’ own concerted efforts to lift the perceived quality bar and persuade consumers to try and buy more premium (read £10 plus, where Prosecco appears to hit its price ceiling) wines.

QUALITY FOCUS

A new top-level classification, Cava del Paraje Calificado, awarded to single estate or single vineyard Cavas, has crowned this quality focus, and while producers have been busy focusing on higher-quality tiers, so the on-trade and independent merchants have been sitting up and taking notice too. “Premium Cava has grown in the sparkling category boom, and over the past 10 years’ Cava has doubled from two million to four million cases in the UK alone,” says Nick Mantella, commercial business development director at Marques de la Concordia Family of Wines, agreeing that where Prosecco led with the “demystifying” of sparkling drinking occasion, others, including Cava, are now following. “Premium Cava offers consumers a scale of high quality assets. We have to communicate these in a simple and interesting way, that it is produced using the traditional method, the same method used to produce Champagne, which consumers can relate to giving credibility, value and some wine knowledge,” adds Mantella.

CURTOICURTO/ISTOCK/THINKSTOCK.COM

FEATURE SPARKLING WINE

Cava heartland Sant Sadurní

CAVA IMPORTS INTO THE UK (CASE VOLUMES, 000S OF 9 LITRE CASES) (IWSR 2017) Volume 2012

Volume 2015

Volume 2016

TTL Volume 2012 to 2015

2,545.75

1,999.25

1,930.00

-7.74%

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TTL Volume 2015 to 2016 Volume -3.46%

Sigouin at Inverarity is also championing Cava as a sparkling category best placed to provide the next step up for consumers looking at expanding their repertoire beyond Prosecco. “Premium Cava represents the best value for money as general pricing in Spain is very competitive, and while Prosecco is always tank method, premium Cava, like Champagne, follows the traditional method,” he says. “Cava completely blemished its reputation with really dreadful wine sold in huge volumes by supermarkets, but now people are coming back to it because the quality of overall winemaking in Spain has come on so much in the past five years, and producers are now making really lovely wines that offer great value.” Prosecco continues to grow, but clearly it has opened the door to other sparkling styles and, it seems, the potential for fleshing out the still fast-growing sparkling category and adding premium tiers and points of stylistics difference is beginning to catch on.

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FEATURE RUM

he WSTA’s headline story from its recent annual spirits report was rum. The starry news was that the spirit is expected to break the £1 billion sales barrier later this year “hot on the heels of booming gin which passed £1 billion in sales” in 2016. This is not the first, nor will it be the last, time that rum is compared to gin in 2017. Comparisons to the attention-hogging juniper juice and its success, highlighted in the WSTA’s report, have followed rum in the past year or so as the thirst for premium spirits takes hold, boosting the number of rum bottles purchased in 2016 to 34 million, worth £960 million – a volume rise of 5% in the off-trade and 6% in the on-trade. But while buying habits and trends for rum are similar to that of gin, with both breaking barriers (albeit at a different pace), the difference in consumer perception and understanding is huge. With its myriad styles and price points, rum in 2017 paints a fragmented picture of Picasso-esque proportions and, despite its gains, still has a way to go to become fully formed in the minds of consumers.

THE FIGURES

According to Nielsen, in the year to August 8 all sub-categories of rum were in growth, other than the largest, white rum (40.9% share), which has shrunk by 1%. Flavoured/spiced (35.5% share) and golden (6.3%) rums continue to be the key drivers with growth up 14.6% and 16.6% respectively. Dark rum (17.3% share) has seen growth of 3.1%. Helen Stares, client business partner at Nielsen, says: “Total rum is growing at 5.9% compared with a year ago, and this is ahead of total spirits’ performance, which is at 3.7%, with the clear drivers being flavoured/spiced and golden rum brands”. This is where the comparisons to gin often

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RUM ISN’T GIN, BUT IT’S HAVING SOME OF ITS SUCCESS, AND HAS ITS SIGHTS ON MIRRORING SCOTCH’S PREMIUM IMAGE. JO GILBERT LOOKS AT THE FUTURE FOR THIS CHAMELEON CATEGORY

FUTURE PROOF October 2017

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FEATURE RUM

begin. Gin and rum constantly cross over one another in reports of the spirits category, such as the WSTA’s report, which says that “though gin tops the table in terms of growth, rum sold more by volume in pubs, bars and restaurants in 2016”. This was driven in the main by the revival of tiki bars, serving tropical-themed rum-based cocktails such as Mai Tai and Zombies, said the report. Likewise, spirits e-tailer 31Dover reports that rum is the second biggest growth category after gin year on year. Marketing manager Marc Sanders traces this evolution back to the noughties, when 31Dover sales of vodka and gin flipped, with gin taking pole position. But while the gin renaissance continues to lead on the site, rum has overtaken gin in terms of growth. This link is bolstered by the fact that rum appears to be successful in many of the ways that gin is successful. It’s cocktail-friendly, diverse and, most importantly, cool – a backup or perhaps wingman on the back bars of the cocktail revolution. These attributes, along with rum’s premium and craft potential, are what lead analysts such as Andy Crossan, consumer insight director at Kantar, to observe: “Rum continues to be a thriving area of the spirits market, growing at an even faster rate in the off-trade than last year. Like gin, the sector is benefiting from consumers opting for more premium products, with more shoppers opting for brands and being willing to be adventurous with their tastes when opting for rum.”

PREMIUM PROBLEMS

But while premium rums are helping to push up rum’s value share of the spirits category, evidence suggests it still has a long way to go in mirroring gin’s success in this segment. This is particularly true in the on-trade where its 2% growth in sales is attributed, according to Phillip Montgomery, client director at CGA, mainly to a “proliferation of non-premium brands”, and driven in the main by the popularity of spiced, often described as a “gateway” to the category. Sales of gin in bars and restaurants have seen a huge uplift, rising 256% in super-premium compared to four years ago (CGA data to June 17), and 100% in premium. By contrast, rums sales in the same segments

are in decline. “Only 0.9% of all rums sold are super-premium, and super-premium sales are in decline. We’re not seeing the same levels of premiumisation as other spirit categories,” a CGA representative says. The number of premium rums entering the market, however, does pave the way for more growth in the higher quality and price bracket, in the same way that the gin market has seen its customer base mature. “We’re seeing the arrival of more niche, premium brands, which, although small, are starting to make their presence in the category known,” Stares at Nielsen adds. “As with flavoured/spiced rum, as well as other categories in spirits, we’re seeing rapid growth coming from some very small, premium brands.”

FUTURE PLANS

Premium is yet to take hold in the rum category in the same way that it has with other spirits. But advocates are determined that this is where the growth will come from in future – and that rum has more of a claim to this segment than gin because of its ageing ability. “The mainstay of the rum category is similar to gin in terms of patterns of growth,” says Nick Bell, retail manager at Amathus, a large importer of rum and rhum agricole. “But there are more premium opportunities in rum. We sell rum for £1,000 a bottle. Gins don’t warrant that. We’ve just acquired vintage rum from 1952. It’s spent 60 years aging in cask – that alone warrants a premium price.” At Amathus, Bell has seen more growth in agricole rhums, which are made from sugar cane juice instead of molasses. Alongside this, Bell believes that rum’s future success relies on building its image as a quality spirit and outlines single cask and cask-finished as areas for potential growth. Using Scotch’s premium trajectory by way of example, he says: “Scotch has modernised itself by doing special editions and cask strength. This is something which has taken a while to catch on in rum.” But the growth in sales of premium rum are paving the way: “Instead of buying two £20 rums, we’ve seen a change in that customers would

NIELSEN THREE YEARS FIGURES TABLE: SDESC

MAT TO WE 15.08.15

Value Sales (£M) MAT TO WE 13.08.16

MAT TO WE 12.08.17

Value change vs year vs two ago years ago

Total rum

£319.0

£323.7

£342.6

5.9%

7.4%

Total rum white rum

£145.3

£141.4

£140.0

-1.0%

-3.7% 26.7%

Total rum flavoured/spiced rum

£96.2

£106.4

£121.9

14.6%

Total rum dark rum

£58.1

£57.2

£59.0

3.1%

1.6%

Total rum golden rum

£19.3

£18.6

£21.7

16.6%

12.5%

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Rums lend themselves particularly well to cocktails

“WE SELL RUM FOR £1,000 A BOTTLE. GINS DON’T WARRANT THAT. WE’VE JUST ACQUIRED VINTAGE RUM FROM 1952. THAT ALONE WARRANTS A PREMIUM PRICE” NICK BELL

SIZE IN TAKEHOME SPEND

Rank # 1 Bacardi 2 Captain Morgan 3 Tesco PL 4 ASDA PL 5 Lambs Navy Rum 6 Morrisons PL 7 Lidl PL 8 Kraken 9 Aldi PL 10 Sainsbury’s PL SOURCE: KANTAR WORLDPANEL

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WSTA: In the past five years, UK rum has seen sales increase 15% by volume and 32% by value. The number of rum brands on the UK market has risen from 50 in 2006 to more than 150 in 2016.

SPICE IS NICE

rather now buy just one for £40 and really enjoy it,” Bell adds. Peter Holland, rum expert and founder of the Floating Rum Shack consultancy, also points to the opportunities to be had from studying Scotch’s premium evolution. “The biggest players in rum tend to be based on price. That’s a shame, as it holds the category back in a way that you don’t see with Scotch. A lot of hard work has been done with Scotch to bring it up to its current level. We need to do the same thing in rum,” he says.

Spiced/flavoured rums are far and away the category’s main growth drivers. Since 2014, spiced rum has increased its share of the offtrade rum market from 25% to 34%. Golden rum is also seeing strong growth in the off-trade – 13% by both volume and value. (WSTA figures)

EDUCATION

But in the main, Holland insists that education is still the most vital component to ensuring rum’s future success. Rum is neither gin, nor is it whisky, but comparisons to these categories from various angles highlight that misconceptions continue to surround the category as consumers, as well as those within the trade, struggle to define it on its own terms. “There is still a massive level of ignorance about the category,” Holland concurs, pointing to the persistent image of rum as a low-quality party drink. “If I can get someone to try it, they realise it’s a quality product. People might have been bitten by it at college and that’s the perception that’s stayed with them. “A large part of what we do is just letting people know that it’s good stuff.” Holland is also a strong supporter of a system of classification called the Gargano/Seale Classification. Drawn up by Richard Seale, master distiller at Foursquare Rum in Barbados, in conjunction with

“IF I CAN GET SOMEONE TO TRY IT, THEY REALISE IT’S A QUALITY PRODUCT. PEOPLE MIGHT HAVE BEEN BITTEN BY IT AT COLLEGE AND THAT’S THE PERCEPTION THAT’S STAYED WITH THEM” PETER HOLLAND

LIZFERNANDEZG/ISTOCK/THINKSTOCK.COM

ON THE UP

specialist importer Luca Gargano, the system doesn’t rely on colour, but rather is broken down into headline categories: Pure Single Rum (single pot still rum); Single Blended Rum (a blend of pot and traditional column rums, comparable with blended whisky); Traditional Rum (traditional spirit column rum, comparable with grain whisky); and Light or Industrial Rum (from modern multicolumn distilleries). This method was presented to a prime audience at the world famous Tales of the Cocktail competition in New Orleans in July by Seale himself. Although not “a panacea”, Holland believes it offers up something crucial, which is creating “a new way of thinking about rum”. “It doesn’t have universal approval,” he admits. “Some brands won’t adopt it because it doesn’t fit for them. I use it in the training I do, because it’s thought-provoking and gets people thinking about what’s artisanal compared to something that is made in a more industrialised way.” Echoing Bell’s call for streamlining rum into the premium segment, Holland advocates a greater level of self-protection to leverage rum’s potential to deliver greater returns. The proliferation of brands at all levels of the price and quality hierarchy means this is a challenge. This is highlighted by Emmali Stenhouse, brand ambassador for Sailor Jerry, who says: “Rum has so much diversity within the category, from the more accessible light rums and agricoles which might appeal to gin or tequila drinkers, to the rich, heavy, aged variants which can resonate with whisky drinkers. “Navy styles and overproofs also lend themselves so well to tiki cocktails – so there really is something to suit everyone across the category.” While she offers up rum’s diversity as an advantage, more coherence is needed – and the next few years will be crucial in moulding the category’s identity in bars, pubs and homes, and in the wider spirits category as a whole. October 2017

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FEATURE CRAFT BEER

hey say imitation is the sincerest form of flattery, but in the world of craft beer the surest sign that the big international brewers admire what a smaller one is doing is when they get their cheque book out and make an offer for it. Stella Artois and Budweiser brewer AB-Inbev has led the majors’ charge into the craft beer space, buying the Chicago-based Goose Island as long ago as 2011. Since 2013, AB-Inbev – which declined the opportunity to comment for this article – has whacked its foot on the accelerator, scooping up a host of other craft brewers across the US (see box). It also entered the burgeoning UK craft brewing scene with the purchase in December 2015 of London lager specialist Camden Town for a reported £85 million, only months after the smaller brewer’s own crowdfunding push had valued it at just £50 million. Other majors have been less prolific. SAB Miller snapped up London-based Meantime in 2015, only to be swallowed up itself by AB-Inbev a year later, with Meantime ending up in the hands of Asahi of Japan soon after in an enforced sell-on deal to satisfy the competition authorities. Heineken’s big acquisition was California’s Lagunitas, in which it originally bought a 50% stake two years ago, taking outright ownership in May this year. Carlsberg bought British microbrewery London Fields in July for a reported knock-down price of £4 million. It will operate as a standalone business unit but its beers will join Carlsberg’s core portfolio and the House of Beers range that it wholesales to premium on-trade venues. Julian Momen, Carlsberg UK’s chief executive, indicated that there was more to come from Carlsberg in the craft beer space and that credibility was an element in its

strategy. “Our customers, and specifically those in London and other major cities, are looking to us to offer them the best possible range of interesting craft beers,” he said, “and we think that, with nurturing, London Fields Brewery has huge potential. It’s the right move for us as we build a credible craft portfolio.”

LIGHTFIELDSTUDIOS/ ISTOCK/THINKSTOCK. COM

BEYOND THE PALE

But the flurry of acquisitions has brought opposition from beer fans and industry commentators who see multinational involvement in the sector – whose name implies a certain artisanal, hand-made touch – as beyond the pale ale. The blog Brew Studs published a hitlist in May of brands it suggested beer fans should boycott because of what it called their “imposter craft beer” status, clearly regarding AB-Inbev as public enemy number one, with the

WITH BIG PLAYERS SCOOPING UP ARTISANAL BEERS, NIGEL HUDDLESTON WADES INTO THE EMOTIVE ISSUE OF COMMERCIALISING ‘CRAFT’ CREDENTIALS

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Craft beer brings kudos to the bigger players

GPOINTSTUDIO/ISTOCK/THINKSTOCK.COM

list comprising virtually the brewer’s entire US craft beer But the big brewers are well aware that not all beer investment portfolio. drinkers are beer geeks-cum-activists. “I’m sure there’s Constellation has also come in for flak for its 2015 deal some evil corporate law that states you’ll lose 30% of your to buy acclaimed Californian brewer Ballast Point. There’s core following when this happens,” adds Avery, “but you’re also been disquiet closer to home, with Brewdog delisting going to take the brand into a new market and expose it Camden Town beers from its bars days after to millions of new potential consumers who the AB-Inbev acquisition. won’t have that tiresome emotional baggage.” “THERE’S NO OTHER With the potential for social media to Criticism of majors’ involvement in the INDUSTRY THAT WOULD craft beer market is far from universal. spread such unrest with unprecedented pace, major brewers are faced with a dilemma: CRITICISE A BUSINESS Andrew Morgan, managing director of FOR BEING BOUGHT BY how to use their craft beer credentials to beer wholesaler The Bottle Shop, which A LARGER BUSINESS get extra kudos as a brewer of renown, specialises in US craft beers, says he was TO GIVE THEM A WIDER while being seen not to dilute the appeal surprised on a visit to the Great American PLATFORM” of the brands they buy or interfere in their Beer Festival to find serious beer-heads ANDREW MORGAN production. clamouring for a sample at the stand for Blue “The whole point of a brand is to create Moon, a craft beer created from scratch by something people identify with and Molson Coors. emotionally – and financially – invest in,” says Zak Avery, “These people who had bought tickets and were in managing director of importer Beer Paradise. “When the the top echelon of beer drinkers in the US didn’t give a perceived core values of that brand change, people get monkey’s who it was owed by,” he says. “And there were a upset, because they feel they’ve been sold short.” couple of other breweries who had ‘sold out’ in the weeks before who were anything but shunned.” Morgan admits to mixed feelings about craft beer takeovers by the big boys. “I could stand on either podium and argue for or against with equal conviction,” he says. “There’s no other industry that would criticise a business for being bought by a larger business to give them a wider WHO BOUGHT platform. That’s just the natural economics of growth.” WHAT WHEN But he says talking to smaller brewers in the US offered a new perspective. “When I gave this opinion that good beer AB-INBEV was just good beer they went into a very strongly-worded, number-laden rant, because they’re so frustrated with 2011 Goose Island, Chicago AB-Inbev [buying so many rivals]. 2013 Craft Beer Alliance, US (32.2%) “They say: ‘Every can of Goose Island you buy you’re 2104 10 Barrel, Bend, Oregon giving them another stone to throw at us.’ For them, 2014 Blue Point, Patchogue, New York there’s no middle ground – they are the enemy. But if we 2015 Elysian, Seattle bought Goose Island Bourbon County Stout I’m sure it 2105 Four Peaks, Tempe, Arizona would sell. I have customers who say they wouldn’t touch 2105 Golden Road, Los Angeles Ballast Point because it’s part of Constellation,” he adds. 2015 Breckenridge, Littleton, Colorado “But if I have fresh cans of [its acclaimed cult beer] 2015 Camden Town, London Grapefruit Sculpin, are they telling me they wouldn’t buy 2016 Devil’s Backbone, Roseland, them from me? It’s unbelievably exciting, awesomely Virginia wonderful world-class beer that’s still brewed in the same 2016 Karbach, Houston, Texas place with the same things in the same way as before.” 2017 Wicked Weed, Asheville, North DOG-MATIC APPROACH Carolina Avery at Beer Paradise rejects the theory that majors are ASAHI snapping up craft beer brands merely to give them a bit of a hipster halo. 2016 Meantime, London “The purchase of Camden is clearly a commercial investment, as it’s a strong brand with a portfolio of CARLSBERG mid-market premium beers,” he says. “There’s clearly a financial value in the purchase, and 2017 London Fields, London there are only so many linear feet of bar space, so I can’t imagine that anyone at AB-Inbev is crying about squeezing CONSTELLATION BRANDS the opposition off the bar.” Avery thinks a craft big-hitter like Brewdog, with a pop 2015 Ballast Point, San Diego, California group-style loyal core of consumer followers, could find it easier to ride any storm of a takeover, were it to occur. HEINEKEN “It’s a really interesting question whether an iconic, fully independent brand could be bought out and still retain 2015 Lagunitas Brewing, Lagunitas, its aura,” says Avery. “My hunch is that if the product, the California (50%) brand and the back story are right, it probably could. It 2017 Lagunitas Brewing, Lagunitas, hasn’t happened yet, but that doesn’t mean it won’t California (100%) happen soon.” October 2017

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FEATURE SOFT DRINKS

SOFT DRINKS ARE SUDDENLY SEXY – AND THERE’S NO LACK OF SALES OPPORTUNITIES ACROSS THE BOARD, FINDS LISA RILEY

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ROMANISAYKOV/ISTOCK/THINKSTOCK.COM

Soft drinks have become cool

nnovation has been flowing across the selection tailored to your customers, so it’s adult mixers and soft drinks category important to talk to them to find out what they in the past year, with barely a week want, he adds. passing without another piece of NPD This is echoed by Ounal Bailey, co-founder hitting shelves. Small and big suppliers of Britvic incubator Wise Head Productions, which alike are keen to grab a bigger share of the developed The London Essence Co range burgeoning market. of mixers (crafted with a signature distilled With health such a hot topic, it comes as little essence) in response to consumer demand for surprise that producers have been tapping into “exceptional-tasting products that truly enhance Brits’ increasing thirst for low and no-sugar their drinking experience”. drinks, while also taking note of the general turn “There’s been an incredible growth in the towards premium and craft that has number, but also quality of options been apparent across the alcohol available,” he says, adding: “For “NON-ALCOHOLIC category for some time, and is now so long, non-alcoholic drinks and DRINKS HAD LONG gathering pace across adult mixers mixers had been sub-standard BEEN SUB-STANDARD and soft drinks. compared to the range of premium COMPARED TO In addition, consumers keen to spirits, craft beers and wines.” PREMIUM SPIRITS, reduce their alcohol intake or who MIXING IT UP CRAFT BEERS AND have completely eliminated it from Mixers, and tonic water in particular, their drinks menu – one in five adults WINES” continue to be one of the industry’s OUNAL BAILEY in the UK are now teetotal (Mintel) biggest talking points and the – are boosting sales and giving the category is going from strength category plenty of scope for growth to strength (see box), with much of this growth as they increasingly look for exciting, generated on the back of the continued rise of the tasty alternatives to their previous UK gin market – off-trade sales alone jumped to alcoholic tipple. £526.8m from £432m in the past year (IRI 52 wks to On top of this, today’s consumer wants “an 16/07/2017 compared to 52 wks to 17/07/16). experience” and they expect a good choice, says And, it’s not just in the off-trade that things Russell Goldman, commercial director, licensed are going well, with mixers in the licensed sector and foodservice, Britvic. becoming one of the best-selling soft drinks, says “Gone are the days when your soft drinks top selling Coca-Cola brand, Schweppes. offering could consist of a bog-standard orange But it’s not all down to gin, says Amy Burgess, juice, full-sugar cola and barely chilled lemonade trade communications manager at Coca-Cola served in a Slim Jim glass with ice (if you are European Partners. The rise of contemporary lucky),” he says. cocktail culture in the on-trade is also whetting In today’s market you need to provide a wide

BATTLE OF THE BRANDS

Schweppes has been working hard in the past couple of years to fight off fierce competition from younger mixer brands, with activity ranging from the launch of its biggest marketing campaign in 20 years, including a packaging overhaul designed to dial up the brand’s strong heritage; the launch of a premium range and, more recently, the roll out of a limited-edition to mark its 225 years in the UK. Yet, despite the considerable efforts, sales continued to decline in the past year, in both value and volume terms (see box). With off-trade sales totaling £68.2m, Schweppes continues to be the top brand, but Fever-Tree is snapping at its heels. So much so that if the pioneering premium mixers brand, which saw sales soar by £27.6m – a 147% jump – to £46.4m in the past year, can continue to grow at even half this level, it will be competing for the number one brand position in the off-trade next year. That’s no mean feat for the challenger brand that burst on to the UK market 15 years ago, going up against a big international player with a premium price tag. Keen to keep the momentum going, Fever-Tree, which was confident from the start that its products – sourced from “the ends of the earth using the finest natural ingredients” – would have a big market, is not resting on its laurels. This year alone it has launched on to all Virgin Airways flights and expanded its dark spirits portfolio with two new variants.

October 2017

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FEATURE SOFT DRINKS

HALFPOINT/ISTOCK/THINKSTOCK.COM

MIXERS - VALUE 52 w/e 23 Jul, 16

52 w/e 22 Jul, 17

YOY

Grand Total

£148,134,912

£178,067,916

20.2

Schweppes

£70,047,323

£68,200,213

-2.6

Fever-Tree

£18,813,001

£46,432,553

146.8

£2,157,349

£2,703,307

25.3

Carters

MIXERS - VOLUME 52 w/e 23 Jul, 16

52 w/e 22 Jul, 17

YOY

Grand Total

182,211,140

200,507,684

10.0

Schweppes

51,272,285

49,362,615

-3.7

Fever-Tree

5,796,291

14,211,251

145.2

Carters

2,782,731

3,495,551

25.6

MIXERS DATA

20.2%

TOTAL MIXERS CATEGORY VALUE: £178.1M UP 20.2%

10% 5.9% 9.1%

VOLUME: UP 10%

UP 5.9%

OWNLABEL: £58.2M

OWN -LABEL VOLUME: UP 9.1%

IRI OFF-TRADE 52 W/E TO 22 JULY, 2017

consumer appetites to experiment more, she says. “The increasing popularity of cocktails is a contributing factor to the positive performance of mixers in pubs and bars, but drinks are no longer just restricted to alcohol. Mocktails are gathering pace as they become an increasingly popular option for people choosing not to drink alcohol, but who still want an indulgent option when they go out,” says Burgess. The demand for cocktails, she adds, is reflected by the fact that they are now offered by 28% of licensed outlets nationwide – a rise of 5,750 outlets year on year (CGA Mixed Drinks Report, April 2016) In a bid to tap into this trend, Halewood Wines & Spirits launched premium mixers brand Lamb &

“MOCKTAILS ARE GATHERING PACE AS THEY BECOME AN INCREASINGLY POPULAR OPTION FOR PEOPLE CHOOSING NOT TO DRINK ALCOHOL BUT WHO STILL WANT AN INDULGENT OPTION” AMY BURGESS

Watt, which the company says is perfectly placed to meet the demands of both bartenders and consumers at home looking to incorporate tonic into their creations. “Tonic has traditionally been associated with spirit and mixer combinations, but with its versatility and the variety of botanicals now being used, it should really be viewed as a flavour enabler, or booster,” says senior marketing manager Leanne Ware. Fever-Tree, meanwhile, says there is a “real demand” for simple mixed drinks with dark spirits, which prompted the business to recently extend its portfolio.

NEW TRENDS

“There are great signs that dark spirits are growing at a global level and we look forward to seeing this develop in the UK,” says off-trade sales director Andrew Ronald. The business had identified the same trends emerging within dark spirits that led to the rise in gin consumption, including premiumisation, the growth of cocktail culture and the rise of craft distilleries, he adds. “The long-term opportunity is huge. Globally premium dark spirits, including whiskies, rums and brandies, are the most-consumed premium spirits, making up 60% of the total premium spirits consumption, compared to gin at just 6%,” he says. Ronald also points to a recent trend in consumers opting for a vermouth & tonic as a “highly” popular apéritif not only for taste, but also because of its low abv.

LOOKING AHEAD:

Going forward, Ronald says he expects to see new and original flavours to continue to be October 2017

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FEATURE SOFT DRINKS PREMIUM NEWCOMERS: LAMB & WATT Launched: June 2017 Manufacturer: Halewood Wines & Spirits The launch of Lamb & Watt marked Halewood’s first foray into tonics. Crafted with “only the finest ingredients” and sweetened naturally with organic blue agave, the quartet comprises Original, Hibiscus, Cucumber and Basil flavours, with each created to inspire bartenders to experiment beyond the classic G&T and bring out “the best” across a variety of spirits.

THE LONDON ESSENCE CO

developed in a bid to quench consumers’ thirst for drinks made with superior quality ingredients, with competition increasing further in the category. This is a view with which Ware agrees, saying that when it comes to tonics, she sees craft credentials playing an increasingly important part “just as it has with gin and beer”. She adds: “As tastes mature and more brands emerge to provide even greater choice, provenance, production and botanicals will become key considerations for both consumers and on and off-trade looking to establish a point of difference in their drink choices and offerings.” And the future is not just looking rosy for mixers but for the adult soft drinks category as a whole, says Wise Head Productions’ Bailey, predicting potential for “unprecedented growth” for the non-alcoholic drinks and mixers market. “We have barely begun to scratch the surface – already we have seen the number of non-alcoholic drinkers increasing dramatically year on year, and the growth of the tonic industry is booming,” he says. While trends come and go, the prospect for development in both those areas are endless, he adds. “There has been a shift in consumer attitudes to non-alcoholic drinks and the demand for premium, high-quality tasting drinks is unlikely to tail off soon,” he concludes.

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Fever-Tree has been a premium trailblazer

Launched: December 2016 Manufacturer: Wise Head Productions Positioned as an upmarket alternative to standard tonics, The London Essence Co mixers range is made with “carefully sourced” ingredients from around the world. It was launched in four flavours – Classic London, Grapefruit & Rosemary, Bitter Orange & Elderflower and Delicate Ginger Ale by Britvic incubator company Wise Head Productions. Each drink contains 20 calories per 10cl and 4g of sugar.

FEVER-TREE DARK SPIRITS Launched: August 2017 Manufacturer: Fever-Tree In a bid to extend the appeal of its dark mixers portfolio, Fever-Tree added Smoky Ginger Ale, made to pair with American and Irish whiskies, and Spiced Orange Ginger Ale, designed for Scotch, rums and brandies. In line with all the brand’s drinks, they are made with natural ingredients and crafted to complement the flavour characteristics of dark spirits.

“WE HAVE BARELY BEGUN TO SCRATCH THE SURFACE – ALREADY WE HAVE SEEN THE NUMBER OF NON-ALCOHOLIC DRINKERS INCREASING DRAMATICALLY YEAR ON YEAR” OUNAL BAILEY

| October 2017 28/09/2017 15:18


ANDREW CATCHPOLE CATCHES UP WITH THE TEAM AT BOUTINOT, WHERE WINE FLOWS FROM VINEYARD TO GLASS

HOLISTIC APPROACH any suppliers talk of connecting the dots between the grape-laden vineyards and final wine-filled glass that reaches the drinker’s hand, looking to bring some of the vibrant story and winemaking experience to bear all the way down the supply chain. But the team at Boutinot have gone a step further, with one foot firmly planted in winemaking and sourcing, producing their own estate wines and exclusive label (its Made by Boutinot portfolio accounts for an increasing portion of the business – see inset), while selling direct and via regional wholesalers in the UK. The company also has agencies in its portfolio, plus a growing international side to this multifaceted business. The business structure and split in the UK market follows a relatively familiar pattern, with Boutinot working with independent retailers who often sell on to restaurants, and supplying some restaurant accounts direct, both within the M25 and around Manchester,

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complemented by regional wholesaler partners and dealings with national on and off-trade chains. “Wholesale and independent wholesale are the main areas of growth” in the UK, says managing director Dennis Whiteley, with this side of the business currently split 2/3 into wholesale and 1/3 independents. Asked about “BEING MULTIFACETED the challenges of PRESENTS continuing to push OPPORTUNITIES, growth across all [ESPECIALLY] FOR sectors of the trade, INDEPENDENTS, and which are under GIVING US BUYING most stress, Whitley is POWER, AND MAKING pragmatic about the tough conditions facing WINE IS A MASSIVE BENEFIT” all in the trade. DEBORAH BROOK “This sounds a bit like a Tory prime minister answer, but they are all challenging, so across the board. But it’s not necessarily a bad thing because it makes you look at everything you do and strive a little harder,” he says.

“You’ll hear from everyone that the UK is a challenge, with Brexit, FX, and you only have to turn on the news to hear about inflation and price rises,” continues Whitely. “Good things and bad things come out of it, the wine business in general will have to get more efficient.” This is where the Boutinot team believe they have an edge, with that foot in winemaking, plus the additional experience born of trading in other markets, delivering a broader picture and greater experience to draw upon. “Being multifaceted presents opportunities, [especially] for independents, giving us buying power, and making wine is a massive benefit, both from the wine quality and production points of view,” says sales manager Deborah Brook. “And one of the benefits of dealing internationally is that it keeps your mind open. “It’s something we don’t talk about much in the UK, but customers know exists – we are doing this and that here,

| October 2017 28/09/2017 10:08


SPOTLIGHT

BOUTINOT BOUTINOT BOOTY: VITAL STATISTICS

Right: Deborah Brook Below: Dennis Whiteley

there and everywhere, but it certainly helps the business.”

VALUE AND SERVICE

Brook says the people at Boutinot are the company’s biggest asset, insisting that “people, wine and customers come first in all that we do”. She continues that “having the ability to grow grapes, make wines, provide exclusive labels, and streamline all of this in a changing market” adds the kind of value and service that purely agency-driven businesses are often hard pressed to provide. And the growing winemaking side of the business – which Whitely says “started for love of wine, in the late 1980s, it wasn’t a big strategic decision” – clearly helps drive other facets of the company. “Private labels and tailoring labels are a growth area,” says Brook, adding that while some quarters of the trade may harbour reservations about this expanding

category, “to tell you the truth, I’m not sure the consumer knows – they just want a good experience, a nice glass of wine”. She continues: “But it is important for trade customers to have some sort of reassurance that they can present wines that are relatively exclusive. “Obviously they have to balance requirements with cost, [as] creating exclusive wines and labels has an implication on costs, but I think we are known for [delivering] good quality-toprice ratio, as we have good relationships with bottlers and growers. We can be flexible, even with the size we are – you have to respond to the market.” Commercial director Michael Moriarty picks up on the theme, suggesting that in the face of ongoing consolidation among suppliers and wholesalers, an opposite trend on lists, leaning towards greater individuality, plays to the strengths of a company such as Boutinot. “One of the trends I’m pleased about is the de-homogenisation of wine lists. There’s a natural curiosity and, while Michael Moriarty

Established in 1982, Boutinot is one of the UK’s leading (and longest-standing) independent importers and producers of wines for the full spectrum of the off and on-trade – from multiples to independents, restaurants groups to neighbourhood brasseries. Boutinot is a producer and winemaker in its own right, with the Made by Boutinot portfolio today accounting for 60% of the business, with 20% of business based on the international market. Key agencies range from Cave de Tain and Cave de Turckheim to Ontañon in Rioja Baja and Emiliana in Chile. The company is owned by its management team – Dennis Whiteley, Michael Moriarty and Tony Brown MW – following a management buyout in 2013.

NUMBER OF AGENCIES: 150 NUMBER OF LINES: 1,600 NUMBER OF BOTTLES SOLD, 2016: 50M NUMBER OF STAFF: 143 Staff include five full-time winemakers (based in France and South Africa); one master blender; two Masters of Wine; one Master Sommelier, two technical managers; a category and insights team; in-house design studio.

“I’M PLEASED ABOUT THE DE-HOMOGENISATION OF WINE LISTS. WHILE WINE HAS BECOME COMMODITISED ON CERTAIN RESTAURANT LISTS, YOUNGER PEOPLE ARE GETTING A BIT MORE GEEKY ABOUT WINE” MICHAEL MORIARTY

wine has become commoditised on certain restaurant lists, younger people are getting a bit more geeky about wine. The world of craft beers and spirits has helped people become more interested and excited about wine,” he says. Moriarty reinforces what Brook says about people, stressing the importance of relationships both in communicating the wines on offer and getting business done. “It’s all about people and relationships, that’s really important, but also within that creating partnerships with wholesalers,” he says. “Gone are days when you could sit with someone and push wine at them. To a much greater extent you have to help them sell through and that means greater understanding of the challenges they have in their business and helping them work through those challenges.” Moriarty concludes with the comment: “With the way the market is at the moment, it’s a time to concentrate on what you are doing and do that well, rather than trying to take on too much that’s new.” In Boutinot’s case that is already quite a spread.

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BATH-BASED CONSULTANT ANGELA MOUNT SAMPLES THE ON-TRADE TRENDS IN THE THRIVING SOUTH WEST

rom the increasingly edgy city of Bristol to the holiday hotspots of Cornwall, and with miles of agricultural countryside in between, the south west presents a huge variety of opportunities for drinks suppliers in both the retail and hospitality sides of the business. However, unlike the south east, where the London effect seeps out to the commuter belt, the challenges in the south west – and the diversity of the offer – are far greater. While Bristol may not be London, there is the trickle-out effect – more traditional cities, and tourist destinations such as Bath and Cheltenham, need a different offer, while the myriad country pubs across the region require something different again. Add to that the holiday ‘staycation’ visitors and Londoners journeying to their holiday homes in the west and the challenges facing drinks suppliers are many. The St Austell Brewery team knows better than any the challenges of providing the right mix for the south west. With pubs all over Devon and Cornwall, it sees very different trends throughout the year. “Londoners with second homes in this area bring new demands,” says head buyer Louisa Fitzpatrick. “What happens

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CHRISTOPHER JONES/ISTOCK/THINKSTOCK.COM

REGIONAL FOCUS: SOUTH WEST

BRISTOL & BEYOND

widely and account managers need to in London generally takes time to filter ensure they understand intuitively the down to this corner of the world, but we requirements of each and every account have to react more swiftly as they expect to optimise and support a everything they enjoy in given customer. London to be available. “WE HAVE TO The supply base across We have to adapt our offer ADAPT OUR OFFER the south west is as accordingly and ensure ACCORDINGLY AND varied as the shops and that, in the key destination ENSURE THAT, IN restaurants it services. locations, we bring in THE KEY DESTINATION Matthew Clark, with its what our London holiday LOCATIONS, WE home in Bristol, has strong clientele want.” BRING IN WHAT distribution across the With the acquisition OUR LONDON region, covering a high of Bath Ales last year, HOLIDAY CLIENTELE proportion of regional pubs including a number of pubs WANT” and restaurants at all levels. and restaurants in Bath, LOUISA FITZPATRICK This includes sole supply the offer has widened, to one of the region’s top but at the heart of this is chefs, Great British Menu service and logistics, with star Josh Eggleton, supplying both his an aim only to cover regions where it can Michelin-starred The Pony & Trap pub provide immediacy of service. and restaurant in Chew Magna valley, SOUTH WEST SERVE as well as his numerous other venues. So how do drinks distributors maximise Interestingly, Matthew Clark performs the opportunities in the south west? If particularly well with its spirits offer you analyse wine lists across the region, across the south west, with many outlets a pattern emerges. What’s right for entrusting the company with sole supply Bristol isn’t necessarily right for Exeter, of this side of their business. Cheltenham, or Salcombe. Too many National distributors Liberty, distributors still approach regions with Bibendum and Berkmann are also strong a one-size-fits-all strategy. This could not performers here, as is Enotria & Coe be more wrong in this region, where the following its acquisition of Great Western multi-faceted consumer demands vary Wine several years ago.

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REGIONAL FOCUS Great Western Wine is now a totally retail-focused operation, but in its former life the on-trade was at the heart of the operation. It’s a channel now covered efficiently by Enotria & Coe account managers, who previously represented the on-trade facet of Great Western Wine and know the minutiae and needs of the local businesses, being particularly strong in Bath, with sponsorship of Bath Rugby. But it’s not just the big boys who dominate in this neck of the woods. Local suppliers Christopher Piper Wines and Talking Wines are among the successful competitors, offering personal service and local business relationships and knowledge, as well as efficient service. The importance of local suppliers is paramount for some. Top Bath restaurant Menu Gordon Jones works exclusively with Bristol-based Vintage Roots. “It’s local, it focuses on organic and natural

LOCAL THOUGHTS

“It’s all about understanding the local market and adapting the offer to suit it in its various guises. What works in Cornwall isn’t the same as what works in Bristol.” Louisa Fitzpatrick, St Austell Brewery

THE SOUTH WEST

“DON’T SEND ME AN ANODYNE SALES REP, SEND ME SOMEONE WHO HAS PASSION, CREATIVITY AND UNDERSTANDS WHAT I AM LOOKING FOR” MARTY GRANT wines, it understands my business, and I trust it,” Jones says.

TOWN VS COUNTRY

While the holiday hotspots of Cornwall and Devon require a cosmopolitan offer to satisfy London visitors, wine ranges in the hundreds of country pubs that pepper the south west landscape are likely to be more traditional. But, once again, it’s down to the calibre and knowledge of each distributor’s local wine representative to understand each business and target accordingly. Bristol is different. The fourth largest city in the UK and with business development rife, there is an eclectic and varied feel to this 450,000-strong metropolis. From the upmarket districts of Clifton and Redland, by way of destination venues such as Michelinstarred Casamia and French restaurant Wilks, to edgier, trendier conurbations such as the latest pop-up development Wapping Wharf and the increasingly trendy Gloucester Road, the restaurant

and bar scene has never been more vibrant. One of the leading wine lights in Bristol is Kate Hawkings, the brains and fibre behind much-lauded Bell’s Diner and popular tapas bar Bellita. Hawkings, who works with a number of suppliers, has made a stand about only working with women producers for her small but perfectly tuned wine list at Bellita. Similarly, in nearby rival city Bath maverick wine bar owner Marty Grant works only with people who are passionate, who have stories – vital as his wine bar, Corkage, doesn’t have a printed wine list and relies on the knowledge and enthusiasm of the team to sell on the wines he picks to their guests. One message is clear – there is a real sense of localness, of belonging, in the south west. Restaurants support their local craft beer, cider and spirits suppliers. They work with people who have passion, symbiotically with the tools of a great wine and spirits list. Distributors that succeed are those with ears and eyes to the ground, a knowledgeable sales team, and one that takes the time to understand the intricacies of this region, identifying the needs of each – typically very individual – account. And these people listen to and work with clients’ needs, not their own agenda.

“We want to make ourselves as important as we can to our local community, and provide the personal service, contact and support that it needs without the corporate feel.” Simon Thomson, managing director, Talking Wines “I want wines with stories, wines that my team can sell to our guests. Don’t send me an anodyne sales rep, send me someone who has passion, creativity and understands what I am looking for.” Marty Grant, owner, Corkage

ALBERTPEGO/ISTOCK/THINKSTOCK.COM

“While our national online offer is growing rapidly, Bath is the centre of our focus for the shop, the community and our local business partners. We ensure we integrate ourselves throughout and become ingrained in the local footprint, be it charity or events.” Richard Lecoche, retail manager, Great Western Wine

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ON-TRADE INSIGHTS STAFFING ISSUES

THE BREXODUS B

rett Woonton, co-owner of wineoriented Vinoteca hotspots in London, doesn’t hesitate when he says, “the most important aspect of my business is staff”. How ironic, then, that this is becoming the most difficult part of his business to maintain. Getting school and university leavers to think of jobs in hospitality as careers rather than stop-gaps is nothing new. But add to this the impact of Brexit on an already acute staffing crisis, and it’s what led the British Hospitality Association’s Ufi Ibrahim to predict back in July that the hospitality and tourism sectors are facing “a perfect storm” as the government aims to cut inward migration from 327,000 in 2016 to under 100,000 a year. On the flip side, evidence has also emerged that a so-called Brexodus – EU nationals leaving the UK as they no longer feel secure or, dare we say it, welcome – has already begun to bite. ONS figures from the end of August show that net migration in the year to March 2017 was down 81,000 to 246,000. Two-thirds of this decrease was caused by people heading to the EU, the ONS confirmed, in particular the EU8 countries of the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Equally concerning for the UK hospitality sector is a recent leaked memo from the government which outlines plans to prioritise British workers over EU nationals, “especially at low-skilled levels”.

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JELENA RUSINOVIC-ZELKOVSKAJA/ISTOCK/THINKSTOCK.COM

NET MIGRATION IS DOWN AS WORKERS FROM EU8 COUNTRIES HEAD HOME. JO GILBERT ASKS HOW EMPLOYERS ARE PLANNING FOR A WORSENING STAFF SHORTAGE

This singling out of “low-skilled” workers – under which those working in bars and restaurants fall – is once again likely to make things worse for the likes of Woonton and his business partner Charlie Young. Woonton confirms that 80% of their employees are from the EU, adding that at least a handful of them partially account for the number of EU nationals who have recently departed the UK’s shores. “Employees are taking Brexit as a cue for ‘it’s time to head back home’. I’ve had staff explain to me that the uncertainty surrounding Brexit has made the decision for them. Also, the pound has tanked, so sending any money back home isn’t worth as much,” he says.

SO WHAT CAN BE DONE?

In a recently leaked briefing document, government officials outline various potential measures for attracting local, UK-based staff. Paul Jenkins, purchasing director at London restaurant group Caprice Holdings, recently told Harpers that “systemic change” is needed in the way the UK hospitality sector deals with its staffing issues – namely the fact that UK workers don’t see hospitably as a career.

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STAFFING

ON-TRADE INSIGHTS

S BITE

“WE NEED TO MANOEUVRE INTO THE UNIVERSITY SECTOR THERE ARE COURSES OUT THERE, BUT WE AS AN INDUSTRY NEED TO MAKE THE JOB PROSPECTS MUCH MORE EXCITING” BRETT WOONTON Woonton echoes this, suggesting that the current crisis has forced them and others to work more intelligently in order to attract new talent. But ultimately, he says, “nowadays, it’s all about the money”, adding: “We have to calibrate our sector to make it more appealing to younger people coming through. “Part of that is adjusting salaries. Wages are going to have to start going up. That’s already happening with restaurant groups which are desperate for staff.” Aside from paying more, there are other steps companies are taking in order to off-set staff losses. Vinoteca’s strategy involves a mixture of creating more benefits (including training) and a new HR position to drive forward and solve some of the company’s staff-related challenges. For Woonton, it’s simple: “To attract and retain staff, you have to ring-fence money for more training and development. We’ve always done this on an ad hoc basis, but we’re having to be more forensic in the way we retain staff.” The new HR person is a substantial additional cost, as is putting employees through courses such as those run by the WSET. Concern that they won’t see the benefit of training staff when turnover is notoriously high is often cited by employees as a reason not to invest in training. However, the WSET suggests that training often pays back quicker than

expected – in as little as three weeks. “There’s a piece of research that we did a while ago that shows every £3,000 spent on training can add £30,000 to the bottom line,” the WSET’s Ian Harris told Harpers following WSET trials which looked into the benefits of staff training. Woonton is also convinced of training as a retention benefit, also helping offset other upward cost pressures. “Rates and rent are going up, margins are being squeezed. But investment in staff feeds back to the customer.” He and others like him also stress the need for more development opportunities and for the drinks industry to rebrand itself as a career for ambitious school-leavers. “We need to manoeuvre into the university sector and [students interested in] business management. There are courses out there, but we as an industry need to make the job prospects much more exciting.” But getting staff to take the jobs in the first place is becoming increasingly difficult. This is what the BHA was talking about when it predicted recently that if the brakes are applied to EU migration, the hospitality industry will have to find “THERE’S A PIECE OF RESEARCH WE DID A WHILE AGO THAT SHOWS EVERY £3,000 SPENT ON TRAINING CAN ADD £30,000 TO THE BOTTOM LINE” IAN HARRIS

an extra 60,000 workers per year to plug the gap, on top of the 200,000 workers required yearly to replace churn in a industry that is already suffering from staffing shortages. If left unchecked, the BHA says this could leave the sector with a deficit of a million workers by 2029. Now more than ever, Woonton is aware of the issues affecting the sector. He and Young are currently in the middle of opening their sixth venue in London’s Cannon Street in the new Bloomberg building. Interestingly, Bloomberg is currently in the process of relocating staff to this building – its official new EU headquarters. Along with several other independent foodie businesses which will move into the new Bloomberg Arcade, Vinoteca will become part of building’s narrative, postBrexit and beyond. Once it is up and running, Vinoteca will have around 200 employees spread over six sites. At the moment, all members of the management team heading up the new City site are Italian: they have yet to recruit any UK-based staff members. Woonton is relatively optimistic. With new digs at the centre of London’s financial district, from where the UK does business with the EU and the rest of the EU, perhaps Vinoteca, Bloomberg and the building’s arcade packed with worldwide wine and cuisine, is a symbol of hope for the future.

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DOING BUSINESS

EXPERIENTIAL MARKETING

he use of experiential marketing – the act of creating a unique, face-to-face branded experience instead of just sending a message to your audience, digitally or otherwise – has been gathering pace with both retailers and brands in the past few years, with many having significantly increased their budget for the advertising concept in a bid to create a closer bond between the consumer and the brand by immersing them in a fun and memorable experience. No doubt this has been driven by the way people are consuming media and the fact that traditional advertising is simply not providing the same benefits for brands that it used to. With brands and retailers consistently and increasingly tapping into the growth opportunities attached to experiential marketing, is there scope for wholesale suppliers to help accounts to instigate, learn from and capitalise upon experiential events and promotions? And, what can wholesalers themselves do to make the most of the trend? When it comes to category merchandising, drivers and integrated campaign amplification, food and drink marketing agency Life says there are “so many learnings” that suppliers can bring from the highly competitive grocery environment into wholesale. Managing director Rachel Deacon says: “In terms of opportunity, I see an immediate parallel between this and the world of ‘Asda Retailtainment’ in the 1990s – a programme of in-store promotional and experiential activity funded entirely by suppliers, where brands’ experience, and budgets, were used to create a calendar of theatre in the grocery retail environment.”

JACKF/ISTOCK/THINKSTOCK.COM

WHOLESALE IS A PERFECT CHANNEL FOR BRANDS TO INVOLVE IN IMMERSIVE ACTIVITIES TO DRIVE SALES. LISA RILEY REPORTS

INVESTMENT IN WHOLESALE

With the grocery retail channels now “so restrictive”, brands could do worse than invest in the “relatively open” wholesale channel, she adds. “For the right wholesaler this is an opportunity for suppliers to support them in differentiating their retail proposition

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PERSONAL TOUCH

“WE NEED TO BE TASTING WINES WITH OUR CUSTOMERS AND WE NEED TO MAKE SURE THE QUALITY OF THE WINE IN THE BOTTLE REMAINS PARAMOUNT” DAVID GLEAVE MW with exclusive, immersive activities that also drive market share for their brand – a win-win,” she says. Agreeing that there’s “certainly scope” to help grow sales via experiential initiatives, wine importer and wholesaler ABS Wine Agencies says it has itself been making an effort to help facilitate engagement between wineries and customers. In the past nine months, the business has arranged more than 450 days of winemakers’ trips in and around the UK to independent wine merchants and regional wholesalers, engaging with their respective customers in a bid to help consumers gain a real understanding of a winery.

“As wholesalers, we are one step removed from the final consumers. We first must sell ideas to retailers and restaurants,” says company partner Elliot Awin, adding these must be “bold enough to excite but reasonable enough to be executed”. In addition to the winemakers’ trips, ABS Wine Agencies this year embarked on tastings in wineries and vineyards over Skype video calls, for which Awin says it received a “fantastic reception”. It is currently working with wineries to offer live feeds in stores during vintage. Liberty Wines is all for the tasting when it comes to experiential marketing in wine, and says it is usually confined to this because “how else can you experience the quality of the wine”. Managing director David Gleave MW says: “As an industry, we need to be tasting wines with our customers and we need to make sure the quality of the wine in the bottle remains paramount. “We don’t need to reinvent the wheel, we just need to focus on quality.”

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PROSPECTORS’ CORNER THE DRINKS WHOLESALER TEAM OFFERS A TASTE OF RECENT OPENINGS AROUND THE UK

PLATE

OTHER OPENINGS

M by Montcalm 151-157 City Road, London EC1V 1JH MBYMONTCALM.CO.UK Shoreditch is bursting at the seams with restaurants and bars and Plate, the latest addition to the scene at the on-trend M by Montcalm Hotel, brings together several hip strands of contemporary dining under the watchful eye of chef Arnuad Stevens, who trained under such luminaries as Pierre Koffmann and Gordon Ramsay. Mixing up an onsite bakery and small-plate sharing menu, where diners can mix and match dishes with a variety of voguish flavours and ingredients, the aim is to offer purity of flavours and relaxed dining without the stuffiness of sommeliers or white tablecloth dining.

VINOTECA CITY 21 Bloomberg Arcade London EC4N 8AR VINOTECA.CO.UK Charlie Young and Brett Woonton, the brains and palates behind the highly successful wine bar group Vinoteca, have opened a sixth site at Bloomberg Arcade in the City of London. Offering the Vinoteca trademark of an ever-evolving list of 200 wines, complete with off-sales, to pair alongside its daily changing menu of Mediterraneaninfluenced cooking, the new outlet will also feature private dining and space for corporate events. Other popular features, such as Vinoteca wine buyer’s choices to match the chef’s menu, will be in evidence, along with a small but perfectly formed selection of cocktails.

CORKAGE CHAPEL ROW 5 Chapel Row, Bath BA1 1HN CORKAGEBATH.COM The irrepressible Marty Grant, whose original Corkage wine bar brought the concept of the no-list wine adventure to the citizens of Bath, has opened a

September has been a busy month in the on-trade, with openings continuing apace after the summer break, showing no signs of slowing as both individual and group operators continue to roll out new concepts. Fuller’s increases the reach of its estate with the opening of The Merchants in Canary Wharf, delivering a craft beer bar to the thirsty workers of the surrounding towers. Closer to the old City, Camino’s Richard Bigg went back to his roots in Shoreditch, rolling out his fifth Camino on Curtain Road, bringing a relaxed Spanish tapas and wine vibe to a spot just a few moments walk from his seminal Cantalupe site, which he opened during Shoreditch’s original emergence on to the London bar scene. The Oxford Wine Company’s latest venture, Sandy’s Piano Bar, has proved a popular hit in Oxford, drawing in a relaxed crowd for a mix of live music, great wine and cracking cocktails, reviving a jazz vibe but with quality lubrication for its erudite punters. Edinburgh has a new and elegant watering hole too, in the shape of The Wine House & Hotel 1821, which combines Enoteca, Zonin wine library and boutique hotel, plus cocktail bar, on Picardy Place close to the city centre.

second site just off Queen’s Square in the Georgian city. Featuring a similarly eclectic but superb selection of wines, chosen because the knowledgeable owner is passionate about what he buys, these will once again be sold to customers over a relaxed sampling of what they might like to drink. Grant’s small and slightly ramshackle original Corkage has won him plaudits from critics and customers alike, described by one Harpers contributor as “exactly what a wine bar should be like”.

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The Drinks Wholesaler October 2017