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It’s a widely accepted fact that the urbanized and internet savvy wine drinkers are changing their shopping habits, thus reshaping the way retailers operate. The Study commissioned by the organizers of Prowein 2015 focused on how these changes are manifesting in terms of observable trends in key markets, which channels and retailers are doing better than the others and reflect on discernible patterns that would allow us to draw broader conclusions about the way wine is sold globally.
Study covers 50% of global consumption
The scope of the report encompassed 8 markets which, between them represent a substantial and relevant cross-section of the world wine market. United States, the world’s largest market for wine, and Germany and the UK, respectively #1 and #2 in terms of imported wine volumes are top three constituents. Japan and Australia form a part of the growing market. Also included are France, Spain and Italy where wine has traditionally been sold in huge volumes, but the sales have been declining on a long term basis.
Using existing published data, plus Wine Intelligence’s own databases, this Report publishes, for the first time estimates of growth trends in retail channels. These 8 markets account for over 12 billion liters of wine consumed in 2013 which is about 50% of the approximately 24 billion liters of wine consumed globally. Any changes in these markets, suddenly or over time, will reasonably accurately feed back into the global supply chain and eventually affect both producers and consumers.
Some themes, many differences
Those looking for a single, unifying theory of wine retail trends may be initially disappointed by the content of this report. Each of the countries under scrutiny appears to be its own ecosystem, with different regulatory procedures and business climates. Popular business notions of globalization and convergence of business models don’t quite square with the reality of wine retail environments which are subject to different legal structures and different consumer expectations.
While in most cases changes are taking place, some of far-reaching proportions, the pace of change is generally quite slow. This should not come as a surprise because the consumers are creatures of habit, and tend not to go in for radical shifts in where they buy their groceries and beverages. Moreover, the installed base of existing retailers has a natural advantage over any new channel or retailer. They already occupy the best sites, have the greatest legacy brand awareness, and benefit most from consumer inertia. In this climate, traditional business models may persist while new ones may struggle to gain traction in the short term.
The convenience revolution: frequent shopping, smaller baskets
Having thus recalibrated expectations, there are some interesting multi-country trends that have been uncovered by this report. Perhaps the most noticeable in several of the key markets is the consumer trend towards buying groceries including wine, more often but in less quantity, Broadly speaking (channel definitions in a country tend to have subtle differences) this has meant the convenience channel has been growing in importance for wine in countries like the UK, United States, France and Spain.
The drivers of this trend arise chiefly from the increasing urbanization of population, falling ownership of cars and the usage levels in some markets (rising oil prices and automotive taxes can also be a factor). This urbanization-austerity model is especially true in Spain. In some markets, the beneficiaries of this trend are the same retailers who already dominate other channels. This is especially true in the UK and France, where “local” versions of the main supermarket brands have migrated back into towns and cities over the past 10 years, having spent the last decades of the 20th Century persuading consumers that grocery shopping was best done at large out of town stores with car parking.
In other markets, such as the US, recent liberalization of Prohibition era laws to allow drugstores which are in fact convenience stores containing a pharmacy and grocery stores, selling beer and wine have boosted this channel.
Online models proliferate
Another multi-country trend worth noting is the growth of direct-to-home, or online-based shopping models. These also come in several forms, from the advanced online grocery shopping networks in UK, to the growing “click and collect” systems in France, and the specialist direct-to-home retailers including wineries in the USA. In these countries and, to a certain extent, in Australia and Spain, the new communications technology has spurred a change in consumer channel usage to the more remote but information rich zone of the online shop.
Consolidation remains a strong trend
A long-standing trend in global retail - consolidation – remains a force in some markets. The displacement and /or acquisition of owner operator and small chain wine retailers by national or international chains, often supermarkets, remains influential in markets such as Germany and Italy. In Germany powerful hard discount chains have been the main driver. However, recently the trend has developed a new aspect, which is the drive by mainstream supermarkets to occupy more premium market space, and put specialist wine shops under pressure.
Conclusions: Polarization of needs between convenience and information-rich channels
These multi-country trends for producers and brand owners imply that they must recognise that retailers have to balance two arguably divergent changes in their consumers’ behaviour.
On the one hand, the growth of convenience purchasing could mean that this channel needs a smaller range of wines in general, with a greater proportion being strong, visible and reliable wine brands, which lend themselves easily to a quick, low-involvement purchase decision.
On the other hand, the growth of online and remote shopping suggests a corresponding need for a broader and more information-rich range in this channel – less about brand perhaps, but more about the provenance.
In terms of specifics, the trends suggest that wine businesses need to adopt differing product and service strategies to these growing channels, while recognising that in some markets, the same customers that have dominated the routes to market of a decade or two ago are also controlling the newer channels. In other markets, such as the USA, there are new channels and new supply chain customers (chiefly the convenience store chains) which are looking to grow their share of market at the expense of liquor stores and traditional supermarkets.
A summary of the report will be presented to participants in ProWein 2015 on Monday, March 16 at 10.15-11.00am in the ProWein Forum in Hall 13.
Source: ProWein
Subhash Arora |