You’ve been reading too many wine supermarket press releases.
I doubt that. I think they’ve stopped sending them out. But just look at the numbers. We as a nation are now prepared, if not happy, to buy an average bottle of wine that is closer to £6 than £5 for the first time. OK that move to £5.56 at the turn of the year might be all down to inflationary pressures, including the 15% drop in value of sterling, but it means the average bottle price is up 19p a bottle in the last two years, and that's not even factoring in the latest duty hike in March.
But surely price is always the first thing any wine buyer looks at - for trade and consumer?
It certainly used to be, and is still a hugely significant deciding factor, but our overall relationship with “price” per se is changing. At least it has since June 23, 2016. That decision to leave the EU also set in motion a series of economic pressures that have resulted in grocery inflation now sitting at 3.2% and overall inflation not far behind at a four-year high of 2.9%. The impact of that on the average shopper is the equivalent of having to do an extra seven shops a year or £133 per household, says Kantar Worldpanel. So, yes, on the one hand consumers are still very sensitive about the individual price of any given product on the shelf. But when we realise prices are going up across the board (butter by 20p, tinned salmon up 14%, plus similar hikes on clothing, energy, or even computer games) then it’s the collective impact that becomes the issue, rather than the individual cost of a bottle of wine.
OK, tell me more?
You only have to look at the national newspaper headlines over the last fortnight to see how our collective attitude towards “price” is having to change due to Brexit. For the first time families will have felt the direct backlash of a weak pound by having to pay more for their annual holiday and seen how far your pound goes when travelling abroad.
This is all getting a bit political. Thought we were here to talk about wine.
Bear with me. You don’t need to spend too much time on social media to see how divisive the whole Brexit issue has become. But equally we know as a country we voted to leave the EU, better or worse. A fact demonstrated in a YouGov poll last week that found three out of five people who voted to leave regard "significant damage to the British economy to be a price worth paying" for Brexit. What’s more 39% of the nearly 5,000 people surveyed said it would be worth losing their job, or having a family member lose theirs, in order to leave the EU. So if prices are going up then that’s a cost we are prepared to pay.
That’s all very interesting but what does it mean for us all in the wine trade?
Well, it’s important we understand the consumer we are trying to sell to and there’s no doubting we are all living and working in a very different retail environment to just over a year ago. But there are also long standing factors at play here, regardless of Brexit. We have talked before about having to serve the post-recession consumer that has never been more price aware or sensitive. But at the same time you only have to look at the boom in Prosecco to see how even price conscious consumers are happy to treat themselves - on a regular basis.
If that’s the case why are Aldi and Lidl continuing to do so well?
They are indeed, but look closely at their figures and it’s not just all about saving money that has made Aldi and Lidl the darlings of the high street. It has had great success with its premium own-label wines and has found selling wine at £15 plus a bottle has all been part of its strategy to attract more middle class shoppers through its doors.And the multiples?It’s also where the big supermarkets are succeeding. It is their collective sales of premium own-label, up 13.9%, that is driving the grocery market compared to branded growth of just 0.9%. The fact supermarket own brand lines now have a record 51% share of grocery spend shows how we have all become value conscious consumers.
So in a nutshell?
We might all in an ideal world like to still have our cake and eat it, otherwise known as everyday low pricing. But in these unforeseen pre-Brexit days, we are now far more understanding that unforeseen economic and political factors mean we are going to have pay a bit more for our daily bread - including an above average bottle of wine.
* This is part of Grapevine newsletter that I produce on a fortnightly basis for the London Wine Fair. You can subscribe to receive a free copy here.
