Luxury on a budget

26 November, 2010

New World sparkling wines are suffering while Prosecco and cava sales soar, OLN’s first Sparkling Wine Report can reveal.

All the New World sparklers in the top 10 and the biggest three Champagne brands have seen sales drops in a market that grew 9% to £669 million, according to Nielsen’s latest figures for the year to October 2, 2010.

The fastest-growing brands were relative newcomers – Borgo San Leo and

a Gioiosa from Italy, and Vranken Pommery’s Charles Lafitte Champagne.

Supermarket buyers say exchange rates have hit the New World sparkling market hard – but the slide, and the concurrent rise in Prosecco and cava sales, suggests this category is becoming less dependent on big brand names.

“On the whole, European sparkling wine currently offers better value for money than New World sparkling wines,” says Sainsbury’s buyer David Peek, who is planning a big Prosecco push over Christmas. “The majority of successful New World sparkling wines tend to be branded, and ‘brand premiums’ are often too inflated.”?He adds: “I believe that much of the premiumisation, or in other words, cost increases, from the Grandes Marques Champagne houses has not been aligned to consumer confidence and desire to trade up. This has led to very mixed results for the Grandes Marques in the UK off-trade.

“However, this has been very much to the advantage of lesser-known Champagne brands where customers recognise good value, while appreciating the reassurance that Champagne offers as a brand.”?Etienne Dumont, which is exclusive to Sainsbury’s, grew 70% to become the fourth-biggest Champ­agne brand in the off-trade, and has overtaken Moët to become the biggest brand in multiple grocers.

Laura Jewell MW, who has taken over sparkling wine at Tesco, says: “Both cava and Prosecco have had a great deal of focus in the past 12 months, and the growth in the latter continues to rise, as the softer, more approachable style of Prosecco continues to win new consumers. Meanwhile there have been some great offers on cavas, both branded and own-label, which have really boosted sales.

“The New World has suffered from poor exchange rates, as with the still wines, and there has not been as much NPD in this sector recently. Wolf Blass and First Cape have helped to expand the New World listings, and we are really pleased with the Finest Angas Brut rosé from Negociants we have just launched.”?Ehrmanns launched two Proseccos – Delfina and Bollicina – in August, and managing director Hugo Campbell says there is “strong demand” for them.

“Stylistically it works, and the name is getting around like Pinot Grigio did. It has an element of sophistication and celebration. When people try it they like it – it’s got light bubbles and a slightly sweeter taste profile. They are calling this the Prosecco recession,” he adds.

But Campbell is confident in the future of New World sparklers as well, and says Ehrmanns is developing sparkling Sauvignon Blancs from Australia and New Zealand. “Now that Marl­borough Sauvignon Blanc is established in the UK, sparkling is the next move to build on that,” he says.

Big brands still have an important role to play in Champagne. Taittinger is the third fastest grower, with sales up 66%, while Heidsieck Monopole is up 40%. But those figures are most likely a sign of heavy discounting, as they lag far behind volume growth of 87% and 49% respectively.

Brands are less successful in sparkling wine, where Freixenet is the only well-known one in double-digit growth – although Martini has capitalised on the rise of Prosecco with the launch of what it says is the first big brand in that market.

Pernod Ricard, which saw Lindauer sales drop 30% and Jacob’s Creek by 12%, is focusing on premiumisation. “That means maintaining price points for long-term sector profitability and carefully balancing that with market share in the short term,” says Matthew Bird, head of marketing for wines.

“As such, Jacob’s Creek Sparkling remains the number one sparkling wine brand by value, with an average bottle price of £7.50 – versus the category average of £5.90 – with less of our volume being sold on promotion.”?He said the company is committed to building brands consumers are willing to pay for, and that it will be advertising Jacob’s Creek on TV in the run-up to Christmas and producing an educational podcast dubbed the “ultimate guide to sparkling wine”.

Lanson is also focusing on consumer education with its Lanson Little Black Book of Champagne, while David Hesketh MW, managing director of Laurent-Perrier UK, says added-value gift packs and promotions are the order of the day for his brand.

He says: “The trade is entering Christmas in a still challenging economy so we will be using a range of promotional activity. Inevitably price discounting will have a role to play, but it is important to be mindful of the long-term and protect the brand’s image.”?Lanson and Laurent-Perrier say they are seeing a return of consumer confidence, and want to diversify by pushing non-dosage, vintage and rosé Champagnes.

Lanson’s Paul Beavis says: “Vintage Champagne does continue to struggle, with volume down by 19% and value down by 10%. If we as an industry are to reverse this decline, we need to concentrate our efforts on improving consumer confidence in this sector.

“In these tough economic times, this can only be done through education – our own research shows there is little understanding among consumers about vintage Champagne and crucially, why it is worth its higher price point.” Diversity is also the key for smaller players. New online retailer champagne does most of its business in more specialised products. Managing director Steven Aulk says: “We have been working to expand our product portfolio and, where possible, list more exclusive lines which one would normally expect to find in high-end department stores.”?“We are quickly becoming a niche supplier in this category and our suppliers are keen to work to with us.”

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