Wine Report 2007: Coming out on top Down Under
The last 12 months have seen little change in the position of the top 10 countries supplying wine to the UK. Tim Atkin MW reports how differing consumer tastes could herald a change in dominance.
Market share by value: 24.3 per cent
Last year’s rank: 1
Last year’s market share: 23.7 per cent
Sales value: £1,078 million
Change on last year: +7 per cent
Other wine-producing countries must look at Australia’s performance in the UK with a mixture of respect and envy. It now seems a matter of when, rather than if, the Aussies will sell one in every four bottles of wine we drink here. Think back 25 years to the days of Kanga Rouge and Wallaby White, when one well-known supermarket buyer said that wines from Down Under would “never catch on”, and marvel at what the Australian wine industry has achieved.
Nor is it planning to rest on its laurels – or whatever the Australian arboreal equivalent may be. The recently published Directions to 2025 lays out a clear strategy for the next 18 years, with continued growth being the aim. How big can Australia get in the UK? Anecdotal evidence suggests that the category is approaching maturity, but the figures just keep growing; 30 per cent doesn’t seem out of the question by 2025.
Some competitors argue that Australia’s success has been achieved on the back of hefty promotions, particularly by Constellation. There’s an element of truth to this, although much of the discounting was a reaction to the large surplus of wine sloshing around in Australia, a situation that has eased with the drought-affected 2007 vintage, 30 per cent down on 2006.
Australia is making an increasing impression on the middle, £5-£10 market thanks to brands such as Yalumba, Yering Station, Lindemans, Wolf Blass and Xanadu. Out of the mass-market brands, Jacob’s Creek continues to be a model of consistency and integrity.
“It’s true that we do promotions,” admits Kirsten Moore, Wine Australia’s regional manager, “but our sales by value are up and so is our average bottle price.” Moore argues the diversity message is “starting to sink in”, with people “appreciating the regional differences and realising that Aussie wine is not just about price promotions”.
Market share by value: 17.7 per cent
Last year’s rank: 2
Last year’s market share: 17.8 per cent
Sales value: £784 million
Change on last year: +4 per cent
Is there finally cause for optimism in the French wine industry? UK volume has slipped a little, if not as much as in previous years, but the country’s improved performance by value suggests that France is finally benefiting from consumers’ desire to trade up. As Charles Collard, managing director of Sopexa UK, puts it: “France is in a much better place than it was three years ago.”
Collard points to strong performances by Bordeaux, the Loire, Côtes du Rhône and Burgundy as evidence of France’s fight back in its most traditional of markets. Despite a loss of listings, due to “major changes in the own-label ranges”, Collard adds there is also a “resurgence of interest in vins de pays, which represent 40 per cent of French wine sales in the UK”. Judges at the 2007 Top 100 competition were more impressed than ever before by the diversity and quality of France’s vins de pays.
France has also benefited from the general excellence of the 2005 vintage and the deserved praise (and high prices) accorded the best wines from Bordeaux, Burgundy and the Rhône. The next year was not in the same league, but France has secured its position as the UK’s number two supplier, at least for now.
France’s greatest strength is above £5, where it has 28 per cent of the market, according to Nielsen. Its branded position is also encouraging, with JP Chenet and Blason de Bourgogne both showing strong growth, and new entrants to the market, such as La Terre and Renaissance, also performing well. Only Piat d’Or appears to be struggling.
Most encouragingly of all, France finally appears to be combining its expertise in the vineyard and cellar with a more modern approach to marketing, labelling and selling its wines. Could France regain the number one spot? Don’t bet against it by 2015.
Market share by value: 16.4 per cent
Last year’s rank: 3
Last year’s market share: 16 per cent
Sales value: £724 million
Change on last year: +6 per cent
If the USA hasn’t quite done what many commentators thought it would do a year ago – that is, overtake France as the number two supplier to the UK – it is still doing very well, thank you, with E&J Gallo leading the assault on the UK market.
The world’s biggest family-owned winery may have bid farewell to founder Ernest Gallo, but there are no signs it is losing its grip on the UK market, where it has had a much more successful year than its rival, the Diageo-owned Blossom Hill.
And yet the suspicion persists that the UK market is not seeing the best of California. The majority of sales here are sweet, pink and inexpensive (53 per cent of the rosé we drink is sourced from the West Coast). The imminent demise of the term White Zinfandel – to be replaced by Zinfandel Rosé – in the UK might affect rosé sales adversely, but don’t bank on it.
For the time being, most of the really top stuff is confined to a handful of independents or never makes it here. The weakness of the US dollar is making the UK a more attractive proposition for exporters, although many wineries still prefer to stick with the domestic market.
A year ago, I bemoaned the quality of most sub-£10 American wines, but things are improving. It’s been a pleasure to taste offerings from the likes of Robert Mondavi Woodbridge, Mirassou, Hahn Estates, Ravenswood, Bonterrra, Brook Ranch and Napa Family Vineyards. I’d like to see a few more brands like that and a little less sweet rosé. But I may be in a minority on that one.
Market share by value: 10.6 per cent
Last year’s rank: 4
Last year’s market share: 10.4 per cent
Sales value: £468 million
Change on last year: +7 per cent
It’s almost impossible to find out the precise number of grape varieties planted in Italy, owing to a combination of synonyms and viticultural and bureaucratic chaos. Most UK consumers probably couldn’t care less. As long as Italy produces Pinot Grigio, who wants to know about Fiano, Aglianico, Barbera or Corvina?
The phenomenon is almost impossible to explain – unless consumers enjoy drinking wines that taste of very little – but a phenomenon it is. Nearly a third of Italian wine sales in the UK are now Pinot Grigio, some of it (look for the brand extension) red or pink. In the last year, Pinot Grigio sales have increased by 1 million cases to 3.1 million cases. There is even talk of a shortage.
While some commentators, this one included, bemoan Pinot Grigio’s rise, Tesco’s Dan Jago sees a positive side. “It has made consumers more confident when it comes to buying Italian white like Gavi and Fiano.” Let’s hope so. Italy’s white wines have really improved in the last five years and most are considerably more interesting than Pinot Grigio.
On the red front, Italy had very good vintages in 2004 and 2005. And there are signs consumers are finally moving beyond names such as Valpolicella, Chianti and Barolo to experience more of what’s on offer. Over the next 12 months, it would be a pleasure to report growth across the full range of Italy’s wine styles.
5 South Africa
Market share by value: 8 per cent
Last year’s rank: 5
Last year’s market share: 9 per cent
Sales value: £356 million
Change on last year: -7 per cent
South Africa’s disappointing performance over the last two years can be explained by a number of factors, but the most prominent are the comparative strength of the rand (making it expensive for producers to export their wines) and the changes in the ownership of the country’s major UK brand, Kumala.
In both instances, there is room for optimism, however. The rand is not as strong as it was a year ago (it was 14 to the pound at the time of going to press) and Constellation, the new owner of Kumala, appears to be getting to grips with the brand and improving the blends. So far, it has not pursued the aggressive promotional strategy of previous owner Vincor. This may have affected the Cape’s volume sales, but in the long term it should protect what’s left of the brand’s equity.
According to Su Birch, chief executive of Wines of South Africa, overall sales of Cape wines bounced back in the first five months of 2007 after a sluggish 2006. She thinks that the vacuum left by Kumala’s lack of activity has created a “bit of operating space for the likes of First Cape, Spier and Stormhoek”. She also points to the new relationship between the KWV and Thierry’s as a plus point and predicts that South Africa will regain the market share it has lost.
Market share by value: 6.6 per cent
Last year’s rank: 7
Last year’s market share: 6.2 per cent
Sales value: £291 million
Change on last year: +11 per cent
After a slight dip last year, Chile has soared back to take sixth position in the 2007 Wine Report. As you’d expect, Michael Cox of Wines of Chile is pleased with Chile’s progress. “It’s steady, rather than spectacular,” he says. “But it’s progress across the board. Our volume and value shares are both up, we’re doing well in the on-trade and our sales above £5 are growing at 14 per cent.”
Chile has a strong own-label presence, with 29 per cent of sales, but its branded wines are leading the growth. Concha & Toro is doing for Chile what Penfolds did for Australia in the 1980s, and is now a major UK brand. Other strong performers are Errazuriz, Cono Sur, Montes, Luis Felipe Edwards and Chileno – and Santa Rita seems to be making a comeback.
The emergence of new cool-climate areas such as Limarí, Bío Bío and San Antonio/Leyda has brought added diversity, enabling the country to shake off its safe and boring tag. Cox has been encouraged by retailers such as Majestic and Oddbins, which “are listing Chilean wines by valley, rather than by colour”.
Unlike Argentina, Chile has established a strong UK consumer franchise. Next it must surely develop wine tourism and take a bigger chunk of the UK market. With New Zealand, Chile has been the most improved New World country over the last five years. Now all it needs is a direct flight from London to Santiago.
Market share by value: 6.5 per cent
Last year’s rank: 6
Last year’s market share: 6.7 per cent
Sales value: £290 million
Change on last year: 0 per cent
Spain is holding its own in the UK, despite losing sixth place to Chile. Some countries would be happy with such a performance, but given the quality of what is being produced on the Iberian Peninsula, from Campo de Borja to La Mancha and Ribera del Duero to Rías Baíxas, it really should be doing better.
What explains the downturn? The answer is that, outside Rioja, own-label and branded sales have had a difficult year. Spain’s most famous wine region is motoring and now sells more wine than Bordeaux in the off-trade at two million cases. This partly explains why Campo Viejo has made further progress as the leading Spanish brand, although quality improvements are also significant. Faustino, too, has done well, especially given its higher price points.
Apart from Rioja and, to a lesser extent, cava and pink wines, Spain has not yet achieved the sales it deserves. This year’s New Wave Spanish Wine Awards highlighted the remarkable quality of the wines from areas such as Ribera del Duero and Priorat, and lesser known Jumilla and Campo de Borja.
The combination of old vines and modern technology ought to be a winner, but Spain is still waiting for the great leap forward. The UK doesn’t lack adventurous retailers – Waitrose, Tesco and Majestic all have diverse Spanish ranges. Spain needs more adventurous consumers to look beyond Rioja.
Market share by value: 3.6 per cent
Last year’s rank: 8
Last year’s market share: 4 per cent
Sales value: £161 million
Change on last year: -6 per cent
With all the excitement surrounding the top Rieslings from the widely-praised 2006 and 2005 vintages, you could be forgiven for thinking Germany has begun to dispel its bargain basement image. It’s certainly true that fine German wine is in greater demand now than for more than a decade. The clamour is mainly for Riesling, but there’s growing interest in Spätburgunder (Pinot Noir) and Grauburgunder (Pinot Gris).
That’s one side of the tale. The other is less cheerful – the country’s overall sales performance in the UK is still on the slide and in danger of being overtaken by New Zealand. Wines of Germany argues this is part of the “repositioning” towards drier styles at higher prices, but it’s a slow process.
There are signs of encouragement. Value is declining less rapidly than volume, suggesting the major losses are below £3. Over £4, sales have grown 28 per cent over the last two years, with strongest growth in the £6-£7 range (+124 per cent), precisely where producers such as Loosen and Leitz have been so successful. But Germany’s £2.64 average bottle price suggests there are still a lot of Liebfraumilch drinkers.
9 New Zealand
Market share by value: 2.9 per cent
Last year’s rank: 9
Last year’s market share: 2.3 per cent
Sales value: £126 million
Change on last year: +31 per cent
The UK’s love affair with New Zealand wine gets more profound by the vintage. From a small but expanding base, the Kiwis have shown the largest market growth over the last 12 months and their average bottle price has again cleared the £6 barrier (to £6.11) beneath which it fell last year.
As ever, it is Sauvignon Blanc that is driving sales, with 73 per cent of the overall mix. Demand for Sauvignon, despite large vintages in 2006 and 2007, still outstrips supply and it’s hard to see that changing.
Pinot Noir is arguably a more exciting prospect. Boosted by the success of Pinot Noir 2007, the third Wellington conference dedicated to the grape, New Zealand has shown it is increasingly a match for Burgundy at the top end and is starting to produce commercial volumes under £12, with the likes of Montana and Villa Maria leading the way.
Add Chardonnay, Pinot Gris, Riesling and small but world-class quantities of Hawkes Bay Syrah, plus a handful of red Bordeaux blends, and see why New Zealanders are smiling.
Market share by value: 1.3 per cent
Last year’s rank: 10
Last year’s market share: 1.5 per cent
Sales value: £58 million
Change on last year: -10 per cent
Only a year ago, I heralded the opening of a London-based Wines of Argentina office under ex-Oddbins buyer James Forbes and speculated it might be the “fillip the country needs in the off-trade”. It gives me no pleasure to say that it doesn’t appear to have made any difference.
The generic body has tried its best, organising the Wines of Argentina Awards in Mendoza, and promoting the match between Malbec and Argentinian beef, but UK wine drinkers (unlike in the USA) just don’t seem that interested. One possible reason for the loss of sales has been Chile’s strong performance in the entry point own-label category. Dominique Vrigneau of Thierry’s says: “The £2.99 and £3.99 price points are beginning to disappear for Argentina. This may be a good thing as consumers will see Argentina as a diverse source of wine styles rather than a place that produces cheap plonk.”
The 25th anniversary of the Falklands War probably hasn’t helped, but there is no reason why Argentinian wines should not catch on. The reds are fruity and full-bodied, with Malbec the star, while the whites have benefited from the establishment of high-altitude vineyards. Meanwhile, the quality of brands such as Argento, Norton, Las Moras, Trivento and Santa Julia is improving with every vintage.