Back to the future: what we predicted for the wine trade 10 years ago
Roads? Where we’re going we don’t need roads.” Those were the immortal words of Doc Brown to Marty McFly, as he powered up the flux capacitor and headed from 1985 to October 21, 2015, in Back to the Future Part II.
The world he found there was somewhat different from the one we live in now, with flying cars, hoverboards, ubiquitous fax machines and clothes that resize themselves.
In April 2005 Off Licence News made a similar journey into the future, when it hosted a conference entitled The Wine Trade in 2015.
Instead of flying cars with rubbish-fuelled engines, the event looked at consumer and supply trends for the decade ahead. It asked where the wine trade should be in 10 years’ time, and how it would get there.
The conference brought together key retailers, buyers, suppliers, consultants and opinion-formers who discussed major issues and how they would develop in the decade to come.
While there were some things no one could have predicted — the Lehmann Brothers bankruptcy that sparked the global economic downturn in 2008, the collapse of Threshers and Oddbins, or Majestic buying Naked Wines — many of the prophecies proved surprisingly clairvoyant (see box).
Then, as now, talk about prices dominated discussions — with suppliers warning that a focus on deep discounts and keeping retail prices low could damage wine quality.
The role of brands, different branches of the retail trade and how to engage consumers were key issues that have remained with us to this day.
Wine Intelligence chief executive Lulie Halstead, who spoke at the conference, points to a number of predicted trends that have materialised — including a shift towards lower-alcohol wines at 12% abv and below, the continued growth of screwcaps, growing interest in alternative packaging, and the fact that while wine prices have risen, in real terms, and when taken in the context of inflation and duty, they have fallen.
She says: “In 2005 we didn’t know what lay ahead from 2008–09 onwards with the global financial crisis. That economic shift has changed behaviour fundamentally, and that wasn’t predicted at the time, when things were looking relatively more buoyant and more stable.
“From a drinks trade perspective the big shift that wasn’t foreseen was the resurgence of the cider category, followed by the resurgence of craft spirits and beer, which have eaten into wine’s share of drinking occasions.”
Halstead notes that brands and categories gain momentum as trends much more quickly today than they did 10 years ago because of the huge proliferation of information on the internet, which is also shared much more easily and widely than it was in the past.
She adds: “It’s very difficult to predict the future. Things like political and economic changes take us all off guard sometimes. But we should always try because looking at where the future lies and how consumers are going to behave and what the demands are going to be is incredibly important, particularly for a category like wine where it takes a number of years to make a change in production terms.”
GOOD NEWS FOR WINE
Although wine sales in the UK have flatlined since the economic crisis, in some ways the market has developed to be healthier than expected. Wine Intelligence had predicted that individual consumption would rise, but that market penetration would level out over the past decade. Instead, thanks to government-led responsible drinking campaigns as well as economic factors, individual consumption has remained similar to 2005 levels, but far more people than predicted are drinking wine.
Halstead says: “There is a long trail of lighter drinkers, but the volume of wine consumed by regular wine drinkers has increased. Wine quality and availability have improved, giving more people the opportunity to drink wine.”
Looking ahead, Halstead believes her 2005 prediction that the winemaker will return as a hero figure will continue to gain traction — but at the more niche, higher end of the market.
She says: “We are seeing buoyancy in the niche and high end of both the on and off-trade, where the winemaker is hero, but we are also seeing the opposite end of the market with the discounters and wine as a commodity at low price points. It is the middle ground, what historically in 2005 was the high ground, where it is less certain and more unstable.
“An interesting area to focus on over the next five years will be what the supermarkets end up doing, because that is where the squeeze is. From what we can see range reduction seems to be the direction they will move in.”
Zak Avery, who spoke at the conference as a retailer and OLN columnist, now owns specialist beer wholesaler Beer Paradise.
He says: “One of the things that I find most surprising is the ever-increasing proliferation of online niche retail. If you look at the web as a narrowcast medium, as opposed to TV and radio which are broadcast media, the web is going to be the way to reach out to niche markets, and it seems to me that web developers and people with online businesses have become very good at doing that. In hindsight it is obvious that was going to happen, but I think it would have been very difficult to predict.
“I don’t think you can predict the future, but you can draw on past experience. But it is important to try and predict the future because that is part of a business’s job. If you want to be successful in business you have to not only service the market that exists, but also be one step ahead and try and source things people don’t know that they want yet. You have got to try and stay one step ahead of the consumer.”
Design consultant Paul Foulkes-Arellano believes the trade has been slower to adopt alternative packaging than he had thought — and things that he predicted 10 years ago are only now coming into the market.
He says: “Even back in 2005 we could see the pressures on the trade and the absolute erosion of margins. What we couldn’t have seen was the financial collapse in 2008, and the utter devastation in Iberia. We would never have imagined it would get so bad that people are not just having smaller margins but literally selling under the cost of production just to stay afloat.
“I work with spirits and beers that are always way ahead of wine. [Any change] takes a long time in wine and we do have to look ahead, otherwise we would still be drinking Liebfraumilch.”
Wine Prophet James Herrick, who advises wine businesses on investment and was dubbed a “harbinger of doom” at the 2005 conference, says that wine can often be a currency game in disguise, and that changes will depend largely on politics, particularly in Europe, where much wine production is subsidised in one way or another.
He says: “It’s much more important for someone on the production side to get their vision of the future correct, whereas retailers can sing and dance and change tunes and do whatever they want to do. Even if you can’t predict the future, it helps enormously as a producer to know what it is you are trying to do.”