For those that made it through the snow to get there, then ProWein 2018 was an inspiring, exhilarating show as producers, suppliers and buyers alike looked within themselves to make the most of the wine that is available with new ideas, formats, packaging and genuine innovation.
On the way back from ProWein, or any major conference or exhibition, it’s a useful exercise just to write down the phrases or words that you have heard the most crop up in conversation over the course of the event.
It can give you a quick assessment of not just the mood of the industry, but what people see as the key dominant and emerging trends that are influencing their wine buying and selling decision making.
A quick look back at what phrases dominated the agenda in 2017 to what was being discussed at the 2018 Prowein could not be more different. For whilst 2017 was all about “consolidation” and “sticking to what you know”and worries over “currency depreciation” and “Brexit,” 2018 was a much more positive affair.
This year’s show was all about producers, suppliers and buyers alike also wanting to “add value” and “doing things differently”. There waseven talk of“bringing some fun” back into the industry, through “fresh and new ideas” and why there was no interest in talking about “cheap wine” but how they could help “premiumise” and “raise the bar a level”. And nobody wanted to talk about Brexit.
All of this positive thinking was being played out in an industry facing the biggest global shortage of wine since the early 1960s. Rather than spend their appointed half hour meeting talking about pricing and availability, both producers and buyers had to have a different agenda as there was simply no new, or very little, wine to buy.
It made for arguably a more focused, professional and switched on fair because of it.
And off we go…Prowein 2018 proved to be more inspiring show than in recent years
Adding value
Instead this year’s Prowein was much more about concentrating on how everyone in the sector can play their part in making the most of what they have got. Or as it was often referred to as “adding value” to the wine category.
Adrian Atkinson, European market manager for Wakefield Wines, said the market was being driven forward by the fact all the “distress stock has gone out of the market”. “It means there has been a collective tightening up and we are seeing a more professional approach in terms of forecasting and planning. There is also a new investment mentality in the market as well,” said Atkinson. “There is more rigour in the business. People are looking at investing and developing new ideas. Very rarely are you seeing someone new come onto the stand with an order book.”
Everywhereyou turned it was a similar story. KWV in South Africa was all about needing to come up with “fresh ideas” and “bringing new energy to the category” like its new Cuvée Rosé wine. Lanchester Wines was the one wanting to “have more” fun with both its own wines and the ones it was helping to create and develop for its customers.
Mark Lansley, managing director at Broadland Wineries, summed up the current market perfectly. “Necessity is the mother of invention. When things get tough and there is a massive change in the industry, then you learn to adapt. You have to be more innovative, and keeping moving ahead. For that reason the wine industry is a great market to be in,” he said.
Felix Solis, for example, was less interested in talking about the different styles of wine it can make from all its various wineries, both in Spain and now Chile, but how it can use those wines to make “occasion based” brands that serve a particular consumer need or desire.
“We have just got to keep innovating,” said Richard Cochrane, managing director of Felix Solis’ UK. Innovations like its new range of 50cl wines aimed at those who want to enjoy a regular glass of wine, but also want to cut down from buying a usual bottle. “There has been a definite shift in the UK off-trade to start looking for different size packaging formats.”
Which, in turn, meant a far bigger focus on innovation than in recent Proweins. Producers were noticeably more bullish about showing off their new products, and more ambitious packaging and design formats.
Be it more sustainable, paper based, Tetra Paks, with in your face wraparound designs, or the latest in can and bag in box packaging.
Cochrane expects to see a big rise in Tetra Pak, and bag in box wines, because not only are the quality of products better produced, but virtually all UK councils allow them be recycled, giving gatekeepers another good environmental reason to stock them.
“They are the ideal format for people to take to events and for drinking out of home,” added Cochrane pointing to its Tetra Pak for Sangria.
Mark Roberts at Lanchester Wines agreed: “The quality is really coming through now on Tetra.”
The wrap-around designs on Tetra Pak like this one from Three Thieves in California, imported by Lanchester Wines, was a key feature of the show
Pushing the envelope
The fact producers were willing to share and show what were often still concept wines, showed the need to be seen to be pushing the envelope this year.
Which for Lansley meant a far greater focus for businesses like his to invest in consumer and demographic data to ensure it is making, creating and developing the right kind of products for the right audience.
This, for an increasing number of suppliers, means working with customers to create wider, more ambitious, and innovative private label ranges.
It’s what business bigger wine companies, like KWV in South Africa, are going to have to concentrate far more on, to make the argument for their own branded wine offer. Lisbet Ryg Olsen, KWV’s regional business manager for Scandinavia and the UK, pointed to the work it had done with Morrisons with its Walker Bay and Kloof Street brands that were at a healthy price point for South Africa at £6.50 to £7.
“If private label work can help build the overall category for South Africa then that has to be a good thing,” she said.
Cochrane said it was important for producers like Felix Solis to see how important private label is to the retailers they want to work with for their branded wines. “It’sall about getting that balance right,” he said whilst stressing the fact 78% of its wines in the UK are under its own branded labels. “There are things that are really important to them and there are things that are really important to them. Own brand is definitely part of the solution. It’s part of the mix as there is limit to where a brand can go. But consumers also want to explore the category.”
All exclusive
Beefsteak: a brand with a different face and approach for different customers
The other option is to create a brand that is exclusive for a particular retailer, but where the supplier holds onto the IP (intellectual property). Like with Ehrmanns Wines and its Carta Roja brand that sells almost exclusively with Sainsbury’s.
Ehrmanns’ managing directgor, Hugo Campbell, estimates around 10-15% of its wines are now exclusive brands for retailers with the majority being its own branded wines. Or like with its Beefsteak Malbec brand it has been able to develop variations of the brand and labelling for different channels and retailers.
Mark Roberts at Lanchester Wines agreed the focus was now on “working with different customers to create channel specific wines” where the challenge is for them to bring more insights into the mix so there are clear, reasoned differences in the wines being developed.
Again the focus here is more on raising the bar, and having slightly more expensive wines than looking to hit a price point, he added.
Account managing
“You really need to have very good account management skills now. You have to know your customer very well,” explained Roberts. “You have to get all your touch points with them right. Integrity is everything.”
Lansley at Broadland Wineries, agreed there is a real need for wine suppliers to improve the skills sets they have, particularly around brand management, data and consumer analysis. “You can have a really good brand, but you need to have the relationship with the retailer to help get them to take it on,” he explained.
Broadland is currently very much on the recruitment trail and has also invested in a European sales manager to help it work with more European partners. “We are getting more interest in the Netherlands, the Nordics and the Baltic States. We have doubled the number of European countries we work with now. We are also selling more of our own brands there, with a bit of private label.”
Equally it is vital that importers, and distributors like Lanchester Wines find the right wine producers to work with, said Roberts. Like minded businesses capable of working to the briefs they give them.
“We have to get our own ranges right,” he explained. “You have to have a real clarity and focus on what you are doing and then build a great base of wine around that. You need good producers to get good customers. But if you have too many agencies it is hard to manage all their expectations.”
Lanchester also follows the same principles when working with its bulk partners. “It’s all about a building that reciprocal relationship,” said Roberts.
Talk in the town…ProWein is as much about the business and networking done in downtown Dusseldorf than it is the Messe exhibition hall
Being relevant
Boyce Lloyd, chief executive of KWV, who joined the South African business from the beer sector, via SAB Miller, last year said Prowein was the first time he had got to see the global wine industry in action. He admitted he was taken aback by the sheer size of the offer available.
“It’s pretty frightening the amount of choice there is here. It also gives you an idea how the consumer must look at the wine category. There are just thousands and thousands of suppliers and producers to choose from. There is so much more choice than there is in the beer industry. But then that sector has far more local brands in each market. The wine industry is much more globalised. It really makes you think that we have to be completely relevant about the wines we offer,” he said.
“For ultimately the consumer will choose who is successful. It’s like there is a live scoreboard up there that decides the outcomes. You have to look at the macro trends out there, spot them early and create brands that are relevant, like our new Cuvée rosé sparkling wine,” explained Lloyd.
Which is why companies of the scale of KWV need to have people on the ground in all their key markets so that they “see those trends for us”.
Innovation KWV-style at ProWein 2018
Stronger relations
So with no need or desire to go in search for new wines, this was also the year to build and foster the relationships you already have with suppliers and producers. Not just for this year, but to lock in their support and wine for the next year or so ahead.
“This is the year to keep your hand over the flame and not go off looking for new partners,” explained Cochrane.
“Yes, our phone rings all the time with new opportunities, but this is the time to really nurture your relationships and look after people. How you work with them in a year when there is less wine will define how you work with them in the future. You have to look people in the eye and be straight with them,” he added.
It is also the time when having a clear multi-channel strategy is paying dividends, said Nick Mantella, business development director at United Wineries. Being able to service wines into regional and wholesalers who are working through different routes to market is becoming more the way to go, rather than look to just havea strong presence in either the multiple on or off-trades.
Lloyd at KWV agreed. “Your route to market is very important. Who you have as your partner, your distributor in every key market. What added value are you offering to your customer? You have to be constantly having new ideas, you need to be reliable, deliver a consistent service or you will be out.”
Only way is up
Demand from China, combined with shortages in key European markets, means wine prices are only going up
When the conversation did turn to price, it was only going in one direction. Up. The world over wines are becoming more expensive to buy, be it by a few cents or more. It feels like the whole base line of the global wine industry has been put under a jack and hiked up a couple of notches, moving all the other price points up too.
From France to Italy to Spain to Chile to Australia, all the entry level price points are a notch or two up from where they were in 2016 and 2015.
What was once a £4 wine is now £4.50, £5 was up to £5.50, £7 to £8 and so on.
Which potentially is good news for everyone in the global wine supply, from the grower up. By producers being able to pay growers a little more it not only ties them into longer term contacts, but there is less incentive to look for a greener field elsewhere.
“We are seeing a lot more quality now,” said Roberts at Lanchester Wines. “No-one is just talking about entry level pricing alone.”
Instead it is all about developing mini projects and ranges of wines that can start at an entry level, but also have a laddered approach to move up several price points. “People are talking about far more ambitious ideas than they have. Its exciting. It’s different,” added Roberts.
The South Africa factor
Then there is the South Africa factor. For so long the go to country for major buyers to source their generic and cheap wines. Now there is simply not enough wine to feed that kind of market and with the ongoing drought likely to pull 2018 volumes down by a further chunk, it is forcing buyers to move, adapt and think on their feet where they go for that kind of juice.
Andrew Shaw, group wine buyer for the Conviviality group, said that where it has been able to move supply for its big volume varietal wines, the big impact is coming from South Africa, due to “the price and volume correlation”.
Boyce at KWV said this was a crucial opportunity for the South African wine industry to ensure it can move its collective price point up and see £5.99 and above as the market it wants to be in. “We have to build a more sustainable and innovative model,” he said.
Risbet added: “We need South Africa to stop the race to the bottom. Which is why this situation at the moment is quite unique.”
Boyce agreed: “The opportunity has come for farmers to get more value out of the value chain and that the price for grapes that have gone up will stick.”
The lack of wine from South Africa, along with the big shortages in the main European markets, means there is a natural realignment taking place, added Shaw.
With less wine to pick, and the drought still hitting yields, the lack of wine from South Africa is having a knock-on effect on pricing in other countries
“The whole of the bottom of the market has moved up,” he said. “South Africa is still the cheapest place to source wine, there just isn’t any. We are seeing a lot of inflation coming through in Spain at entry level which is actually healthy for the long term marketplace if we are going to drive the discounted products out.”
Shaw says the market is having to cope with what he called a “double whammy” effect of inflation, that stretches from 3% to 8% depending on the category, and a 10% decline in volumes.
“We have had two years of issues. One year was Brexit related, the other is volume related. We’re now likely to see a smaller European harvest going into 2018, and now into South Africa, so can’t see any other alternative than further inflation and continued pressure on price,” he explained.
Lansley also pointed to the huge influence that China and the US are now also having on pricing and volume dynamics. “China is sucking up Australian wine, whilst the US is taking its share of New Zealand Sauvignon Blanc and rosé. That in turn is moving prices up as demand in those countries goes up,” he stressed.
There is just not the opportunity, he added, to buy “price point wine”. “It seems the UK retailers have given up on the race to the bottom. Australia has stopped supplying at that end in any case.”
He added: “Those that are buying on spot will be finding it very difficult as long term partnerships will be tested. We have not, for example, seen a great pull to go and source wine from Eastern Europe either. But if you want to join the race to the bottom then you can still can.”
Instead he sees businesses like Broadland concentrate even more on the on-trade and supplying the national distributors and operators where there is a constant demand for exclusive labels and new wines. Particularly as the major supermarkets increasingly have their own few “select suppliers” that they choose to work with even if it might be cheaper to look outside them.
“We have got our own in-house design team, we have a MW led blending team and can create good wines very quickly”
Time to reboot
The overwhelming feeling at Prowein was that 2018 will be seen as a reset year for the industry as a whole. Where the whole sector has been moved up and that any future talks about wine, availability and volumes will be done from the point where we are now. With little appetite or need for things to slump back to the low, unsustainable entry level pricing of before.
