Reviews

Joel Payne: «Wine sales depend on cultural habits»
«Vitrina» December 2008

Joel Payne is a recognised expert and critic for German wines, as well as the chief editor of Meininger’s Wine Business International — the only global professional publication for wine trade.

Eleonora Scholes met him to discuss the role of supermarkets in selling wine, their current problems and latest international trends.

– How great is the power of supermarkets in selling wine?

– That’s quite different from market to market, but today I don’t think there is much a country anywhere where it’s not a sizeable part of total sales. In Germany today multiples sell 82-87% of the total market in volume. The numbers that I’ve seen in Great Britain are not far from that mark, perhaps a little bit less. Then it becomes very much an issue of what you call a supermarket. Supermarkets are broken down in terms of size and also price points. They also include discounters which have a quite different role in each market. In Germany they are very powerful. It’s estimated today that one of every two bottles sold in the country goes through a discounter. In Holland it’s not quite that high, and until just recently the phenomenon essentially didn’t exist in Great Britain. Chains like Aldi and quite a number of others had such a small part of the market that it wasn’t relevant, which means that supermarkets like Tesco’s and Marks & Spencer are able to have fine wine offering. That still exists in the United States as well where in the nicest supermarkets you even see bottles of Chateau Latour or Romanee-Conti on the shelves.

– Does it mean that supermarkets are suitable not only for moving volumes of entry level and mid-quality wines, but also for premium quality offerings?

– There is room for that, but very often it’s down to cultural habits. If you look at more traditional European markets, people have always gone to a wine shop when they wanted something better. Now there are fewer and fewer of those, and in many cases wine shops are also becoming chains. Some like Oddbins in the UK, Nicolas in France or Jacques Weindepot in Germany have many branches repeating same phenomena that actually created supermarkets. Originally a supermarket was nothing other than a large family store that was successful, then began operating in more than one location and then developed into either a regional or a national chain. Now many of these chains operate worldwide.

Depending on the cultural background, you can also sell high quality wines. That is the case in the US because most people have never shopped anywhere else. They don’t go to a butcher to buy meat, they don’t go to a baker to buy bread, they don’t have open markets on Tuesdays and Saturdays the way you do in many European cities. If you are making all your purchases in a supermarket anyway, then why not the finest wines? It’s only a recent phenomenon. There have always been wine drinkers in America, but it was such a minute part of the beverage market. Today the situation’s changed. People who are buying high priced wines today probably never knew that before you bought those wines through a small dedicated shop. But upscale supermarkets have sky lighting, granite floors, the entry hall is trying to recreate a farmer’s market with big carts full of vegetables and fruits, they have an in-store bakery. They are trying to create a buying experience.

– If the supermarket channel of distribution is so powerful, has it affected the structure of wine industry?

– Certainly. Linking to your last question, the reason some wine shops still definitely have a value is not only because that’s the only place you want to sell an upscale brand, but it’s because many of the brands are small. If you look at Burgundy, Piedmont or Rheingau, none of producers there make sufficient volumes to ‘feed’ a supermarket, and they need to have outlets as well.

Now let’s move to another level. Because supermarkets are becoming so powerful, brands are either being created for them, or growing with them. There is only certain amount of wine that can be sold and consumed. The more of that becomes a big branded item, whether it’s an independent brand or a supermarket’s own brand. I think in the future there will be more large brands made by dedicated producers who will do nothing else. They will control more of the market. As they become better in terms of quality, the only people who are going to be able to manage outside of that part of the market are those who can offer in wine true individuality and quality.

We are seeing two different movements taking place in the market. If I look at Piedmont — when I wrote my first article on the region 25 years ago, you spent 2 days there and visited 12 producers, and you probably had seen everything that was worth knowing. Today I spend a week and visit 50 producers and I know another 30 that I should have visited but just could not. On the one hand, that is fabulous because it creates diversity, but there are no systems of distribution to make that work for so many producers. I think that even the smaller, upscale producers are going to grow in size. Soon we won’t see what we still have on the Mosel today — well known producers that have only 3 hectares of land and make only 18,000 bottles a year. Even Petrus makes 40-50,000 bottles in a good year. If the name is to be recognised, you have to have at least a certain minimum volume — unfortunately, I don’t know exactly what.

– Which countries have succeeded best in creating brands?

– If we are talking about creating new brands, the New World has been more successful. There are a number of reasons for that. Most of it has to do with freedom. Producers are not hindered by legislation and they think in ways that have to do with creating new brands. Now let’s look at traditional markets like France, Spain or Italy. Much of their production was consumed locally, though the situation is changing slowly. Even if producers are ready to create a big brand, they are impeded by legislation. For a category like vin de pays in France or indicazione geografica tipica in Italy, the areas are growing larger so you could almost now talk about just wine of France, Italy or Spain without a specific geographic origin. But then you still have structural disadvantages as most of the land holdings are dispersed and highly fragmented. It’s difficult to generate efficiencies of scale that you can have in Argentina or Australia. That will change as well, but it’s going to be slow and probably painful because there is a long tradition of the small land owner in Italy, France and Spain. New generation of winegrowers don’t understand that what their fathers, grandfathers and great grandfathers did before them is no longer a viable source of income. Yet, they wield enormous power especially when they go on the streets and protest. As long as they have a safety net with European funds, there is no motivation to push forward quickly, like in the New World.

– What are the most significant current trends for wine sales in supermarkets? What are short-term forecasts?

– Trends are always tricky, but there are a few obvious ones. Rose has been growing astronomically, though from a reasonably small base. I think that may continue for a short while longer. We are talking about wines for everyday drinking, easy and pleasurable. Rose is certainly much easier to drink than most red wines, at least for not quite an initiated palate. It used to be that many people thought a red wine is more serious. Now the stigma has been lifted.

We are definitely seeing a movement towards wine that has less alcohol and less oak. Now the wines receiving top scores still have a lot of both, but more people at every level, from wine writers down to consumers, are saying that that is not really what they are looking for.

I also think that as markets mature, the trend will be for value for money, and it’s already started. People will look at it differently, not like now in Great Britain where value means 3.99 pounds per bottle or a promotion “Buy one get one free”. Soon people will be asking more “What’s the best wine that I can buy for 6.99 pounds?” or “What’s the best quality wine under 10 euros?”. Then the offer to the consumer will be much more diverse.