Battle lines drawn for market share

21 January, 2011

Despite their fearsome reputations on the retail landscape, supermarkets have been forced to take a close look at their drinks aisles in a bid to adapt to the continued pinch of the economic downturn.

The big story of the year saw a U-turn from Asda when it returned to its three-for-£10 multibuy deal on wine just five months after it promised to axe the promotion.

In May last year the retailer increased the mechanic to three-for-£12 to try and raise quality and price following consumer research, much to the relief of the trade.

Sainsbury’s followed suit by notching up its price but unlike Asda declined to say it was a permanent switch. Tesco meanwhile said it had no plans to move away from three-for-£10.

But in October Asda said it was forced to rethink its strategy due to market changes in a “fast-moving environment”.

Morrisons launched a full own-label wine range for the first time, structured in three tiers – everyday, occasion and best. It includes some 65 wines from France, Spain, Italy and Australia.

Asda, too, revamped its wine range and gave own-label greater prominence in a bid to increase “quality and choice”.

Sainsbury’s BWS category manager Justin James says one of the grocer’s three main objectives in 2010 was to “ramp up our own-brand choice at the entry point” with its new range of House wines.

He says more consumers were encouraged into the category thanks to clear label messages and a separate wine fixture for the own-label brand. “The range is displayed by style and is adjacent to entry-point brands encouraging consumer exploration and trade up,” James adds.

Waitrose wine buyer Andrew Shaw says he has taken a look at entry-point wines in reaction to consumers spending less “by working with our supply base to offer well- presented, appealing entry-level wines that deliver excellent value for money”.

Focus on fine wine?At the other end of the category, there has been renewed focus on the premium own- label offerings and fine wine.

Tesco BWS category director Dan Jago says: “Value lines have done well but we are also clearly seeing customers prepared to spend more on quality products, which linked in to our focus on the Finest range during its 10th anniversary year [last year].”?Since Tesco’s wine category manager Claire Lorains joined from Tesco’s household team last March, she has been focusing on developing the own-label Finest offer and refreshing the supermarket’s core range, as well as looking at the expanded online fine wine offering to see what would work in shops.

“The challenge is how we can reflect the very small parcels we are able to sell online, but which are obviously very challenging to transfer into the in-store retail environment. We continue to learn from what works online and what we can take forward into stores,” she explains.

Tesco also extended its Finest premium own-label brand to beer and cider, including wheat and abbey beers from the Huyghe Brewery in Belgium, and one each from Scottish brewers Harviestoun, Brewdog and Williams Bros.

Sainsbury’s has “up-weighted and redesigned” its Taste the Difference range and introduced a golden rum, an Irish whiskey and a premium vodka to its spirits portfolio and a range of beers and ciders from producers such as Aspall, Thatchers and Shepherd Neame. In wine, four new Taste the Difference wines have been introduced from the Rhône – a Gigondas from Meffre and a St Joseph and Crozes Hermitage from producer Michel Chapoutier.

Sainsbury’s also revamped its fine wine range to offer people drinking at home a choice that can match a restaurant wine list.

Fifteen new wines went into shops in October, with a stronger emphasis on classic French and Italian regions.

There have been major differences in strategies among the supermarkets concerning range reviews.

Sainsbury’s James says: “Wine has been streamlined most with the range decreasing by 20% over the last 18 months.

“Evidence would suggest this has helped sales so that less is more and customers can better understand the 750 lines remaining. It is likely that this approach will increasingly be applied to other alcohol areas. Whenever applied this is always sense-checked with loyalty data to ensure the credibility of the decision.”?The review saw Sainsbury’s target four types of consumer, ranging from the “novice” looking for easy-drinking wines to “confident” customers who want to experiment.

Tesco’s Jago says range reviews have been conducted across the entire BWS offering.

“Last year was a strong year for BWS at Tesco. We have strived to deliver a broader offering rather than focusing on a one-size-fits-all strategy, and have conducted range reviews in all three categories to continue offering customers the quality and value they expect.”?Waitrose, the Co-op and M&S say their ranges have not been reduced.

Vicky Wood, category strategy and marketing manager for BWS at the Co-op, says: “We have not reduced or streamlined our ranges within BWS, but we have changed them to include supplier and own-brand new product development, and to meet and reflect emerging trends.”?Andrew Bird, category manager at M&S, says: “We have strengthened our range – there has been no reduction in line counts, supply base or quality because that is not what customers are asking for.”?Shaw says: “We have broadened the diversity of the range. With so much streamlining and homogenising of wine ranges and suppliers happening in the marketplace there is a genuine risk that we’ll devalue the product to the extent that between us all we will kill the goose that laid the golden egg.” Waitrose, M&S and Morrisons have all invested in wine specialists dispensing advice in-store. Bird says a training programme had been developed for his in-store wine advisers, while Shaw says: “Our wine specialists and knowledgeable BWS teams in store are a key asset to engage the consumer and increase loyalty and trust.” Morrisons said it was going to increase the number of wine advisers in its stores after research for the company showed widespread ignorance of some basic wine facts among shoppers. Wine development manager Arabella Woodrow MW says: “As more people stay in and host their own dinner parties, choosing wine can feel like a daunting prospect. This is why we are continuously perfecting our range, so it is clear and easy to understand the difference between Bordeaux and Beaujolais.”?Asda launched its in-store electronic Wine Selector in a bid to simplify the category. Adrian McKeon, category director for BWS at Asda, says: “The user-friendly terminal is the direct result of customer feedback which showed shoppers find the category confusing and jargon-filled.

“The wine category needs to continue to communicate with customers in a simple and straightforward way, and other retailers need to follow our lead to ensure continued participation in the category and to provide more guidance in helping customers to navigate the wine fixture.”?Outside influences?All the multiples highlight external impacts from duty increases, VAT and exchange rate fluctuations as challenges for 2011.

Tesco’s Jago says: “Managing costs is still a critical part of the role for our buying team. We are also seeing our supply base increasingly embracing consolidation to achieve the same control over costs within their own organisations.”?McKeon says Asda was driving down costs with its new UK bottling initiative.

Bird says he has taken other measures to try and beat the downturn. “We have maintained or reduced many prices over the past year and invested in promotions both in- store and online,” he says.

“The priority has always been to improve quality while continuing to offer great value. Where we have reviewed costs, this has been around improving internal efficiencies such as logistics rather than changing products or suppliers,” he adds.

Sainsbury’s James says a key challenge this year will be “operating in a more economically impacted environment”.

“So far some of the impact of this has been mitigated by conversion from on-trade to off and the changes on the high street – this year with more VAT and duty it will be very challenging. No World Cup and a royal wedding won’t make up the difference, but a long hot summer would be helpful.” Co-op’s Wood warns: “This year will be a very competitive trading environment as customers tighten purse strings and retailers compete for every shopper.” McKeon predicts widespread change on the horizon. “Continued legislative change will drive a different approach to alcohol retailing – it’s quite clear the way we as a sector retail alcohol is going to change in the future. Politicians and policymakers across the UK are increasingly concerned about the costs of alcohol misuse to society and are looking at various solutions.

“In the past, we have sold alcohol below the cost of duty plus VAT. Last summer we wrote to the Home Secretary to call for a ban on this practice.

“That is a simple, straightforward and fair way for government to have an impact on prices. It doesn’t punish the majority of customers who are responsible drinkers and, importantly, it means increases in prices return additional funds to the public purse which can be used to tackle alcohol misuse.”




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