As the German supermarket continues to grow – sales were up 17% in the 12 weeks to July 19, giving it a 5.6% share of the UK grocery market – rival multiples have been slashing ranges and prices in response.
The latest figures from Nielsen via the WSTA show average wine prices falling and wines under £3 soaring a massive 130% in the UK off-trade.
But while Aldi, which maintains a core range at £2.99, is a key player in this market, UK wine buying director Mike James’s message is all about trading up – especially at Christmas.
“I have been looking after the category for five years now and have been offering consistently good quality and not cheating my customers,” he tells OLN at the retailer’s Christmas wine tasting. “If something is £2 more than something else, it should be better quality.
“They are now saying: ‘We trust Aldi. Ten pounds is more than we would ever think of spending on wine at Aldi, but we are happy with our £5-£6 bottle so let’s give it a go.’ We have got their trust and can take them to the next stepping stone.”
This season that is all about the classics, and James’s aim is to offer an enhanced range featuring the main players you would expect to see in a serious portfolio.
He says: “As wine people we want to put in superb, esoteric wines which we think are fantastic, but if they don’t sell there is not a lot of point.”
The simplicity of the range fits in with Aldi’s ethos of no-frills retailing and everyday low prices on a compact range of good value items. Then there is the odd thing that surprises you, like an HD TV, a pair of rubber clogs, or a Priorat.
James is particularly proud of having signed up a Chablis producer in time for the festive season.
“It is notoriously difficult to buy, but now I’m working with a producer and it’s top secret who it is,” he says. “I have spent an awful lot of time trying to get in with a really good producer for the long term. I didn’t want to just put a Chablis on the shelf knowing it will sell because it says Chablis on the label.
“I have been going out spending time with winemakers, understanding their regions and how they work so we can give that to our customers. We are going to be selling at fantastic prices, but just because it is low retail doesn’t mean we don’t need to over-deliver on quality. We need to convince our customers the quality is consistently good and over-delivers.
“If people have always spent £4 on an Australian Chardonnay but at Christmas treat themselves and trade up to a Chablis, it would be a problem if they then thought it was not much better than the £4 bottle of Chardonnay. That wouldn’t help us to get people to trade up, which ultimately is what we are trying to do – we want customers to spend a little bit extra because, proportionally, the extra quality will go a long way.”
This is not a new thing for a retailer to say, and almost the whole trade’s mantra, from Tesco to the smallest start-up wine merchant.
But it may come as a surprise to hear it from a retailer best known for its keen prices – although there are numerous awards to attest to its quality credentials, including 43 International Wine Challenge medals and OLN’s own Drinks Retailing Award for Multiple Wine Retailer of the Year 2015.
Prices remain low – in some cases eyebrow-raisingly so, such as a complex, keroseney fruit bomb of a 2003 Riesling Auslese for £9.99 and a Limoux whose smoky, steely, fruity and savoury flavours belie its £6.99 price tag.
Has James had any trouble keeping to these price points at a time when, until recently, most supermarkets were pushing prices up?
“Not this year,” he says. “Duty didn’t go up and the pound is stronger. But as a member of the UK wine industry it is incumbent upon me to try to enthuse our customers to treat wine as the amazing thing it is, and maybe spend 50p more because you will get the equivalent of £2 more enjoyment.”
James says part of the secret to getting great deals is to have long-term relationships with producers.
“The more long-term we are working with people the easier it is for them to invest time in making bespoke products for us. The other thing that sets us apart from some of our competitors is that we always buy a fixed quantity. Once I’m happy with the wine we will agree to a fixed number of bottles of that vintage, with the same price for the first and the 300,000th bottle. We don’t go back halfway through the contract and say: ‘We are taking £1 off the retail price, can we have some help?’ It is very clean-cut and straightforward for the suppliers and they appreciate that, as far as possible, we try to get it right.”
He also thinks a tight buying team is essential if you want a range without passengers. “The great thing about just having one person in charge of wine or beers and spirits is that you have a complete overview of the range and are not competing with a colleague for shelf space. I know what I have got and how it is working. I might be thinking maybe I should have a premium South African Sauvignon Blanc, but if I have three things from Chile doing the same thing there is not a lot of point.”
One of the key weapons in Aldi’s armoury when it comes to trading up – and using wine appeal to draw in its target middle-class shopper – is its Lot Series.
The first collection of four limited- edition, individually numbered wines launched in spring with a headline- grabbing four-per-customer limit, and a further five were unveiled at its recent Christmas tasting. Ten more Lot Series wines are to be released next year.
The latest collection, all priced at £9.99, features a South African Chenin Blanc, a Priorat, a Carmenère from Apalta and Colchagua, a Cabernet Sauvignon from Clare and Coonawarra and a Super Tuscan. There are around 35,000 bottles of each wine, each with a tasting note on the front label and a neck hanger with information about the winemaker.
James says: “It is about communicating with customers. People are fascinated and scared about wine in equal measure. The more help we can give to try to communicate our passion and the wonder of wine to customers the better. The Lot Series is all about telling the wonderful story of wine, and explaining that it is a little bit of the winemaker’s heart and soul in a bottle.
Many of the deals have been years in the making – James tells how the Priorat was conceived at a tasting in a mountainside vineyard when he was on a trip he won through a scholarship in his WSET Diploma studies.
“Priorat is not a go-to wine in the UK, and it wouldn’t work unless we were able to communicate properly with our customers,” he says.
And are they open to trying these lesser-known wines?
“One of the first wines in the Lot Series was a Pézenas at £9.99. Pézenas is fairly unknown and no other supermarket would sell a Pézenas. We sold 10,000 bottles in the first week. Customers are coming to Aldi to try these wines.”
A lot has been written about the appeal of the discounters – the comfort of a no-frills range and the openly functional shopping environment for cash-strapped consumers, the euphoria of feeling they’re getting a bargain which drives them to spend more, and the simplicity of not having to choose between 10 types of medium-mature Cheddar while furiously trying to work out which is the best deal.
But when James starts playing independents and multiples at their own game with less well-known wines, bigger ranges and more expensive bottles, doesn’t he risk compromising Aldi’s USP?
In fact the store’s core range remains tight at 70 wines, and many of the extras are just here for Christmas. In the five years James has been buying wine, the core range has only grown by 10%.
“Over the course of 2015 we will have sold about 200 wines, a lot of them just here for Christmas, or summer,” he says. “We are limited by space.”
James joined Aldi 11 years ago, on the operations side of the business. When the buying job came up he was finally able to indulge his love of wine professionally.
“It was known I was quite into my wine on an amateur basis, with a library of wine books and going on wine tasting holidays.
Aldi gave me the opportunity and I haven’t looked back, and hopefully it hasn’t.”
Critics sometimes say the success of the so-called discounters rests with their tight management structure, and that individual buyers are simply carrying out instructions from their German head offices. But James says this couldn’t be further from the truth.
“We are based in the Midlands – a UK office packed with UK people. We are Aldi by name but Aldi UK by nature. It means we are more aware of our customers and are not putting wines on sale to satisfy a European palate rather than a UK palate. And not just from a content point of view – packaging and everything else is for the UK market.”
How does he feel about the term “discounter”? “I prefer the term great value retailer. We don’t promote. We like to think we offer fantastic value. We over-deliver compared to our price points, so we are an over-deliverer.”