Ernest & Julio Gallo, one of the biggest wine brands in the UK, spent less on advertising last year than Budweiser spent in a month. Yet wine has overtaken every other tipple in the take-home drinks market, according to AC Nielsen.
Between 1996 and 1998 the value of wine sales leapt from £3.8bn to £4.5bn in the UK. Over the same period, wine producers spent just £23m on advertising through press, posters and radio.
But this practice of doing little wine advertising in the UK is about to change.
Two wine producers have announced their intention to launch TV campaigns in the UK. Australian brand Jacob’s Creek has begun testing a TV ad for the first time in the central region, and Bulgarian producer Domaine Boyar is to launch an estimated £2m satellite and terrestrial TV campaign through M&C Saatchi this autumn.
Observers believe that if these campaigns are successful, other producers will increase marketing budgets and launch on TV too. A new wave of wine advertising could be just around the corner.
Rob MacNevin, marketing director for Stowells of Chelsea and Paul Masson wine brands, says: “[The marketing of wine] will grow exponentially over the next few years.”
If so, the wine market will have just about come full circle in 20 years.
Wine first took off in the UK in the late Seventies. In contrast to recent years, the early market was peppered with brands such as Le Piat D’Or, which achieved sufficient volumes to advertise on TV throughout the Eighties. However, as the market began to grow in sophistication, these brands swiftly became unfashionable and withered. Le Piat D’Or now advertises on radio and spent just £311,000 last year.
The decline of these brands was paralleled by the rise of supermarkets. Realising that upmarket wines would be the ones to grow, retailers used their own brands and expertise to reassure drinkers interested in the unbranded chateaux wineries of France or Italy. This practice was successful and has built the modern-day wine market. Now retailers control about 70 per cent of wine sales in the UK, and, in this sector at least, they don’t like brands or advertising. They sell first and foremost on price.
The growth of wine marketing has been curtailed by the structure of the wine industry. Historically fragmented and agricultural, it was characterised by small players with low margins, driven lower still by retailers. The early wine brands were backed, for the most part, by brewers in the UK. Since their decline, wine marketing has often been developed by collective bodies such as the Bordeaux or German wine councils, and focuses on origin rather than brand.
John Emerson has been involved in wine marketing for 23 years and is a consultant for Australian brand Hardy’s. He says: “The wine market has never had, until recently, the ambition to produce large volumes for brandable products. If you don’t have any volume, you haven’t got consistent distribution, so you don’t advertise. The substructure which gives the basis to create a brand has been absent.”
But that is changing. As the global wine market has grown, so have certain producers who are reaching the critical mass necessary to consider more advertising. Also, the grip UK retailers have on the market through own-label sales is reportedly loosening. “Own label seems to have peaked. It is no longer growing,” says Christian Porter, managing director of Caxton Wines, the distributor of Jacob’s Creek.
Although French and Italian wines still command the biggest share of the UK market, growth is shifting heavily towards New World wine from Australasia and the Americas. This is some of the most branded wine on the market. Datamonitor figures show New World wine had a compound annual growth rate of 13.7 per cent between 1996 and 1998. This compares with a 3.8 per cent compound rate for the wine market as a whole during the same period.
Unlike Old World wine, New World is dominated by a handful of big players. In Australia, for instance, four companies produce 80 per cent of the wine volume. These manufacturers have invested heavily in technology, which is enabling them to deliver consistently high quality wine in quantity.
A shift into TV advertising, however, remains a big step for modern wine producers. As well as the expense, there is also a psychological barrier. Producers fear attracting the snobbish disapproval of wine connoisseurs who may influence the rest of the market. This has hobbled brands such as Le Piat D’Or in the past.
Porter says: “Marketing is a sensitive matter within the wine industry. We are doing extensive pre- and post-campaign tests [for Jacob’s Creek]. By delivering a good message about quality and origin, we believe we can avoid the mistakes made by our competitors.”
Exactly how sophisticated branding gets in the wine market remains to be seen. As Emerson points out: “Brand values have been created which do not match the way consumers make choices. Traditionally, the wine market is driven by price segmentation, so the key thing is to get the research which enables you to segment attitudinally.”
That may be some time away, and until then wine brands are likely to remain flimsy compared with the personality of brands in other consumer markets. Like a good vintage, the wine market will need to mature with age.