Sorry to put the image of Billy Ocean into your heads, but when you take a considered view of the premium on-trade in 2018 then his 1980s vision that “when the going gets tough, the tough get going” does seem as relevant today. Particularly when comparing the different skill sets of our major national drinks distributors upon whom the majority of the sector relies on to get things right. As we await its portfolio tasting next week, Enotria&Coe’s Jon Pepper MW looks at the challenges it is having to overcome in order to deliver the savings, and added value services on-trade buyers are still going to expect no matter how tough trading is.
Enotria&Coe’s annual tasting at the Saatchi Gallery in London will be the public face of a business that is working hard to ensure it is taking the right steps to be able to offer discerning sommeliers, restaurateurs, bar owners and on-trade buyers the wines, spirits and services they want. Jon Pepper MW, director of buying, marketing and retail gives Helen Arnold the inside track on what those steps are.
How do you see the on-trade faring in 2018, compared to last year?
I think 2017 was a challenging year for the on-trade, with sales of wine and spirits down, with the notable exception of gin and Prosecco. Last year we faced the smallest global wine harvest in decades, which has resulted in shortages of wine and dramatic pressures on prices. But despite all of this, the UK remains at the centre of the wine world.
We have been doing a lot of work to minimise the impact of costs, particularly on our lower priced wines, but that cost pressure challenge is very real, and in the on-trade there is also a lot of pressure on rates, rents, increased wages and inflation.
There is also a lot of pressure on consumer’s disposable income, with various economic pressures to contend with as we approach Brexit. And I think that will continue into 2018, which presents a challenging economic climate for our industry.
What are the main trends in the on-trade you have observed in the past year?
There is a definite shift towards people drinking less but drinking better, so they’re going for the entry level wine plus one, not the cheapest on the list, but one step up. That is backed up by the figures showing volumes are down, but value is up.
And there’s a definite trend towards more premium wines by the glass, so people can treat themselves to something nice without having to splash out on a whole bottle. We have been doing a lot of work with preservation systems such as Coravin and Verre du Vin offering more premium wines on a single glass basis. There’s definitely a premiumisation trend sweeping the market and that’s a nice growth area for us.
The on-trade outlets that are riding that trend are doing well. So not just those that are quality focused, but are also concentrating on providing value for money at every level of the price spectrum. The consumer focus on price is challenging at the moment, as they are looking for value as much as aggressive pricing.
And gin is still as popular as ever – our gin sales were up by 15% in volume and 20% in value last year.
What do you consider your key opportunities for growth in the coming year?
It’s been an interesting harvest in 2017, and particularly challenging in Europe, so as a result I think people’s portfolio’s will change.
Between ongoing pressures from exchange rates, particularly with the euro, plus the short harvest across France, Italy and Spain there are significant pressures on prices.
We are seeing growth in some of the more consumer-branded regions, and by that I mean premium Rioja, Malbec from Argentina, New Zealand Sauvignon Blanc and Prosecco – none of which are the cheapest wines on the list by any stretch. They are well known quality cues for consumers and have been performing well for us and I think that will continue into 2018. Again, that plays to the story of drinking slightly better wine, not just going for the cheapest house offering, but going for something a couple of pounds more expensive.
We’ve also had a lot of success with premium Italian wines by the glass, such as the sparkling Fontanafredda, which gives people the opportunity to try something different.
Consumers are undoubtedly becoming more adventurous and we are seeing more diversification in the wines that we sell. Millennials are renowned for trying lots of different new products and educating themselves.
English sparkling wine is an exciting category for us, and our new partnership with Hattingley Valley is showing great growth and promise.
What about France? Are any regions there showing particular growth?
Provence has seen volumes grow by 11% compared with the previous year, while the value has grown by 16% during the same period. All price categories have benefited from the trend.
Alsace has also been performing well for us, with our trade volumes up by 6% between 2016 and 2017 while the value has grown by 15% during the same period. The premium category has experienced healthy growth, but also recorded substantial growth with our national accounts.
And last year South West France saw volume growth of 3% compared with the previous year, while the value has grown by 5% during the same period. This is mainly driven by the white wine category which is seen more and more as a quality region offering excellent value.
How are you coping with the challenges caused by the short European harvest?
We are lucky in that we have a number of very long term relationships with a very broad supply base which we have worked on for decades. Our buying team went out to Europe very early, being aware of the situation, to ensure we could secure the volumes we need. And actually it’s a great opportunity when vintages are short – it gives customers the chance to tender out business, rethink their wine lists and to look for quality over price.
We have brought in some new business as a result of having our volumes in early, and are also looking at changing the country of origin of some of our entry-level wines, to make sure we can maintain our prices. South Africa is the obvious example, where there is a lot of interest in bulk wine. We will be seeing a lot more South African wine in both the on and off-trade in the coming year I think.
Despite the shortfall, I think that in general quality was good, and prices will be going up across the market.
Argentina and the US will also come to the fore to help make up the shortfall.
Which countries or regions will benefit from the shortfall?
Portugal was one of the few countries not affected by the late spring frost, and is increasingly appealing to more adventurous wine drinkers with wines such as Vinho Verde for example, which is also appealing to consumers because of its lower alcohol content.
Cool climate New World regions such as the Hunter Valley are producing some great Semillions, while Malbec from Cafayate as well as Cabernet Franc and Tannat are coming to the fore. Cool climate Prosecco will continue to be an important opportunity for growth and revenue in 2018, although we predict its huge growth is likely to start waning.”
And Rias Biaxas was one of the few regions in Spain to experience a very good harvest last year.
I think South Africa is one of the most exciting wine countries in the world at the money, with many up and coming young winemakers doing great things. We are looking at entry-level options from South Africa, which offers the best priced varietal wines and will be launching a new portfolio from South African soon.
How do you account for the ongoing success of Prosecco?
Prosecco is a really consumer friendly wine, relatively low in acidity, with a bit of sugar, some nice, approachable fruit, and with a soft drinking style. Add to that the fact that it’s got a bit of sparkle, making it feel a bit special and that its always going to be cheaper than Champagne makes it a really good consumer offer. If you look at the numbers, a lot of still wine consumers are adding Prosecco to their mix, so it’s bringing a lot of new consumers into the sparkling wine category.
Do you think the gin craze shows any sign of abating?
No, we have seen double-digit growth in our gin sales in the past year, and if anything I think the popularity of gin is increasing. We are seeing it spreading out beyond London, where sales are on the up. I think that people have become interested in gin as a category, rather than just a rather dull drink mixed with tonic. There are loads of different styles, and the flavour differences are really quite overt.
If a buyer only has an hour or two to attend your tasting next week, what would you advise them to focus on?
Right at the centre of our tasting we will have an amazing gin garden, with over 200 gins in our range, all categorised by flavour profile, with tonics to match. Gin sales are on fire at the moment, and have been for a while. This gives us the opportunity to showcase the breadth of the category and to present the wide range of boutique offerings from regional producers all over the country, which are really interesting.
The gin garden aims to bring together a world-class collection of gins catering to every palate, with flavour profiles ranging from the very floral and fruity to the herbaceous and spicy, as well as the flavour renegades. For example, we have a red gin from Australia made from Shiraz grapes – Four Pillars Bloody Shirax which is very different. That’s the thing about gin, its’ really interesting as its pushing the boundaries of what we think of as gin.
As you would expect, we also have a great Italian line up, as well as a good selection from Australia, including a fantastic aged Semillion from Mount Pleasant. We are also doing a big push on France this year, with a new Champagne area a highlight.
You can find out more and register for the Enotria&Coe tasting on February 6 at the Saatchi Gallery in London here.
If you are interested in the Enotria&Coe business then check out our dedicated page on the company as one of our Supplier partners for the year.