Broadland Wineries’ Mark Lansley on challenges and opportunities for wine importers and bottlers
By Richard Siddle
If you are looking to plot the key trends facing major wine importers, and bottlers of bulk wine around the world then Broadland Wineries, one of the most dynamic and important players, is a good place to start.
It might be situated on the outskirts of Norwich, Norfolk in the UK, but it has a global reach in terms of the wine it is sourcing either for its own growing range of wines or bottling for third party distributors and retailers.
This is a company that is constantly analysing the market as it stands now, but where it is likely to go in the future and adapting its own business model to ensure it is able to capitalise on the opportunities that open up.
It’s clearly getting those predictions and judgements right as it has just enjoyed its 10th consecutive year of growth. Here Mark Lansley, its chief executive, looks at the year ahead, and how, in particular, Brexit is affecting his plans.
What are the key opportunities and challenges you face going in to 2017?
With the pound falling 15% in value during 2016 our profitability will be reduced in 2017. The bottled-at-source wines we import have increased around 15% and these increases are difficult to pass on in full to our customers because of the pressure they are under. But we are fortunate because as a bottler many of the costs of our UK-packed wines are not so directly or immediately affected by the fall in the pound, and the economic balance of packing at source or in the UK is tilting toward UK-pack.
Of the 1.1 billion or so litres of wine consumed in the UK each year about half of this is UK-packed, and I would estimate there is about another 0.1 billion litres that could now be moved to UK-pack and savings made for the companies that do. But perhaps half of this will remain packed at source for non-financial reasons.
How do you assess the market and what pressures do you think will be the most important in the year ahead?
We regularly analyse market data from Kantar, VINEX and other sources. We are now seeing clear opportunities to increase sales and profits for wine retailers, because of changes in consumer demographics, behaviours and preferences, and retailer promotional mechanics and the devaluation of the pound.
Prices of goods that have a proportion of imported materials are now filtering through into prices consumers pay. CPI is rising. On its own this would not hurt much but behind this is rising household debt and a risk of increasing interest rates and mortgage payments. The Bank of England cannot allow a consumer debt bubble to go unchecked again, so I am sure that consumer spending for most folks is going to have to come down.
This may cause further bifurcation in the wine market: the below-£4 and the above-£8 categories being the winners.
How you are responding and what do you see as the big opportunities in the months and years to come?
For the UK off-trade, we have been studying retailers’ sales results data in a number of wine categories, consumer demographics and seasons. We then link this to the wines where we have distinct competitive advantages and knowledge. As an example, we can see clearly that no single UK retailer has optimsed their mulled wine profit opportunity and there is another £10m+ of retail sales to be had each autumn.
For the UK on-trade, we have been studying who is growing, where and why. We are seeing some clear patterns and so again we see great opportunities for certain regional and national distributors. As an example, when Argentinian Malbec rose, it rose for good reasons and this gives us clear indicators for what needs to be trialled next, and how.
As another example, we are seeing new wine delivery mechanisms and formats as being very valuable for certain types of on-trade establishments as consumer involvement is so important for making a night out fun and interesting. Certainly makes my evenings of market research enjoyable!
Overseas, our US and Nordic sales staff are seeing emerging trends that we think could be of real interest and value to UK retailers and are feeding back these to our in-house consumer insight specialist, Master of Wine and label designers.
For example, in the US wine labels are much more varied and engaging . Whilst in the Nordic countries consumers perception of wine is better managed. These types of trends can lead to opportunities in the UK for certain types of on and off-trade companies that are looking to innovate and experiment a little more.