Creating a private label wine? Watch out for these common mistakes.

By Cruz Liljegren

Private labels started as cheap inferior products. Historically, they did not even carry the name of the store and where therefore called `generics´. Over time, generics have lost shelf space and importance to copycat store brands and premium store brands. Intense price pressure from hard discounters like Lidl, Netto and Aldi, has pushed mainstream retailers to develop private labels that identifies the lowest price at which a product is available at the store. Apart from these giant private label programs we now also have wine importers, distributors and restaurants creating their own labels. Sometimes successfully so, but often-time they are making less informed choices than major retailers such as Carrefour, Albert Heijn. Delhaize and Sainsbury’s.  

So what are the most common mistakes that small and mid-sized private label owners are doing? VINEX lists four of them below.  

1. Purchasing base-wines of inconsistent quality Some bulk wine buyers always go where the price is the lowest. Every year they will be trying to make a better deal with a new winery. This year they purchase from winery X, next year from winey Y. Apart from the considerable work effort, it creates an inconsistency in product quality that the final consumers are not likely to appreciate.  

– Above all, retailers needs consistent and safe products, quality assurance (in the form of certifications: editors remark) is an absolute must to be considered as a supplier, said Clive Donaldson, Wine Sourcing Manager at Wm Morrison. Successful wine business grows from a foundation of reoccurring purchases. Major retailers understand that loyal customers is a necessity to reach their financial targets. If your wine displays different characteristics every year you will loose your fans quickly.  

The Dutch product quality study by Jan-Benedict E. M. Steenkamp concluded that quality typically weights more heavily than price in purchase decisions. Consumers are often willing to pay a disproportionate price premium for better quality. On top of this we have a changing landscape in the wine world making wine sourcing much more of a sellers market than before.  

– The global underproduction in 2017 has boosted the necessity of of multi-year contracts, the times when the buyer could push down prices to the bottom are over, said Florian Ceschi Director of Ciatti Europe.  

2. Over-value your private label wine    One of the key benefits with private labels is that your clients and consumers can’t compare your prices. As a private label brand owner your margins can be rather low or very high, no-one will ever know for sure. This puts brand owners in a strong negotiating position compared to the buyer. Because of this `asymmetric information advantage´, also known as information failure, the brand owner sometimes choses to price their wines too high. This can be a mistake, if not properly backed up with value adding marketing. Clive Donaldson suggests another approach.  

– Instead of just margin margin margin, how about using your private labels to differentiate yourself as a retailer? Use it for customer loyalty! A private label wine communicates who you are as a company and what you stand for, said Clive Donaldson of Morrison supermarkets.  

However, if you are seeking high margins anyway, be sure to increase the perceived value of your wines by advertising. It’s a mistake to believe that your private label will sell good at the same price as heavily marketed brand leaders.  

3. Too much emphasis in label design/packaging As the wine industry evolves and continues to reflect the styles of popular culture, wine labels will phase out traditional designs and begin to emphasize brighter and edgier labels. Nowadays private label-wines often have effective wine labels that targets a specific demographics. One study by Annie Larson suggests that 94% of millennials remember graphic wine designs, in contrast to the 68% who remembered wines that had traditional labels on them.  

Everybody seems to understand that label design is more important than ever, but how about the wine in the bottle? It’s important to get the balance right here and not spend all your bucks on the label, and then very little on the wine inside the bottle. It’s a short minded approach that seldom leads to repeat purchases.  

4. Lack of product transparency A trend in 2018, and beyond, is that consumers want to know who’s behind their food and drink. Even more extreme in this regard are wine writers, bloggers and others in wine media. If you have a lack of transparency writers will generally not even touch your private label. For them to have anything to write about you must specify details such as region of production and who actually made the wine. Just as wine producers to, a private label brand owner should create technical sheets with all the relevant information together with a catchy story about how the wine came to be. This will not only make writers more keen of writing, it will be a fundamental part of your sales material as well.  

All quotes taken from personal interviews and talks at International Bulk Wine and Sprits Show on the 26th of February 2018.

FACT BOX BELOW 

Who is doing it well in the world of private label wines?

Wm Morrison Supermarkets Plc – the Innovators Clive Donaldson, Wine Sourcing Manager at Wm Morrison, has done a fantastic job with the private label programme at this supermarket. Why is it so good? Part of the secret is that they are proving that private labels can be innovative, not just copycats. Their Marlborough Sauvignon Blanc is a good example. To offer their consumers something different, they decided to source grapes from a single sub-region of Marlborough. Not customary practice, Marlborough is a region where most wines are blended and therefore, according to Clive, rather bland in individual character.  

Lidl – consistent, with a premium feel One contemporary benchmark in private label wines is Lidl, they do particularly well with their `Cimarosa´ brand – a bold and consistent range of wines that show premium ambitions. The quality of the individual varietals consistently deliver on their promise, just as they should.  

Vinomofo.com – relentless focus on their clients Vinomofo, the Aussie wine startup that has impressed wine drinkers with its “no bowtie, no BS” approach, have more to celebrate than their new $25 million financing deal. They focus on their clients like no others, the Vinomofo private labels goes perfectly with the personality of the company and the wants of their subscribers. Bold, innovative designs that are made to instantly connect with their youthful customer profile.