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by Carolyn Evans-Hammond, Published in Wine & Spirit International, January 2004
Supermarkets account for an ever-growing share of wine sales around the world. This trend is reshaping the playing field, and has prompted a re-evaluation of the ways in which wine producers compete in the demanding grocery sector and beyond.
The KPMG Wine Industry Group in Australia recently examined market access issues for wine brand owners in the UK, US, Canada, Australia and New Zealand. The report titled Shelf space...is there room for me?, questions a range of common strategies including the traditional on-trade versus off-trade market approach.
“Over the past 20 years, wine retailing has altered dramatically, principally due to the growing pervasiveness of the grocery channel,” says Keith Smith, executive chairman for the Wine Industry Group of KPMG in
So analysing the market by place of consumption—on-trade and off-trade channels—is no longer enough. This model must be overlaid by a third dimension of “convenience” and “destination” outlets, definitions which identify the consumers impetus for buying wine.
Convenience channels and independent groups tend to be grocery groups or pubs and restaurant chains, while specialist stores and restaurants form the bulk of destination outlets. Destination outlets offer consumers an experiential /discovery element whereas convenience channels compete heavily on price.
This new way of viewing the market throws into question the previous model based on the notion of 'vertical brand integration'. Known as 'brand ranging' and 'ladders', the vertical brand integration model relies on consumers buying entry level wines and trading up within a brand’s portfolio.
“The consumer is now differentiating between convenience and experiential brands,” says Smith. “As a result, brands that sell in destination outlets may compromise their brand equity by selling in convenience channels as well.”
Appearing in both types of outlets can not only blur a brand’s image and erode equity; it can make destination outlets reluctant to list the brand because they seek a different offer to convenience channels.
Smith is not recommending that established brands like Penfolds and Beringer move away from a brand integration model but that new and less established players question if this structure is suitable for them.
“The first requirement for new and less established players is to determine where the brand or brand portfolio will be most appropriately represented—convenience or destination outlets,” says Smith.
“Once the appropriate channel is identified, brand owners must differentiate their offer; find ways to engage the consumer—not the buyer, who is a conduit; and be creative in their approach.”
The KPMG Wine Industry Group in Australia recently examined market access issues for wine brand owners in the UK, US, Canada, Australia and New Zealand. The report titled Shelf space...is there room for me?, questions a range of common strategies including the traditional on-trade versus off-trade market approach.
“Over the past 20 years, wine retailing has altered dramatically, principally due to the growing pervasiveness of the grocery channel,” says Keith Smith, executive chairman for the Wine Industry Group of KPMG in
So analysing the market by place of consumption—on-trade and off-trade channels—is no longer enough. This model must be overlaid by a third dimension of “convenience” and “destination” outlets, definitions which identify the consumers impetus for buying wine.
Convenience channels and independent groups tend to be grocery groups or pubs and restaurant chains, while specialist stores and restaurants form the bulk of destination outlets. Destination outlets offer consumers an experiential /discovery element whereas convenience channels compete heavily on price.
This new way of viewing the market throws into question the previous model based on the notion of 'vertical brand integration'. Known as 'brand ranging' and 'ladders', the vertical brand integration model relies on consumers buying entry level wines and trading up within a brand’s portfolio.
“The consumer is now differentiating between convenience and experiential brands,” says Smith. “As a result, brands that sell in destination outlets may compromise their brand equity by selling in convenience channels as well.”
Appearing in both types of outlets can not only blur a brand’s image and erode equity; it can make destination outlets reluctant to list the brand because they seek a different offer to convenience channels.
Smith is not recommending that established brands like Penfolds and Beringer move away from a brand integration model but that new and less established players question if this structure is suitable for them.
“The first requirement for new and less established players is to determine where the brand or brand portfolio will be most appropriately represented—convenience or destination outlets,” says Smith.
“Once the appropriate channel is identified, brand owners must differentiate their offer; find ways to engage the consumer—not the buyer, who is a conduit; and be creative in their approach.”