Memorandum by Wine Intelligence
QUESTION A2
Wine as a category does have several distinguishing
characteristics and one particularly that differentiates it from
other food and non-food FMCG categories. This is "sense of
place"—the concept that all wine is made by a vigneron
on an identifiable piece of land in a distinctive area of countryside.
Consuming wine is very much about the emotional imagery of sun-splashed
vineyards and traditional wine farmers—neither of which
is conjured up when choosing and consuming most other food and
drink categories. While most of the 23.5 million UK adult regular
wine drinkers have low levels of objective knowledge about geographic
origin, the concept of "place" is one of their five
important choosing cues, helping them decide which wine for which
occasion or which is best value for their current needs at a specific
price range among the dauntingly-large selection of wines on offer
(biggest supermarkets: 800+ different wines; up to 2000 bottle
facings).
Thus, while "place"—or Geographical
Indication—was historically a producer measure to protect
origin, it is now an essential consumer instrument of recognition
and assurance. For the consumer, "GI" is often a proxy
for quality, and always an indicator of style. Relatively well-regulated
geographic wine regions such as Chablis, Rioja and Chianti are
outstanding examples how the concept works effectively in the
interests of both producers and consumers.
QUESTION B3
The current issue is not one of the fundamental
relevance of a GI system. However, there are two serious issues
which need to be addressed:
(i) Some GI's are increasingly unable to
find profitable markets for all their volume.
(ii) Traditional rules about what can be
produced in each region now urgently need structural reform.
These rules were created mainly in the 19th
and early 20th centuries to protect the rights and opportunities
of small producers or grape-growers, by defining what varietals
could and could not be used, how they should be labelled, and
whether irrigation could be used. Much of this regulation revolved
around the co-operative structure, with the objective of ensuring
payment to and a level playing field for all producers rather
than making wine that consumers wanted. Certainly not a market-driven
system suitable for dynamics of the 21st century global wine market.
Reform must address over-production and quality
in areas where current volumes and styles are unable to find profitable
markets.
QUESTION B4
No. Over the last 30 years, wine sources outside
the EU—the so-called New World wine regions—have come
to market with a different production model, based on much larger
units of winegrowing (100's of hectares versus as little as one
or two within in the EU) and wine making and, most importantly,
styles and value propositions that set new standards for consumers.
The New World also adopted simple labelling and marketing approaches
which, effectively, democratised wine and created a much bigger
consumer market. "Accessibility" is the much-used phrase
to describe what differentiates New World offer from traditional
EU producer approaches to market.
QUESTION B5
No, or very slowly. Protectionism is strong
in many EU wine areas—both versus other and often neighbouring
EU wine areas, and versus non-EU sources. Subsidies and incentives
to grub up are the mechanisms to bring order to the supply-demand
balance, but they are expensive and politically unacceptable to
elected representatives from some of the most seriously-threatened
areas.
QUESTION C6
Grubbing-up is a necessary 1-time measure to
reduce supply in producer areas that will never be able to compete
structurally or in quality/value terms. However, the EU and more
importantly the wine regions themselves must invest effectively
and durably in demand-generation imperatives that will enable
globally competitive wine to be brought to market:
— 21st century styles of wines.
— Label descriptors that inform and
engage consumers.
— Production and supply-chain efficiencies.
QUESTION C8
Yes, selectively, but only as a transitional
measure where a wine area is in the process of upgrading its capabilities
as above. Removing production capability in commercially non-viable
areas is the only solution, however painful to some local families
(no more so than removal of fishing licenses).
QUESTION C9
None, beyond transitional distillation.
QUESTION C10
Potential impact varies widely. Chablis, for
example, will survive and continue to flourish as a distinctive
wine region. Parts of southern France and central Italy will not.
QUESTION D12
New approaches to labelling are an imperative,
as defined above. Much of the labelling regulation within EU wine
regions is consumer-unfriendly and thus a significant factor in
loss of market share to New World sources. Labelling must achieve
3 essential tasks to engage consumers and generate demand:
— Explain what the wine will taste
like—or what the regional style offers.
— Indicate clearly where the wine comes
from and who made it.
— Suggest what sort of wine drinking
occasion it is best for—casual drink; informal/formal meal
settings; type of foods; etc.
And labelling needs to be a smart market-led
combination of front and back labelling. Many EU wines have no
back label, or are often only in the language of the producer
country.
QUESTION D13
Enormous! From articulate wine makers coming
to the UK to enthusiastically hand-sell their wines, to large
company running sophisticated multi-channel marketing programmes
from UK-based offices. However, we should not attribute marketplace
success solely to great marketing. The wine is:
— Consumer-friendly in style.
— Suits without- and with-food occasions.
— Perceived by consumers as good value
and very frequently heavily discounted.
QUESTION D14
Many lessons can be applied, including matching
and clearly exceeding in front of the consumer the winning factors
identified above.
However, the solution is not simply to produce
wines that look like New World wines. Retaining regional character
is vital, and a latent strength that even many Australians would
like to emulate. Long-term, the biggest learnings are about production
and distribution structure, and adopting producer business models
that support globally competitive scale and reach.
February 2007
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