Examination of Witnesses (Questions 520
WEDNESDAY 14 MARCH 2007
MR MICHAEL PAUL
Q520 Baroness Jones of Whitchurch:
There was a very useful report that we downloaded called "How
do consumers select wines?". But that was going back
to 2002. Presumably you have done other reports since then on
how consumers select wine.
Mr Paul: Yes.
Q521 Baroness Jones of Whitchurch:
Can you give us a flavour of how things have changed since 2002?
Mr Paul: The average consumer is more confident
when buying wine now, and one should not over-estimate that, and
therefore maybe buying a wider variety of brands than perhaps
they were buying before. As they become more confident, they are
hopefully paying a bit more for the wine. The key thing which
is often forgotten when people talk about how consumers choose
wine is that the first decision they make is not about price,
it is not about what they like or do not like; it is about whether
they are going to drink it themselves or whether they are going
to take it to someone else's house. That is absolutely crucial.
They will pay more if they are going to take it to somebody else
even though they know when they go there that they are probably
not going to be drinking it themselves, and that it will get hidden
away. Also they will play safe, so maybe they will drink a Chilean
Chardonnay at home but they buy a bottle of Claret to take to
a friend down the road. It sounds obvious when I mention it like
that, but it is often forgotten. People think it is all about
price, price, price or deal, deal, deal. But actually it is not.
Q522 Baroness Jones of Whitchurch:
Of the research you have done about how they choose wine, do you
get a sense of what they would like, in terms of more information
that we might be able to help deliver to them, that would make
those choices easier?
Mr Paul: That is a good question because, if
you do research, the consumer always says it is so confusing,
that this is a impenetrable maze. But actually there is something
which I call the retail paradox, which is that if, say, you normally
buy Jacob's Creek and you are given the choice between buying
Jacob's Creek from a Tesco store that has 700 lines and from a
garage forecourt that might have ten, you will go to buy from
the Tesco store because Tesco has more credibility as a supplier
of wine. So people are actually buying into the confusion and
that is a key point about wine. Subconsciously or consciously,
they actually like the confusion because it implies that it is
more aspirational; this is something they really do not understand,
so it must have a lot of added value in it. Complexity adds value,
if you like, even though they may always buy Jacob's Creek. I
think that is a crucially important point.
Q523 Baroness Miller of Chilthorne Domer:
I would like to turn now to the question of GIs. I found some
of your comments on them were very interesting, people buying
into the sun-splash dream and so on. But actually the GIs do not
really reflect that. I would have thought that for most visitors
to France, for example, then the south of France, say Languedoc-Roussillon,
would have far more visitors than Chablis and within Languedoc-Roussillon
all those little GIs would be pretty meaningless. How do you think
the sector should start to address that in actually making more
of a link between what the consumer understands as that sense
of placea place that they visit or a place that they would
like to visitas opposed to something that is actually such
a small geographical area that it is meaningless?
Mr Paul: I think that is a very interesting
point, and of course a lot of these GIs are successful and premium
because they have been around for so long. There are examples
of names which, if their wine were launched today and did not
exist beforehand, it probably would not get remotely close to
the price it actually gets simply because it has gained from having
been around for a hundred years or so. There are other GIsas
you rightly point out, in the south of France there are a lot
of themwhere actually a lot of the wine is pretty good
but there is no awareness amongst the consumers of that wine being
good because it does not have that history behind it and it has
not necessarily been marketed very well. There are 750 appellations
in France and you could get out your pen and end up with 500 and
agree a way of marketing them in a way which would be appealing
to the consumer. If you could start again and do that, then that
would be sensible; but I would suggest it is unrealistic. By cutting
down the number of GIs do you improve things at all? I would argue
that actually that is not really the issue. There are an awful
lot of GIs that need to market themselves better. We have just
got a project working with InterSud in the south of France to
do just that, but it is terribly easy to analyse the problem and
less easy to come up with a solution of how a particular region
in France should differentiate itself from any other region in
France when maybe its wines are relatively similar to another
one down the road. I suppose the point I am making is that the
whole thingthe patchwork quilt, if you likeas a
totality adds such huge value almost because people do not understand
it, which is really the point I was making earlier. If you cut
out half of them and simplified it so you had neat little rectangles
on a map, you would probably destroy the added value pretty well
over night. The issue is how do you take something which is production-driven
and was set up to avoid terrible wine into a marketing opportunity?
That is where the French generally have not been good and the
Italians have been worse. The only people, I would suggest, who
have done it particularly well are the Spanish, with the way they
have given much more freedom and allowed almost companies to become
GIs. That, to me, has a lot of potential but then the way the
Spanish trade is structured there are actually big companies who,
more on a New World model, produce some of the finest wines.
Q524 Baroness Miller of Chilthorne Domer:
The wine industry is much more complex, but if you take food now
in Britain, for instance, with beef or lamb or cheese, it is tending
to move the other way, into being much more specific about area.
You talk about salt marsh lamb or beef from Ruby Country in Devon,very
specific but tying it into the qualities of the particular area
it comes from, a very sunny area or the seaside, for example.
Do you think the GIs actually give consumers any sense of what
it is about the place beyond famous names? Or is that the move
you think they will be making?
Mr Paul: I think that is the way they have to
do it. The thing about what is happening in other categoriesI
do not want to sound cynical because I do not mean to be at allis
that the move to create provenance or to create more naturalness
of product is actually marketing-led. Then, of course, the product
has to live up to the hype or whatever, but it is marketing-led.
Wine is sitting over here with all this provenance and history
and millions of GIs; food is actually moving in that direction,
with wine as a kind of role model. Wine has already got there
but it has got there in this totally chaotic and amateurish production-driven
way. The issue for wine is: how do you inject marketing thoughts
over here to make what wine has got more meaningful to the consumer,
who is increasingly demanding what you are talking about, which
is more provenance, and they want to know who makes it and whether
it is made in the right way, whether there is quality control,
et cetera. Wine has all that to a large extent but it is not marketing
Q525 Lord Cameron of Dillington:
I would like to talk to you about labelling. It seems to me that
the restrictions on labelling sum up the worst aspects of the
constricted European market place and that they are more designed
to protect existing producers than they are to give information
to consumers. I would like to have an idea as to your definition
of "accessible" labelling. Secondly, what sort of information
do you think should be allowed? Should there be complete freedom
of labelling? If there were to be complete freedom, how do you
link that to the protection of GI status as being partially valuable
to selling wines?
Mr Paul: I actually have a couple of bottles
here, which I thought might illustrate the point. I did not pick
one of the big Australian brands but this is an Argentinean brand
called Argento. It is well designed and it looks as though it
could have been around a long time, even though it has not been.
It has Argento, a very clear brand name; it has the variety if
you need to know it. There is information, the real Argentina,
on the front label, and then there is a mass of stuff on the back
label which you either say you cannot be bothered with but it
makes terribly interesting reading or, when you take it home,
you look at it and see it has all the legalities. This is designed
by a UK company and most of New World packaging would fit into
that. That is attractive, appealing and, if the consumer only
wants to know where it comes from, it tells them that; if it is
a brand they know, it tells them that; and, if they want to know
what shoes the wine maker wears when he treads the grapes, they
can read the back label. Now this classic French regional label
has the number it is105887in the make, as if anybody
really minds about that, and no back label at all. That is an
extreme. Funnily enough, I looked on the shelves in the office
and most Old World wines now have some form of back label. I had
to search quite hard for this. If you take the top clarets, they
do not have back labels; it is assumed you know. There is this
mixture of arrogance on the one hand, this assumption of "why
would you want to know anything more, just drink it and you know
it is great kind of thing". At the other end, there is this
kind of "what does it really matter, it is just for everyday
drinking, why do you need to know the name of the wine maker"?
Or, it is far too expensive to put a back label on and the machine
will not do it, whereas this obviously is designed by a marketing
department but trying not to look to designed, which is also important.
That is an accessible label. You could argue that there are more
accessible labels which would have, say, Chardonnay in big letters,
whereas that does not really tell you other than that it is a
bottle of French wine and it is red.
Q526 Lord Cameron of Dillington:
Those may or may not have been decisions taken by the businessman
responsible for producing and marketing the wine. But what worries
me is the fact that there are so many restrictions on the label
by the EU regime. What you are saying therefore is that there
ought to be total freedom? Or maybe not?
Mr Paul: Yes, I am saying there should be total
freedom but obviously the legalities have to be on there. It has
to say where it is from, the alcohol strength has to be on there,
and of course we are now getting into the discussions about "units
of alcohol" labelling and whether there should be any health
warnings on the back label. That has all got to be taken into
account. But apart from that there should be freedom for anybody
to say what they want on a label. Let us give an example here,
if you are a Burgundy producer. There is a lot of discussion in
Burgundy about whether they should be allowed to put Chardonnay
on the label, because some Burgundy producers want to be able
to tell people that their Chablis is a Chardonnay. As a marketing
person, my view is that that is the last thing they want to do.
Why would they want to tell people that all Chablis is (in inverted
commas) is a Chardonnay? That is like saying that Champagne is
just wine with bubbles in it. You destroy your image in that way.
However, that should be a business decision.
Q527 Lord Cameron of Dillington:
We are talking about the EU regime?
Mr Paul: Absolutely, so if a Burgundy producer
wanted to say Chablis and then Chardonnay in big letters, they
should be allowed to do so.
Q528 Viscount Ullswater:
Could I ask about bottle shapes? Is there any kudos in bottle
shapes? Those to me look like Bordeaux bottle shapes. Would Burgundy
be very upset if you started using a Burgundy bottle to sell a
Mr Paul: The interesting thing is that, from
a design perspective, labels look much better on bottles with
shoulders than they do on Burgundy bottles. Generally, marketing
people prefer bottles with shoulders, but again there should be
total freedom. The New World has a real problem, because in most
of the New World countries there is a glass monopoly and that
is why Australian bottles tend to look all the samepretty
dull, whereas if you go to Italy every town seems to have a glass
factory and that is why you get these kind of olive oil bottles
on the wine shelves. That is an aside, but generally speaking
New World would go for shoulders for design purposes.
Q529 Lord Plumb:
Could I just ask about corks and screw tops? We have heard evidence
from the World Wildlife Fundand I could not for the life
of me think why they were concerned about winebut, of course
they are, because the cork trees are coming down. That is their
argument and I wonder what the market is looking at at the moment.
Mr Paul: I was involved in this around 2000/2001,
because we were getting such a high incidence of corked wines.
Corked wine is a fault in either the tree or the process, which
means that wine either does not taste very good or tastes totally
flat. Of course, if it tastes flat, the consumer just thinks it
is a boring wine, when it actually is not; it is just the cork.
To take for example an incidence of 4%, if you think of the marketthat
is six million cases of wine coming into the UKit is totally
unacceptable. The cork industry to us in the trade did not appear
to be taking the problem seriously enough. Then you had plastic
corks coming in, and then of course the move to screw caps, which
was led by Tesco as an initiative. At that time all the consumer
research said that screw caps were seen as cheap and should not
be used. However, screw caps are now much more acceptable, particularly
for white wines. Wine makers always did send their samples round
the world in screw caps and they have done for years and years,
because they know they are not going to get a corked wine. Of
course, the Portuguese are now doing a lot more work on improving
the quality of the cork, which is a good result all round. I have
to say that the amount of cork that goes into wine bottles is
a reasonably small proportion of the amount of cork that is produced,
so I think to blame the wine industry for affecting the wildlife
in Portuguese forests is a little bit strong.
Do you have anything to say about the rise of the back label?
Tesco on their own brands have a back label, which gives about
eight different bits of information in a very concise way. Is
this because consumers want the information on the back label?
Mr Paul: I think there is some information that
needs to go on a label, and it is easier if it goes on the back
than on the front, because obviously it gets in the way of the
design on the front. Tesco have done research into this; some
consumers never read back labels, others do. The issue with labelling
is that you have to appeal to everybody on a back level; some
never read it and some want probably even more than is on it.
Tesco have come to the decision they have. They are a pretty professional
outfit and I am sure they have researched that pretty well.
Q531 Lord Plumb:
You spoke earlier of protectionism, but would you like to spell
this out a bit, protectionism both internally and externally,
and how this compares with protectionism that may exist in various
parts of the world where they are importing fairly large quantities.
You did not specifically refer to protectionism as such, but in
the market place you were making the comparison between the wines
that are coming in and the varieties and so on, with the wines
that are produced internally. There are protective measures which
the EU has implemented for quite a long period of time. Really,
my question is how this compares with protectionism in some of
the New World wine markets.
Mr Paul: Protectionism exists, if you like,
informally in the New World, in the sense that, if you are a French
producer wanting to sell your wines in Australia, you might find
that pretty trickyfinding a distributor, finding a retailer
who would be bothered with more than just the top-end stuffand
obviously marketing your product to consumers who are patriotic
in the sense of buying their own product. The same is true in
New Zealand, Argentina and Chile. Only the top-end wines tend
to get through. Here of coursewithout wanting to be impolite
about our own wine industrywe are very open to imported
wines and I think there are something like 24 countries on our
shelves at the moment. This, in a way, is by far the most open
of the markets. Eire is the same, but Scandinavia has the monopoly
system, which means there is not exactly competition at the retail
end. Most of the other countries in Europe have their own wine
industry to protect, but it is about the consumer favouring their
own products as much as anything else. In the New World I would
say there is no kind of formal protectionism but the informal
one is very powerful.
Q532 Lord Plumb:
We find that in other products too.
Mr Paul: Yes.
We have European wines losing market share in Europe and overall
consumption of wine in Europe going down. What do you think the
EU wine producers have to do to reclaim some ground?
Mr Paul: Let us say you were in charge of the
whole of the French wine regime. My message would be that all
these New World people have come in, they have increased consumption,
they have increased interest in wine. There is far more excitement
now in wine than there has been; it was a pretty jaded market
in the early eighties. The New World has come in and done that,
they have provided a platform for the French or the Italians or
the Spanish to say, "OK, we have had all that stuff, now
let's get onto the real thing" or something like that. The
overall marketing premise is pretty straightforward. What is interesting
if you do research into Australian wine drinkers is that you find
that Australian wine drinkers segment into people who drink Australian
wine up to, say, £5 a bottle and then buy something else
when they want to trade up or for special occasions; and the something
else they go and buy is French or Italian. Even the average Australian
wine drinker is actually buying into premium French wine. If you
take, that argument all France has to do is take this incredible
provenance and start marketing it in a way a hundred times better
than it is at the moment. It is purely a marketing problem. The
potential is there.
You were talking about the aspirational nature of trading up to
the higher levels. But a lot of French wine is not at that level,
is it? Can the European producer fill the sort of Jacob's Creek,
middle range, £5 a bottle market?
Mr Paul: That requires much greater flexibility
in wine making practices and vineyard practices. It also requires
much greater freedom in terms of cross-regional blending. The
argument I was using before was on a generic level. Let us use
Bordeaux or Burgundy as an example. To get down to the individual
producer potential, they are obviously not going to get together
with each other all the time, they are competing with each other.
What can they do? They need much more freedom to be able to come
up with styles of wine and labelling of wine that actually appeal
to the consumer. It is far too rigid. For example, blending allows
the wine maker to perform. Even in Australia, a Chardonnay only
has to be 85% Chardonnay; it can be 15% something else. That is
a huge flexibility.
That is what is missing at the moment in the European structure?
Mr Paul: Absolutely. The point was made earlier
about the landholding. If somebody only has two hectares, what
can they do? Somebody who has 10 hectares and could plant another
10 to produce some interesting blend which could sell at £5
or £6 a bottle, then they should be allowed to do that. The
issue is: who is going to decide whether that person should be
allowed to plant and that person over there should not be allowed
Q536 Lord Plumb:
Is that due to the regime itself? Or is it individuals who are
traditionaliststhey work in a certain region, this is their
wine, this is the way it is produced and they are not going to
change? Is it a commercial problem? Or is it a political problem?
Mr Paul: I think that is a very interesting
point. I was talking at a Brewers' conference recently and, if
you talk to brewers, they accept that the reason they are in businessapart
from having fun and making great beeris to make an acceptable
return on investment. That is fundamentally why you are there,
otherwise you go out of business. I would suggest that in France,
Italy and Spain, the majority of companiesnot in percentage
value but in volumewould not understand that as a motive
why they are in business. I do not mean that pejoratively. If
you are a family company, your main objective is maybe to hand
this over to your son or it may be that you just want to make
great wine. The idea of making a return on investment and having
a business plan, which most beer people would accept is the norm,
actually does not exist in wine. If you look at the co-op system,
the objective of the co-op is to get rid of the wine at the end
of the vintage. There is no incentive to make better quality,
because they are paid by the hectolitre. The profit motive, which
is what drives business fundamentally, does not exist in wine
to the same extent that it exists in other categories, and that
is crucial to understand. The point is very valid: if people are
not bothered about making a return, you can say, "Lucky old
them, what a great position to be in". But how can people
who do need to, compete with people who do not need to?
Q537 Baroness Jones of Whitchurch:
As you were saying earlier, over the hill comes Tesco and waves
a cheque guaranteeing income over a number of years. Presumably,
as you were saying, those supermarkets themselves can change production
methods, practices and all those issues you have been raising.
They have the power to make that change which the actual producers
themselves would not necessarily initiate?
Mr Paul: That is absolutely right and that is
why major retailer involvement in wine has been so beneficial,
because it has not just changed the market place, it has helped
the person who wants to get on in wine develop by giving them
advice, by sending in perhaps wine makers. The supermarkets, it
seems, are extremely well qualified to be able to go into a winery
and make recommendations; it is almost a free consultancy.
Q538 Baroness Jones of Whitchurch:
Would most producers want one of those supermarket contracts?
Or are some of them a bit sniffy about it and think it is beneath
Mr Paul: Having worked for French people in
the pastI am going back a while nowthe idea that
you might want to have your wine in Sainsburys rather than in
Harrodswhy would I want to do that! I think that is breaking
down now, but I am sure there are still people who take that attitude.
You have to remember that supermarkets here are much more sophisticated
than in many parts of the continent. They look far better here
and the wine range is obviously pretty sophisticated, whereas
maybe in a French market town the supermarket is seen as performing
a different task.
Q539 Viscount Ullswater:
Are you saying that the price in a supermarket is equivalent to
quality? You were talking about buying your £5 bottle of
Australian Chardonnay and, when you want to impress your friends,
you spend more. Are the supermarkets making a judgment on quality
and pricing accordingly? They do seem to be powerful and important.
Mr Paul: Yes, they are. They are important,
but remember that a supermarket, just like a producer of wine,
is marketing-oriented and will try to sell that wine for the highest
possible price they can get away with. That is just the normal
rule of business. The consumer will then decide whether they come
back for more.