Uncategorized

Chill winds still buffets UK wine trade

While the Irish wine trade has proven itself to be extremely flexible in adjusting stocking levels, the UK has witnessed more high profile downfalls

wineOddbins, the UK wine chain with several branches in Ireland, is still facing an uncertain future, with administrator Deloittes indicating that although they were in talks with several parties regarding a sale of the business, nothing was settled yet. A management buyout by its managing director, Simon Baile, was also rumoured to be on the cards. However, some commentators are not optimistic that the chain will be saved, as a number of stores are believed to need refurbishment, while there is a high level of debt, along with a significant number of unprofitable branches.

This is hardly a surprise. Many of the stores seemed poorly placed in Ireland. Some were tucked away in slightly obscure suburban locations, while others, while attractive, were located where there was little parking. The Blanchardstown branch was initially an exciting store with plenty of parking, but its retail park location in Dublin’s north west meant that a lot of wine drinkers simply didn’t know about it.

It is ironic that the UK has, if anything, seen more high profile downfalls in the wine trade recently than Ireland. Chains such as First Quench and Unwins have disappeared while, against all the odds, Irish multiples such as O’Briens and Next Door have been soldiering on. Not many good independent retailers have closed either. The Irish trade has shown itself to be extremely flexible in adjusting stocking levels and altering ranges, in order to achieve the right mix of entry and premium labels for the current market.

Not that things aren’t challenging. Wine importer Edward Dillon, for example, were among several importers which saw a decrease in turnover in 2010. For Dillons, the fall was around 13%, from €106.7m to €93m leading to a loss of €1.3m. The firm has already moved to correct its position, although it’s been painful, with a fall in employment from 97 to 69. Nevertheless, the firm has some excellent agencies and, like all in the trade, it’s now a matter of balancing the ranges offered to ensure that sales grow again. It’s hard not to conclude that, overall, things could be worse; in the UK off-trade, wine sales are at their lowest level for 16 years.

Asian market still sparkling

China is developing a thirst for sparkling wine which the French reckon is going to grow to the point that Europe won’t be able to supply it. The solution: to build a winery in Mongolia. Multi grande marque owner, Moet Hennessy, and a large Chinese agri-food producer, are jointly planting over 160 acres of vines in the region of Ningxia. Moet will build a winery on-site and wines will be sold as a Chandon brand. It’s been claimed that Ningxia is similar climatically to the Champagne region, with weather moderated by the Yellow River.

It is just another sign of how important the Chinese wine market has become. In value, it bought more Bordeaux in 2010 than did the UK. Its traders have also become significant players at the Bordeaux En Primeur sales with some UK merchants also reporting that, for vintage 2009, they sold more than 30% of their en primeur purchases on to Chinese buyers later. The 2010 vintage, for which tastings have begun, is said to be more classic than 2009, which was generally in ripish style and perfect for less experienced drinkers. Sauternes, Bordeaux’ classic sweet, which has strong appeal in Asia, is said to be a little fresher than usual. Some experts believe that this year, while Chinese buyers will certainly purchase from top growths, they will also be seeking more approachable wines from less famed chateaux. That indicates a broadening Chinese market with increasing interest at mid point. The En Primeur market is now worth well over £100m.

Increased Chinese interest is bound to send Bordeaux prices even higher. As far as older wines are concerned, there already seems to be something of a bubble, with cases of Ch Petrus, for example, selling at up to £58,000 a case for the 1982. For the moment, at least, China is less smitten with Burgundy or the top Italians. China now drinks about one billion litres of wine a year and, as well as buying abroad, ventures like the Moet one above have become increasingly common as it moves to create better quality wines of its own.

Sign up for Drinks Industry Ireland

Get a free weekly update on Drinks Industry trade news, direct to your inbox. Sign up now, it's Free