Despite being slammed as poor value, branded wines are increasingly popular with UK drinkers.
The wine market poses an odd combination of challenges to marketers. Volume sales are growing and the market is highly fragmented, with the world's five-biggest wine producers accounting for less than 8% of international sales. Meanwhile, supermarket pricing pressures are making it more difficult than ever for brands to increase their profitability.
There should be scope for building wine brands, but those that have done it successfully took a battering earlier this month when a panel of Which? experts said they believed branded wines offered poor value for money.
The UK drinking public has certainly developed a taste for wine.
If current consumption rates continue it will become the country's favourite tipple - ahead of beer - within the next 10 years. Sales grew by 31% between 1999 and 2004, making the sector worth pounds 7.6bn, last year according to Mintel.
Off-trade sales account for about 80% of volumes, although prices are being forced down by discounting in the multiples. Discounting is so widespread that the real market value is not matching volume growth. Mintel says the price of the cheapest bottle of wine has risen by just 50p over the past 25 years and the average price of a bottle off-trade was pounds 3.89 in 2003-2004.
UK consumers have a broad repertoire when it comes to the variety of wine they will drink. However, in recent years, the Old World (produced in Europe) wines have been losing out to the rapid growth of wines imported from the New World, especially Australia and North America.
In 2003 New World wines overtook European vintages for the first time.
Wine from Australia, South Africa, the US, Argentina and Chile accounted for 468m bottles, compared with 410m from France, Italy, Spain and Germany.
France's share of the UK market has fallen from 30% of UK imports of still, light wine (with an alcohol content of less than 15%) in 1999 to 22.6% in 2004. This has been blamed on the French producers' complacency and a lack of marketing to combat the New World competition. Australian wines outsold French ones by value in 2004.
Women consume more than half of all the wine drunk in the UK, with the over-60s age group being a key consumer base. And, although the supermarkets are driving down prices, Mintel's research shows that consumers are willing to pay more for quality.
Although there has been a rise in the number of brands appearing as companies build their portfolios, the global wine market is highly fragmented with the five leading producers accounting for just 8% of volume sales. Branded wines dominate both on- and off-trade sales because they provide consumers with a reliable product within the low- to mid-price band. These wines tend to appeal to drinkers who lack knowledge or experience of grapes and regions.
Despite their popularity, branded wines were dealt a blow earlier this month when consumer watchdog Which? published a report concluding that branded wines are poor value. Its panel of professional wine-tasters and critics tasted 41 wines, including the best-sellers from the top 11 brands, and none scored more than 13 out of 20.
Emma Chamberlain, marketing and innovation manager at wine wholesaler and distributor Percy Fox, was disappointed by the Which? report. 'For the past 15 to 20 years, all wine brands have been trying to demystify the category,' she says. 'You give people a choice and make it accessible - something for the masses rather than a snobby activity. The Which? panel gave everyone a pasting: all those wines are successful and have lots of consumers. It is about experts versus consumers. Of our brands in the Which? list, Blossom Hill and Piat d'Or, we sell 65m bottles a year to 17m consumers. …