Trading Up is the Wrong Tactic

A lesson from the U.K.—to get wine drinkers interested in quality, educate them early on

In the U.K. the huge supermarket chains dominate wine retail, and their buying power and the competitive nature of the market mean that price discounts—some genuine, some manufactured—are a constant. Wine is often used as a loss leader to drive foot traffic in-store, where customers will swell the retailer’s coffers by doing the rest of their grocery shopping.

So among the seminars at this year’s London Wine Fair was a session entitled Chasing the Premium, at which members of the U.K. wine industry were beating themselves up over the age-old question: How to get consumers to trade up?

Having gone around in circles in this debate, alighting on the usual touchpoints of education and marketing, it fell to Mark Jarman, the senior buying manager for wine at the supermarket chain Morrisons, to offer a sobering perspective. “Many of our customers aren’t interested in trading up,” he said. “They put aside £5 for a bottle in their weekly shop and that’s it.”

Coming from a representative of one of the U.K.’s notorious supermarkets when it comes to this sort of “loss leader” behavior, the observation was somewhat laughable. Certainly such customers have little incentive to trade up when they are bombarded with spurious promotions luring them into the store—in the mistaken belief that they can get a decent bottle for £4.99, a price that delivers neither value to the consumer nor profit to the supply chain.

This “constant race to the bottom” on the part of the major chains was derided by Andrew Bewes of the importer Hallgarten Druitt as “a disaster for everyone.” His stance hints at a change in mindset in the U.K. For years, the average amount spent on a bottle of wine here hovered stubbornly below the £5 barrier. But constant tax hikes, together with the pound’s post-Brexit fall, has made this price point undeliverable without reducing quality to an even more execrable state.

This may be tolerated by the weekly shopper but not others, it seems. In the past four years, the average price of a bottle has risen sharply, to crest £5.50. In its latest range review, Sainsbury’s, one of the leading supermarkets, cut its £5 to £5.50 offerings and expanded its premium tier, notably in the £7 to £10 bracket. Such a move suggests that people are willing to spend more to drink better.

Whether this is due to anything the wine trade has done, however, is open to question.

There’s no doubt that the industry has effectively communicated the message that the majority of a £5 bottle goes to fixed costs—notably tax but also marketing, packaging, transport, and the like—meaning that if consumers spend an extra £2, it goes to better wine. As a result, there should be a huge opportunity in persuading “bottom-feeders” to trade up. But they will only do so if they are given compelling insights into a wine’s quality and makeup. And while such savvy marketing is commonplace in the spirits and beer sectors, the wine trade hasn’t grasped the nettle.

Studies show that British drinkers are skeptical about spending more on wines they don’t know much about. There is still, it seems, a perception that they’re being hoodwinked by all that talk of terroir and tannins. Certainly premium wine brands have done a pretty lousy job in making their case. Meanwhile, innovation––say, new styles presented in packaging that appeals to a generation brought up on craft beers and small-batch gins––is, according to Jarman, “almost nonexistent.” The industry even seems to miss the open goal that’s presented by a wine’s back label, real estate that could easily be used to make the case for higher quality. I suspect most of those who trade up do so merely as part of natural maturation, in the same way I have upgraded my choice of car, watch, and coffee since my teens.

The unlikely saviors may reside among the next generation of drinkers. Drinkaware, a U.K.-based charity involved in curbing alcohol abuse, says the price per liter for alcohol spent by 18- to 24-year-olds is rising; the trade needs to persuade young consumers to value quality over quantity from the get-go. Trying to get them to trade up from a low base is a much tougher proposition. Just ask brand Australia, which has enjoyed huge success in volume but has struggled to convert that into value, with its average bottle price a paltry £5.15. A U.K. importer of Aussie wine complained recently that “the wine trade is terrible at signposting reasons to buy quality products,” while another highlighted the need “to persuade people to trade up to areas where there is more profit but also more interest and diversity.”

How to get there? As the old joke goes, I wouldn’t start from here …

Guy Woodward is a wine writer and the former editor of Decanter, the leading British consumer wine magazine, where he worked for 10 years. He is a former chairperson of the British Society of Magazine Editors.