Enotria says the time is right for multiples to "re-engage" consumers
Supermarkets need to mimic the success of independents and the on-trade in exciting consumers with diversified ranges if they are to return to growth, supplier Enotria and Coe has warned.
Enotria bought Coe Vintners at the tail end of 2015 and they officially joined forces this month ahead of an inaugural tasting at London’s Old Truman Brewery on February 23, which will show off its new combined range of wine and spirits.
The acquisition gives the group an arguably unparalleled reach in the premium on-trade, but around 45% of its volume is sold through the off-trade.
It has watched range rationalisation take place at the leading grocers, which are focusing on EDLP to combat the likes of Aldi and Lidl.
It worries that it “sounds like a return to the bad old days” but is optimistic that now the big retailers have “corrected” the “unwieldy and difficult” wine shelves they will start to focus on differentiating their ranges and trading shoppers up to premium products that “engage consumers”.
Chief executive Troy Christensen told OLN: “Premiumisation is occurring in the on-trade in wine and in spirits and both Enotria and Coe have done a pretty good job of helping to activate the channel in those categories. On-trade outlets engaging the consumer in this way are where the growth is coming from.
“This is one of the things the [multiple] off-trade is missing out on quite a bit by going down nothing but that price engagement. In the on-trade people are happy to spend money and they have a better experience for doing it.
“The off-trade was desperate to play the price game so they leveraged the key brands at a high level and tried to take down costs by disintermediating the supply chain.
“Now you have big brands and lots of private label that aren’t engaging consumers, just driving price.
“The big four came to the agents and said they were going to disintermediate them and do it ourselves. When the price pressure came they had to cut back their back offices. It’s great to have big brands – I worked on those sort of brands [at Accolade] – but they are missing that pipeline of innovation. By disintermediating the supply chain they are missing a bunch of innovation in the incubation of the next tier.
“Where the off-trade can come back is with that new consumer engagement.
“I am optimistic. There has been a retrenching period, a wine correction. Now you are back at this base, now people have cut back and there is very little differentiation, where do you find the right people to expand it?
“We think there is an opportunity after the correction to put our head above the parapet and re-engage the consumer. You need differentiation in the market to win.
“SKU reduction, big brands, EDLP, private label, cutting resource out of head office – how do you differentiate?
“The independents are an area that’s growing, up 4%. They are doing unique, funky labels from interesting areas. They have that interesting, unique mix.
“Independents are doing well, cocktail bars are doing well, food-led on-trade outlets are doing well – what are they bringing? Consumer engagement and differentiation.
“I am optimistic that the big retailers will see this opportunity after the correction.
“People will drink across the price points. You just have to give them the opportunity and reward them when they decide to trade up.”
John Hearn, who built up the Blossom Hill brand at Percy Fox, joined Enotria a year ago to head up its off-trade division, and he believes the trade has a duty to excite shoppers and protect the wine industry’s future.
He said: “There is an assumption that wine will continue to grow. People aren’t just going to drink. We have a duty of care as the wine industry to recruit consumers into wine. They are not just going to fall into it because it’s there. It’s very arrogant to assume people will just continue drinking wine – we have to invest in it and excite them.”
He added: “It’s really disappointing that mainstream retailers focus on price and think that is all consumers care about. The categories are just homogenised. The opportunity is to expand that.
“The strange conundrum is that the big four are trying to take on Aldi and Lidl in a price war that they will never win.
“Wine is such an exciting product. But it becomes a commodity. You have taken out a lot of duplicity in the range. What next? You are either going to expand out again or constrict further unless more people come out with our position.
“We know from the on-trade that they are happy to pay money for premium drinks.
“In the UK no one thinks twice about having two cups of coffee for £6. They can go somewhere cheaper but they don’t, they go to Starbucks or Costa. People are happy to pay money if they understand the value of the experience.”
Two major areas of opportunity Hearn and Christensen identified are Prosecco and Malbec.
Hearn said: “Prosecco is selling for £5-£6, but it could be £6-£8. You need those price fighters, but tier it so there is an opportunity to trade consumers up and get them spending more.”
Christensen, who hails from the US, added: “In the States Prosecco is growing value above volume and engaging the consumer. In the UK on-trade value is growing above volume. But in the off-trade volume is up 67% and value is up 60%. If you are growing that much but you are discounting it, how is the off-trade using Prosecco?”
Enotria has recently added leading Argentinian brand Trapiche to its portfolio and believes the off-trade could enjoy a strong boost if it championed Argentinian wine in the same way the on-trade does.
Hearn said: “Think about the Malbec trend in the on-trade. It’s a category that could explode in the off-trade in the next couple of years, but it needs shelf space.”
Christensen added: “There are some big opportunities in Argentina and not just in Malbec. The consumer in the States that is picking up Trapiche is the ideal consumer for retailers. We get that retailers are trying to reduce their costs but we need to prove why it would be advantageous to increase their ranges. We are trying to provide the right kind of solutions to ensure that next tier is coming up so it is not just big brands and private label.”
Trapiche is just one of a stellar selection of producers from across the globe that will feature at the upcoming Enotria & Coe tasting, which will feature a raft of new additions to the range, alongside well-known favourites from Planeta to Peller and Brusset to Bertani.
The deal to buy Coe Vintners was announced in August 2015, following the merger of Bibendum and PLB the previous year, and commentators remarked upon the continued consolidation taking place in the market.
But Christinsen believes that Enotria and Coe Vintners are a great fit, marrying Coe’s expertise in spirits with Enotria’s wine knowledge and footprint.
He said: “It’s exciting. Coe in particular had a great reputation. The two businesses coming together is more of an on-trade story, but it helps us build up our business in the off-trade.
“Coe is very premium and has a great reputation for category leadership, customer service and customer engagement. They have always tried to help customers trade consumers up to premium products, which is something we have always tried to do at Enotria as it can provide a better customer experience and helps build up the category of wine and spirits and build emotional attachment to it.
“Coe was very unique in spirits in trying to bring new products and lots of SKUs and lots of complexity to the category. It is not just driven by price, which is what a lot of the spirits groups out there are doing.
“It is culturally similar to Enotria and a strong match. Coe was a bit limited in the M25 and east and we are trying to expand into where Enotria has a bit more reach nationally.
“We have taken on every commercial person that wanted to join us, which was just about everybody.”
Enotria invested in new facilities last year and launched 80,000 sq ft warehouse in Park Royal, west London, that can handle the increased business the combined group is handling. The migration of Coe occurred during the first week of February and an extensive combined fleet of vans now glistens outside the group’s sprawling offices, which form part of the largest trading estate in Western Europe.
The acquisition only covers Coe of Ilford Ltd, and excludes Coe Group companies such as Mangrove and Barwell & Jones, but Enotria will distribute drinks from those companies.
Some SKUs have been axed due to natural duplication, but Christensen said most have remained and that it is actively seeking new additions to the portfolio.
Christensen said: “We are not aggressively changing anything [in terms of range]. It’s a very customer service oriented migration into a tighter range that we can expand into more interesting things. On the spirits side we kept everything.”