| Supermarkets like Aldi are successfully selling wine under their own labels.
Are private labels a con, or do they offer another way to market for wine producers?
Who likes private label wines?
Sommeliers are rarely impressed; independent retailers are less than thrilled; wine snobs aren’t partial. They typically invoke snorts of derision – gusts of wind that can upend buses. Yet it’s not simply raw prejudice; many Buyer-Own-Brands have traditionally been of dubious quality. They’ve been used to shift volumes of bulk wine and winery dregs since time immemorial.
If the trade’s (overall) attitude towards private label wines provided an unbiased, objective barometer, then we might assume they were dying on their feet. Yet as with many things in our political sphere, the “people” and the experts are not in agreement. All the indications are that private label wines are going to devour more market share over the next five years, leaving less retail space for branded wines.
But why? A Nielsen report published in August 2019 suggested that the “stigma and stereotypes have faded for store brands”. It observed that the premium assortment of products in the retailer-branded portfolio continues to expand. According to the report, which focused on the US grocery sector, private labels amassed more than $143 billion in sales across US outlets, a figure that’s up nearly $14bn since 2015.
“Today, consumers are much more willing to splurge for store brands than they would for name brands; 40 percent of surveyed Americans say they would pay the same or more for the right store branded product, while only 26 percent of those surveyed feel that name brands are worth the extra price. Store brand sentiment in this case has seen substantial improvement from 2014, but consumers remain relatively unchanged in their willingness to splurge for name brands,” the Nielsen report stated.
The fact is that the premiumization narrative is increasingly spreading its tentacles to the private label market. The IWSR’s data confirms Nielsen’s wider findings: the consumption of private label wines rose 9 percent (2014-2018) in the US, while branded wines could only manage a rise of 1.1 percent in the same period. In the UK market, private label consumption rose 13.5 percent between 2014-2018, while branded consumption declined 2.4 percent in that period. The IWSR also predicts a forthcoming decline in the sales of branded wines (2018-2023), which cannot just be attributed to the generally stagnating still wine market.
The supermarkets are clearly taking note. In September 2019, major chain Aldi announced it was launching a 35-strong premium own label range that will be available exclusively online. Market research had led the buying team to the conclusion that there was an untapped market for more expensive private label wines, targeted at better off consumers. So now Aldi boasts its very own premium “icon” wine range – prices start at about £7 ($9) and rise to the £20 ($27) mark. Of course, a Burgundian would scoff at such meager prices, but within the context of the private label market, they present a new benchmark for a budget retailer. This move has increased the number of Buyer-Own-Brands sold online by the German chain by around a third. Upmarket private label is likely to become an ever-more lucrative business.
“We know there are a lot of customers who want to be able to spend more online than they can in an Aldi store and we want to capture those customers and offer them premium, high end wines that they will love,” observed Aldi’s buying director Josh Henley in an interview last month. However, the phenomenon is not limited to the value-led supermarkets. Swank Waitrose, a supermarket that caters to a very different audience, also reports an enthusiastic response to their expanding range of Buyer-Own-Brands.
“Sales of our own label wines are doing well. We’ve just launched wines into our new-look premium range, Waitrose & Partners No.1 and our Blueprint range has also proved extremely popular with customers,” says Bethan Davies, consumer communications manager at Waitrose.
| UK supermarket chain Waitrose is happy to display its own labels alongside branded wines.
Online retailer The Wine Society is way ahead of the curve. Their premium own label Exhibition Range has been a cornerstone of the firm’s success for years.
“Certainly the data suggests that the premium end of wine is growing and we are seeing this with our members – sales of our private label wines grew 5 percent (in line with overall sales) over the past 12 months,” says Pierre Mansour, head of wine at The Wine Society.
“The society’s own-label range, including our flagship Exhibition wines, offer the best value for money across every price point. These are the wines that our buying team put most of their effort into, both in terms of quality and pricing. For these reasons they are extremely popular, accounting for around a third of our sales.”
But the real story here is arguably the growing schism between consumer and winemaker priorities. A powerful neurosis about differentiation exists across both New and Old World regions, a neurosis that leads winemakers inevitably towards the conclusion that more is more. More messages about diversity, more spiel about terroir and heightened classification/stratification frameworks. New World wine labels, ironically, are becoming more “European”, with a race to display more and more named terroirs on the label. Does this have a positive effect? The debate rages, but the growing success of premium private label wines suggests that consumers with money to spend have different priorities. Namely, an instantly recognizable brand they can trust, that is easily accessible. Premium branded wines with overcomplicated messages may find they increasingly can’t compete in the race.
However, the rise of pricy private label in the UK and US – by historic standards – doesn’t tell the whole story. According to the IWSR’s data, the demand for Buyer-Own-Brands declined in Europe between 2014-2018, while sales of branded wines are actually forecast to grow in the period 2018-2023, albeit by a paltry 1 percent. Moreover, the market in cheap-and-nasty private label is hardly moribund. Bulk wine now accounts for 40 percent of all wine exported globally, and is worth more than $3.3bn overall. The world’s supermarkets rely on entry-level BOBs as important loss leaders. It’s a vital part of their business model, as is repeated discounting and promotion-led marketing; it is unlikely that this segment of the market will simply evaporate any time soon.
The Champagne market, at least in the UK, is also bucking the private label trend. Nielsen analysis has shown that consumers are rejecting Champagne Buyer-Own-Brands, in favor of spending more on premium styles – with less frequency – or trading down to Prosecco for the weekend tipple. The trend for declining Champagne sales in the UK market can, at least partially, be attributed to the slump in demand for supermarket BOBs.
This, of course, speaks to the nature of the Champagne market, which commands far greater levels of consumer loyalty to branded labels – Moët & Chandon, et al – than still wines could ever dream of. Yet all the indicators are that red, white and rosé BOBs will take more shelf space, which is bad news for branded wines. Supermarket own-label Prosecco is also in a strong position.
Much will depend, though, on the global economic situation over the next five years; the memory of the 2008 financial crash has has not yet faded. Indeed, many economists believe that Europe, with slowing GDP growth rates, is on the verge of another recession. If that is the case, than both private and branded premium wines will suffer – but who will suffer more? The UK may also be about to crash out of the EU without a trade deal. Alternatively, cultural, gender, and generational factors will undoubtedly have a decisive impact – for example the rising tendency for young adults to shun alcohol. If this trend continues, then one can imagine the bottom end of the market being more adversely affected, with a healthier demand remaining for pricier wine. Premium private label wines are the natural domain of Gen X and Baby Boomers, rather than fickle, cash-strapped Millennials and Gen Z.
The often maligned Buyer-Own-Brands may be about to have their glorious moment in the sun.