The Importance of the Bulk Wine Market in the UK
The UK is one of the most important bulk wine and private label markets in the world.
This is primarily the result of the sheer size of the overall UK wine market, which is now the sixth-largest in the world, trailing only the U.S., France, Italy, Germany and China.
Bulk wines now comprise an ever-growing share of that market. According to the latest data from the CBI (Centre for the Promotion of Imports) in the Netherlands, bulk wines now account for 13% of total wine imports to the UK in terms of value.
Key factors at work in the UK bulk wine market
To understand why the UK bulk wine market has grown in both size and scope, it’s important to understand some of the key factors at work in terms of supply and demand.
One of these factors is the importance of supermarket chains (Tesco’s, Sainsbury’s, ASDA) and discount shopping chains (Aldi, Lidl) in the sale of wine in the UK. As these supermarket chains have increased their market share of total wine sales, it has led them to explore the use of private labels and bulk wine to boost their margins.
On top of that, UK consumers tend to be more price-sensitive than wine drinkers elsewhere in Europe. This naturally puts downward pressure on wine prices, and makes it more important than ever for retail stores to offer plenty of “value wines.” At one time, of course, the notion of “value wines” would have implied an inferior wine that was shipped to the UK in bulk and then bottled in market.
Typically, these were wines that were intended for the low end of the market and entry-level wine drinkers. These consumers tend to favor wines that are “easy to drink,” and that means that more complex, structured wines are actually at a disadvantage to wines that do not require as much sophistication to appreciate.
But then something extraordinary started to happen – these value wines began to catch up in quality, to the point where they could compete against much more expensive wines that were bottled at the source and then shipped to the UK.
The bulk wine that became a UK superstar
The one example that UK wine enthusiasts are still talking about is the case of a Chilean Malbec, available for sale on the shelves of the local ASDA (a British supermarket chain owned by Walmart) for less than £4.50.
That wine turned into an overnight sensation. That’s because the wine – the La Moneda Reserva Malbec 2015 from Central Valley in Chile – was named the best wine under £15 by Decanter World Wine Awards. Soon after, the British media was calling this wine from Chile “the best wine in the world,” and the wine began to fly off the shelves of supermarket chains.
This wine was made in Chile, but shipped in bulk and bottled in the UK. In many ways, it was the defining moment for bulk wines in the UK. For anyone who once worried about the quality of £5 wine shipped in bulk from places like Chile and South Africa, the success of La Moneda Reserve Malbec gave them peace of mind that buyers could have the best of both worlds: low cost and high quality.
But does that mean that every wine should simply be shipped in bulk and then bottled in market within the UK?
The rule of thumb, say wine industry insiders, is that “anything New World under £7 retail is probably worth bulk shipping.” Once the price of a bottle of wine crosses over the £7 mark, though, any savings from shipping in bulk are marginal and it’s better and more economically effective simply to bottle at the source and then ship to Britain.
Why the £7 price point? This goes to one of the defining features of the UK market – the price-conscious consumer. Most British consumers will only consider wines in the premium and super-premium market if they have been substantially discounted. That was one of the keys to the success of the award-winning Chilean Malbec – it managed to stay below the psychologically important £7 mark (and by a large margin, too!).
Boutique bulk wine in the UK
The newest trend in the UK bulk wine market involves “boutique bulk wine.”
This is a new type of business model that enables UK retailers to charge a price premium for a private label wine with a strong brand story. The goal is to source wines from smaller family wineries abroad that can be affordably shipped to the UK to create “bespoke brands.”
One easy way to see this dynamic at work is by heading down to the local Tesco’s, where the UK supermarket leader has created a new category of private label premium wines known as “Tesco’s Finest.” This demand by retailers for their own private labels is one of the reasons why the bulk wine market is taking off within the UK.
The reason why the CBI in the Netherlands now thinks the premium private label trend is going to take off within Europe (and especially the UK) has to do with the blending possibilities of the wine. It’s now theoretically possible to create a great-tasting wine that consumers will love, all at a much lower price point than for a wine bottled abroad and then shipped to the UK.
Wine nations capitalizing on the bulk wine trend
If you look at the list of the largest wine-exporting nations to the UK, you can see that Australia, the United States, France, Italy, Spain, Chile and South Africa are at the top of the list. Chile and South Africa are of particular notice because they are two of the wine exporting nations that have really been able to capitalize on the bulk wine trend.
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According to a recent CBI report (“Bulk Wine in Europe”), there’s a good reason for this. As the CBI points out, bulk wine shipments tend to favor suppliers in distant countries with large-scale production of wine for the low end of the market. Thus, even though Spain is a bulk wine superstar, the economic case for bulk wine shipments is not as strong as it is for South Africa and Chile, which are separated by a much greater distance from the UK and can really leverage low transportation and shipping costs for bulk shipments.
On top of that, British wine drinkers are more receptive to New World wines than wine drinkers in other European countries with their own thriving wine industries. In other words, a consumer in London is much more willing to consider a wine from South Africa than his or her counterpart in Paris (where they would naturally favor French wines).
As can be seen, a combination of several factors related to both supply and demand has made the bulk wine market a fast-growing and attractive part of the broader UK wine market. Going forward, it appears that the next great iteration in this market will be the appearance of more premium private label wines made possible by the economic advantages of bulk wine shipments.
This Guest Post was Provided by IBWSS London Exclusively for Social Vignerons
The International Bulk Wine & Spirits Show offers a full, 360-degree view of the bulk and private label wine market. On 26 & 27 February 2018, IBWSS London will be the place to be for buyers looking to become part of this rapidly-growing market.
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About the Event Producer: Beverage Trade Network
International Bulk Wine and Spirits Show London is brought to you by Beverage Trade Network, the leading online platform dedicated to connecting the global beverage industry.
Beverage Trade Network (BTN) successfully connects wineries, breweries, distilleries and brand owners with international importers, distributors, brokers and beverage industry professionals on a daily basis. Strong partnerships with international and US organizations have helped BTN establish IBWSS as a premiere sales and marketing event committed to connecting the private label and bulk beverage industry.