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Why the Growth in Premium Own Label Wine Is Going to Get Bigger

A quality own-label range allows individual businesses to control their supply chains in a better way and gives them better margins.

29/05/2019

Having a quality own-label range is now a given for any retailer or large on-premise chain. It not only allows individual businesses to control their own supply chains better, but it also gives them better margins - 50% plus versus their normal 30-35% on branded wines. It’s also increasingly what their customers want to buy.

Consumer recognition and acceptance of private label have been transformed over the last 10 years to the extent that most shoppers will now seek out a retailer exclusive in those categories where there is not perceived to be a big difference with a usually higher priced brand.

Which is very much the case in the wine category where there is so little brand loyalty or understanding of what one brand offers over another.

But it is no longer just at the entry-level end of the market where consumers want to see a quality private label offer. They are increasingly happy to choose a retailer or restaurant exclusive wine over a brand at higher price points too. Particularly with those chains that have earned a reputation for the quality, value, and consistency of their private label products.

Nielsen now claims that close to a fifth (17.7%) of the value of the overall US grocery market is now made up of private label products. In markets where a private label has been established far longer, like the UK, then that total share is nearer 35% and 50% plus in some categories.

Wine: open to private label

“When consumers consider quality, many view private-label products as good and getting better,” says Nielsen in its 2018 ‘The Rise and Rise of Private Label’ report. Crucially Nielsen sees wine as being one of the key categories where consumers are happy with the quality of own label and would like to see more premium products, particularly organic options.

Which is why all the main retailers are taking premium private label so seriously. It’s also where they might, for once, actually thank the influence of the German discounters, Aldi and Lidl. They have identified wine as a key category to draw in more affluent shoppers and have worked hard with premium producers to showcase and highlight good quality, but also excellent value for money premium own label wines in their stores.

It’s also a huge area for specialist wine retailers, particularly those online. Naked Wines, for example, has built its entire model around offering its customers, its Angels, only exclusive, private wines that they help to finance with their $40 monthly subscription.

Majestic, the UK’s largest specialist wine retailer, now says around 50% of its range is private label across a number of pricing tiers. Majestic wine buyer, Beth Pearce, told this year’s IBWSS conference in London that it was far more ambitious with the premium private label wines they were now introducing.

“We probably do think private label first because of the importance of long term security of supply at a certain price and quality that we need,” she explained.  “Our main private label range, Definition, in which we define the world’s greatest wine styles, we are relying on Majestic as the brand – a name consumers trust – and allow them to explore the world of wines with confidence.”

Premium private label is also enabling Majestic to encourage its customers to try grape varieties they perhaps would not try otherwise. Like Gruner Vetliner. “As the varietal is a bit out of the ordinary for mainstream consumers we decided to list the wine in our own label Definition range, giving consumers the assurance of the Majestic brand,” she said.

Driven by bulk wine

What’s really transforming the premium private label market is the quality of bulk wine that is now being shipped around the world and then bottled in the market. Whilst previously bulk wine was used mainly for entry-level and strategically priced own label wines, improvements in quality control and shipping mean it is now possible to ship and bottle higher priced bulk wines.

As Mark Roberts, sales director for Lanchester Wines in the UK, part of the Lanchester Group that owns Greencroft Bottling, one of Europe’s most important bottling plans, told this year’s IBWSS London event: “When you talk about bulk wine, we are seeing more interest in higher quality wines and blends, and people’s expectations of bulk is far higher than it was,” he said. 

It’s why Majestic, for example, is now “trying to push the boundaries a bit” with its premium private label range, says Pearce. The most expensive bulk wine listed by the chain is from the US and retails at around £15 under its Parcel Series range. “We might buy stock from a producer who doesn’t want their name on the label, and is working with quality-focused bottlers, and trying to push the boundaries a bit to see if we can achieve higher sales,” she said. “It enables us to provide great value for our customers and blend exactly the wine we want.”

But it is always a careful balancing act. Push too far with private label and you can turn your customers off if they don’t feel they have enough choice and difference between retailer and restaurant wines and those that come directly from a winery.

The doors, though, are wide open for premium private label to really steal a march, which, in turn, throws up its own challenges to producers and brand owners to ensure they stay relevant in this fast-changing and dynamic world.