Our vision

The market for quality wine up until recently....

For years and years, wine in Europe has been distributed according to the classic distribution model whereby the producer supplies the wines to an importer, the importer possibly supplies on to a distributor, the distributor supplies on to the retailer who then in turn sells the wine to the final end user.

The first importers selected the wine producers who had already developed a good reputation and presented these brand wines in their own country to both selling points and to the hotel and catering industry.

The power of the importer

Importers generally claimed an exclusive importership with the producer, in order to protect their own market in this way. If the producer is not favourable towards making the marketing budget free, then it is the importer who has to invest time and money in order to put the newly imported wines on the market. If the importer already has a well built-up network of retailers and hotel and catering customers, the investments are quite limited.

As soon as a wine producer’s wines have already been imported by a wine importer, it is no longer possible for another importer to likewise import the wines from this wine producer. The other importer therefore has to search for other producers in order to develop an outlet for the producers in the homeland.

The first importers in a member country hereby created a power block within the value chain, whereby the importer became the gateway for wine producers to the outlet and, on the other hand, the importer became the gateway for end users and retailers to brand wines. The result was that importers became customer owners, by means of which they had the highest margins within the value chain.

After 1991, when the Treaty of Maastricht was signed, it became possible for retailers to buy wine from importers in other member states. Importers of brand wines suddenly had competition from abroad, because the interior borders within the EU had been removed. Up to 1991 the importer had a product monopoly on the imported wines, by means of which the price fixing could be determined from a cost perspective and not from a market perspective.

From 1991 onwards, a high cost structure with the importer was punished for the first time, since retailers and the hotel and catering industry could compare the prices and could address importers about their price policy.

Retailers thereby wanted to become more powerful within the value chain. In order to become more powerful within the value chain, purchase combinations or retail chains emerged, in order to somewhat contain the power of the importer in this way. However, the power block of the importer towards the producers remained intact. Producers with a less strong brand value have difficulty in entering the distribution chains. The producers are not selected or they are squeezed out in a huge way.

As more and more importers started to work in a member state, the entry barrier for new importers became continuously greater. The added value of new imported wines is difficult to demonstrate, meaning a great deal of money is needed to get them onto the market. As a result of this, new importerships can often not grow any further than small specialized, usually hobby-like, companies supplying to friends, acquaintances or friends of acquaintances. These are usually the small companies which the less well-known producers of quality wines, easily more than 99.9% of the market, are forced to do business with, as a result of which the export volume is small and will remain small.

The power of the wine press

Throughout the world a great deal of wine is produced, far too much wine even. The amount of quality wine made in the wine producing countries every year is also too much.

Due to the enormous over-supply, it is barely possible for the consumer to make a correct choice. Producers try to do everything in their power to stand out. The lyrical descriptions of one producer are even more attractive than the other, but the main point is that these background descriptions do not reach the consumer. There are too many descriptions and there is not enough time to make a perfect selection.

Producers try to relate their background descriptions to the importers, who in turn pass on the description to their distributors. However, importers, distributors and retailers must know the lyrical descriptions of dozens, if not hundreds of producers. At the end of the communication chain, the lyrical description has been reworded into a standard description, which is almost identical to all the other descriptions. The result is that the consumer does not get to hear any distinguishing description and listens to independent authorities such as the good friend who is a wine connoisseur or reads what the wine critic press have to say.

The wine critic press, led by Wine Spectator, Wine Advokate, Gambero Rosso, Decanter, Vinum, Steve Tanzer, among others, is becoming more and more powerful because their opinion is increasingly swallowed whole. The success is understandable because wine lovers everywhere in the world are on guard against the many bad buys which can happen when they purchase wine blindly. As a result of the large offer of wines, it is likewise barely feasible to taste all the wines. Renowned wine critics and their scores make the world of wine a great deal clearer for consumers!

The wine producers are not completely happy with this. If your wines receive an excellent score, then as a wine producer you will have no wine left in your wine cellars within a day. If they score between good to very good, but dozens of producers score higher, then that is the start of the problems; never mind the situation if the powerful wine critics are non too enthusiastic about your product, which can have disastrous consequences.

From the above-mentioned the only conclusion can be that wine producers have little to say in the wine market. Only the large, powerful producers or small producers with a high cult status can manage to hold their own in this market.

Social, economic and technological trends and developments

Who are your wine drinkers?

For years and years, in Europe wine has been distributed according to the classic distribution model, whereby the producer supplies the wine to the importer, the importer possibly supplies on to a distributer, the distributer supplies on to the retailer who then in turn sells the wine to the final end user.

It is almost incomprehensible that for that reason a wine producer does not know his own wine drinkers. Hardly a single producer is capable of serving up customer details of all the consumers who have drunk his/her wine or have a supply of it in their wine cellar.

In itself, this is of course quite logical, in view of the present distribution structure, but technological, social and economic developments are bringing end customer ownership much closer.

Imagine that you as a wine producer have the information to hand about your ‘drinking audience’. That means that you as a wine producer yourself can communicate one to one with the wine drinker. The lyrical description about the wine company, the wines, the wine makers, etc. will thereby become a unique background description because it is communicated directly from the source. The producers can therefore steer the consumption by advising upon ‘drinking windows’, they can draw attention to ‘peak moments’ and will also be able to involve the end consumer in the experiences with regard to the harvest, the product development, the taste developments from various vintages, food matches, films, etc. It will even be possible to set up an interactive platform, where consumers and producers can meet each other.

In this way producers create a bond with their wine drinkers with regard to their wines. A bond which is completely impossible to achieve in the present distribution chain. Since that bond does not exist, consumers listen to the authority when making their wine choice and the producers must just wait and see again whether that will have a good result for them or not at the end of the chain.

The future of the market for quality wines

The existing distribution model for quality wines has reached the end of its life cycle for various reasons. Marketing communication from the producer is impossible whilst this is extremely relevant in a world of over-production. Only the large brands which are organized as beverage companies such as Carlsberg, Heineken, Coca Cola, etc, can produce a perfect marketing communication. This is completely impossible for the much smaller, quality wine producers.

Wine producers will start to reconsider their position and take on board the world developments with regard to social, economic and technological areas.

There is a noticeable trend whereby the polarization between fast food and slow food is increasing. People have the increasing inclination to resist mass production of food and they are more aware of the consumption of this food. Buying at the source is a trend and if it is up to consumers they would also prefer to buy their wine at the source: from the producer.

As the result of the globalization of economies, we are seeing an enormous increase in parcel services which can ensure the fine distribution of wines to the end users.

Technology is enabling us more and more to buy at a distance via e-commerce platforms and also to find what we are looking for, as a result of the availability of advanced search engine technology.

If wine producers take all these factors into consideration, then it will not be long before they seize the chance to start to approach the end user directly.

The wine producers will recognize that they will be able to realize the direct sales to end users with all the subsequent advantages. The wine producers will become customer owners and will therefore know their ‘drinking audience’. Marketing communication will enable them to better show the uniqueness of their products and they will be able to create more loyal customers. The wine producers will thereby be in charge themselves with regard to the price policy and will therefore no longer be handed over to price competitors further along in the distribution chain, who destroy their wines with regard to the price.

Wine producers will only select importers who supply to the hotel and catering industry. This form of distribution will remain critical because the hotel and catering industry will continue to be an important outlet channel. It will not only be an important sales channel but it will also enable producers to promote their wines to end users who are not familiar with their wine. For a producer of quality wine, the wine is the pre-eminent marketing instrument. Distribution to the hotel and catering industry via importers will be an important part of the total distribution campaign because it will attract the new end users who, having experienced a wine tasting found via search engines will go in search of the wine they have experienced.

Producers are still barely aware of the number of end users who are already searching for them. The amount of people reached by their website is much higher than they think, and as soon as producers realize this, they will understand that their website will have to become a point of sales. After all, the first potential customers who are prepared to make a quick transaction visit this website. They should therefore be helped immediately so that these potential end users are not lost for ever.

A perfect hotel and catering distribution will therefore start to play an important role in attracting new end consumers who can order their wines via the producers’ websites and can have that delivered to their door within the whole of the European Union. Direct marketing and loyalty tools will enable producers to let the end users come back for repeat orders or to buy new vintages.

Wine sales via the Internet will boom enormously and the classic distribution model will die a death. It already appears to be too expensive now, as a result of which the classic bricks and mortar wine shops are pricing themselves more and more out of the market. The consumer is becoming increasingly price conscious and the future of the local wine shop is extremely gloomy. Importers are noticing that this market is subsiding due to competition from the Internet and they are even making a thorough search for new outlet channels. Importers will be forced to do this because the added value of importers in the value chain is becoming increasingly smaller. Importers will change into ‘supply holders’ and this role will be mainly of value to hotel and catering entrepreneurs who can have the wine delivered quickly upon call. Importers will have to apply themselves to realizing added value to hotel and catering entrepreneurs by presenting themselves as full wine service providers.

In a few years’ time, in Europe there will be tens of thousands of wine producers who make the step to dividing their distribution into a B2C branch and a B2B branch, whereby a well organized form of cooperation between producers and the hotel and catering industry, such as with vouchers, kick-back fees, possibly facilitated by importers, will have an overwhelming effect on the B2C turnover.

Wine e-Commerce for the near future...