The on-trade has been urged to take lessons from the airline industry and work on a yield per person model rather than obsessing over cash margins on wine.
ONS figures show that drinking rates continue to plummet among Brits as moderation becomes the order of the day, especially among millennials. The Holy Grail of the trade is to inspire consumers to drink less but drink better, thus preserving margins and demonstrating a tangible push towards responsibility.
But the industry needs to do more to convince consumers to trade up and focusing more on quality rather than on margins can preserve the health of the wine category, according to Liberty Wines managing director David Gleave MW.
'All the statistics show that people are going to carry on drinking less, so we have to assume and hope they are going to drink better,' he says. 'But we have to give them a reason to do so.
'Too much thought goes into, "how do I get the most margin?" and not enough thought goes into, "how do we sell the best quality?"
'Cash margin is a battle that a lot of people have been waging for years. It’s waxed and waned. If people are drinking less, we as an industry need to look to other industries. I can think of the airline industry, looking at yield per seat, yield per person coming in rather than just a cash margin. If we try to sell them house wine we aren’t going to make very much. If we can sell them a better wine then we may be a more profitable business.'
Gleave has been an MW since 1986 and has turned Liberty into one of the on-trade’s leading suppliers since he founded it 20 years ago, with a range of 1,200 quality wines covering all major regions and accounts spread across UK, so he is well-qualified to give his verdict on wine lists.
'I go into a lot of places and they have a very pressed and congested wine list,' he says. 'They say, "our customers won’t spend at that level, they won’t go above £30". Well, if you train your staff, if you give them a more enticing list and give them a reason to go above £30, they might just do it. They are not going to stick there forever, so go over there now and pull people up. But the wine has to be good enough.
'A lot of people say people won’t go over £20 for a Pinot Grigio. Well they are going to have to at some point. We want people to be drinking wine and not duty, and the more they spend on a bottle the better quality they are going to get. We have to carry on making that point.'
By the glass
Wines by the glass is another important battleground for the on-trade, and there is a great opportunity to champion quality in this arena.
Gleave says: 'I have had conversations with a number of buyers over the past year saying they are selling more wine by the glass and much less wine by the bottle and we are worried about that as a trend. Part goes down to people drinking less, and part because the 25 to 44-year-old group is more confident about what they want and looking for quality, provenance and authenticity.
'In my generation we used to go in and say we’ll have a bottle of white and a bottle of red. Now four go in and say "well actually I’ll have a glass of the Riesling, I want a Pinot Noir, I’ll have the Albariño and that person over there doesn’t drink". Four people are choosing by the glass and we can’t rely on bottle sales, but we’ve got to make sure we give them something very good by the glass.
'The constant mantra for me is one of quality. If we want people to drink better we have to underline provenance and authenticity. Wine has that in bucketloads and we have to push it. Stupid labels sell well in certain parts of the market. But in the premium sector we have to be looking at a link between the bottle and the people that produce and sell it. If we can do that the wine industry will be in a good place.
'The number of pubs that are closing is a regular news feature these days, and certainly there has been a long-term decline. I don’t think that’s going to change. It will slow, but the nature of pubs is changing. They are becoming more casual dining than boozers.
'That’s different in London, but once you get outside London, with drink driving and everything else that we’re going to see, pubs have to change position, and those that do so will flourish and those that can’t because they are too small or too isolated will struggle.
'We have seen an increase in other licensed premises as more restaurants are opening. Eating out frequency is slightly down but we have seen a big increase in spend. That is carrying on. Consumer spending in May 2017 fell 0.8%, according to VISA, the biggest decline in four years, but spending on dining out grew. It’s now a firmly ingrained habit, but how are we in the wine business going to take advantage of that?
'We have to be as a wine industry working with people that are buying and selling wine and training them, to make them better, because the business now is not about putting a wine on the list and making the best margin and selling as much of it as you can. We have to educate staff.'