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Published:  23 July, 2008

Over the past few years there's been a world of change in the corporate wine market. John Stimpfig investigates whether it's all for the better

Ask anyone in the wine trade about the corporate market and they'll tell you that it isn't what it was. The most frequent complaint by many of the traditional merchants is, of course, that the stock markets continue to flounder. And although some merchants may be concerned by the downturn in the value of their personal non-wine portfolios, most are more worried by the knock-on negative effect this has had on business - especially with regard to in-house and client-facing entertainment budgets. As if this wasn't bad enough, lunchtime drinking has become marginalised and replaced with mineral water. Even the tax loophole that allowed City traders to take their bonuses in tax-free classed-growth claret has been closed down for some years now. Clearly, things aren't what they were. And yet if you question the relatively small number of merchants, agents and wholesalers involved in selling wine to the UK corporate market, almost all of them report surprisingly brisk and profitable business. Of course, the market has changed,' says Andrew Gordon, sales director at Corney & Barrow. The trick is to change with it. That way, you can still make good money selling to what is very much a niche market.' Perhaps one of the biggest changes in the corporate market has also been its polarisation into two distinct areas. The first remains the more traditional social or business function' type of trade with merchants supplying alcohol for staff and/or client entertainment. The other has been the growth in the loyalty, gift and incentives market. First, let's take the function side of the trade and begin by broadly defining it as business' as opposed to on-trade' accounts. According to Robert Manners at Berry Bros & Rudd, this corporate market has taken the biggest knock in recent years'. Indeed, everyone I spoke to admitted to the fact that budgets aren't what they were back in the good old days of the big bang and the fast buck. Nevertheless, in order to compensate for the cuts, most merchants have responded positively by casting their marketing nets wider than ever before in terms of geography and industry sectors. Corney & Barrow is a classic case in point. Despite its City base, it has long since ceased to focus on selling wine within the confines of the Square Mile. Our main patch is still the City and the West End, but we also do good business in some of the regional financial centres like Edinburgh, Leeds, Birmingham and Manchester,' says Gordon. Moreover, we're also selling to a much broader range of business sectors including marketing, advertising and PR, as well as the more traditional areas of accountancy, corporate finance, banking and legal. The fact is that we now cover the whole spectrum of daily commerce and it still represents a large and significant part of our turnover.' What prompted Corney & Barrow to look elsewhere for new business wasn't just the recent fall-off in City budgets. The competition also got a lot tougher as the major catering companies also moved in on the corporate market. The change, according to Gordon, has been significant. Whereas perhaps you would supply 10 banks, ad agencies or accountancy firms with their wine, you are now supplying one centrally negotiated contract. So the stakes are certainly higher now.' In addition, the usual suspects are touting for business alongside Corney & Barrow, which has sharpened things up even more. John Armit Wines, Berry Bros & Rudd, Lay & Wheeler, Bibendum and others are all working hard at getting their slice of the key corporate accounts. But so too are Enotria, Hallgarten and a small flotilla of other wholesalers, not to mention numerous provincial merchants that are able to use local knowledge and contacts to their advantage. In addition, both Majestic and Oddbins are targeting this broad sector with greater focus and manpower. Majestic's figures continue to show a good increase, and corporate sales now account for over a quarter of the company's turnover. (However, it should be noted that, like many merchants, Majestic incorporates its on-trade sales into this figure.) Meanwhile, it has recently appointed three new business-development managers outside London, bringing the team's total to eight. This is in addition to a 19-strong staff in central London selling to corporate customers in the City and West End. Like Majestic, Oddbins Wholesale has been able to advantageously use its branch network as a mini-warehouse to provide greater flexibility and speed on orders, including same-day deliveries. According to the company, its range of business accounts includes financial corporations, media, advertising and music agencies through to government bodies and the armed forces. It too describes the sector as a large and growing market'. There are, of course, several reasons why the corporate sector continues to be so attractive and profitable despite the tougher trading conditions. One is that it is a no-go area for the supermarkets. Another is that once orders are established, they tend to be regular - in terms of both the frequency and the product. Often they tend to be much less time consuming, don't require so many samples and there's usually only one delivery point,' says Damian Carrington at Enotria. In addition, Gordon points out that not only are the volumes good, there's much more scope to make profit because they're not after as much discount as the hotel and restaurant sector. Another important spin-off benefit is that you're gaining access to a large and interesting private client list. An individual buying wine for an ad agency or a bank is likely to be a good customer in a private capacity as well. So there's a big overlap.' Certainly there's little doubt that the corporate dining market, particularly in the City, is well worth breaking into, even though it isn't the gravy train that it used to be. Consequently, merchants are hoping that the markets will bounce back, taking budgets back up with them. My gut feeling is that it will rebound because it has shrunk a lot over the last three years. But will it get back to the crazy days of long lunches? That is extremely unlikely,' says Gordon. Besides, it wouldn't be healthy.'

Gift opportunity Yet if the entertainment side of the corporate market has been a bit of a mixed bag, the loyalty, gift and incentive side has mushroomed. Most recently, Laithwaites has announced that it is staking out this broad sector by setting up Direct Wines for Business under John Knapp. His brief, as general manager of the Corporate Business Division, is to supply companies with a broad range of wines for their incentive programmes. According to Knapp, the logic of the move was compelling. Having worked with its various partners such as High Street Banks, Nectar and the National Trust, we realised that the type of work we did with them would easily transfer to the corporate market. So far, that has proved to be the case.' The size of the total UK incentives market is impossible to calculate, but no one is in any doubt that it's big and getting bigger. The real issue for us is how much we can grow our wine sales within the sector,' says Knapp. Encouragingly for Laithwaite and Co, Direct Wines for Business is already starting from a base valued at around an impressive 10 million per annum. Moreover, Knapp is expecting to double that figure within three years. A lot of the work will be done with existing partners, after which the company plans to increase sales by pitching the service to blue-chip companies and SMEs [small and medium-sized enterprises],' Knapp adds. Direct Wines has already launched a fully functional, transactional website and increased staffing levels in time for the Christmas rush. It also plans to implement a bold marketing strategy adopting a range of multimedia approaches including exhibitions, direct marketing, press advertising and PR. Knapp suggests that the total spend could amount to 1 million over three years. With its enviable track record in logistics, fulfilment and delivery, Direct Wines also believes that it has a USP that will provide a strong competitive advantage and act as barrier to entry to other merchants. The fact is that we are a well-established direct-marketing business with plenty of expertise in our field. This is a complex area and it is a difficult sector to operate in.' Nevertheless, Direct Wines does have competitors. One is Berry Bros & Rudd, making it one of the few players working in both the corporate-incentive and entertainment markets. According to Robert Manners, there is a link between the two: If you do a good job throughout the year in supplying wines for corporate entertaining, you usually get the key Christmas gift order as well.' However, Manners suggests that the corporate gift and incentives market has shown erratic growth over the past three years. He points out that the market is growing in volume terms but falling in the value per order. For instance, last year, we took 20% more orders for a 5% net gain. In other words, people are ordering NV rather than vintage Champagne, or sparkling wine rather than NV Champagne.' Although the gift market does operate all year round, it's no surprise that most of the activity goes into the last two months of the year. The Christmas gift-pack market is hugely successful when it comes to the corporates,' says Manners. BBR produces a glossy brochure specifically for this market with a range of wine- and food-related gifts and hampers. Internet activity also plays a part in wooing business customers. Yet despite all the flashy technology and marketing, the most effective sales technique is making the 400-500 calls to clients who ordered the service last year. It's long, arduous and extremely boring. But however much you mail or e-mail them, talking on the phone is much more effective in hitting the spot,' says Manners. The rewards are clearly worth all that effort. Manners values the business in several figures, with some orders coming in at over 35,000 each. Over in Knightsbridge, Harrods' corporate service manager Gavin Dixon also reports that the hamper market is our best performer in the corporate department. And wine has a huge part to play in that.' Last year, Harrods was marketing 55 different gifts and hampers, ranging from 15 up to 5,000 for the Chairman's Choice', which included bottles of 1988 Krug Clos de Mesnil, 1985 Loville Las Cases and 1970 Taylor's, to name a few. Christmas is extremely busy and some orders require up to 600 different deliveries. But we tend to do good business all year round with the season's events, such as the rowing at Henley, cricket at Lords and tennis at Wimbledon.' However, for many merchants, the wine and hamper market is a difficult one to crack. Peter Watts Wines in Essex has been supplying wine-related hampers to private and corporate customers for several years. It's complicated to put together and there's a massive packaging outlay, much of which you're holding for 10 months of the year.' Nevertheless, Watts has developed close links with around 100 local businesses. I would say it is worth around 100,000 a year. But it is extremely profitable because the margins are so good and there's a lot of repeat business. Initially, we began with wine gifts, but to be successful you need a broad range of gifts (including high-end foodstuffs) rather than a few bottle packs.' For regional independent merchants, local businesses are obviously a lucrative potential source of extra revenue. At The Oxford Wine Company, Ted Sandbach points out that the incentive and gift side is good, solid business. Often, clients ask us to select the wine and this can be very useful if we have an end-of-line product that needs de-listing. So it's ideal for moving through good, genuine bin ends. We operate a quick, efficient service, which we find is growing throughout the year as well as being popular at the Christmas peak.' Without doubt, the most critically important factor in the corporate gift market is the final delivery of the product. Orders need to be out in time for the annual Christmas rush because if they are not signed, sealed and safely delivered then you can kiss goodbye to any subsequent order. With Christmas, there's no flexibility whatsoever. The wine has to be there by that date,' says Manners. Yet it can be difficult to get customers to make a decision by the cut-off date, which is why I constantly have to remind them that Christmas is on the same day as it was last year.' At least some things in the corporate market haven't changed, even if everything else has.