British pay premium for NZ cask wine

By SIMON HENDERY liquor writer

Tesco's controversial decision to stock premium New Zealand wine in 3-litre casks may have caused ripples in this country but it has proven to be a savvy move for the British supermarket giant.

News that Tesco was selling Marlborough sauvignon blanc by the cask met outrage from some wine exporters last August.

They feared it would cheapen and damage the reputation of New Zealand's iconic white wine varietal.

But Tesco wine buyer Phil Reedman told winemakers at an export conference yesterday that the £19.95 ($54) casks were selling well beyond expectation and their success was a tribute to New Zealand wine.

The "bag-in-box" wine category was one of the fastest growing grocery categories in the UK, said Reedman, who is Tesco's product development manager responsible for Australian, New Zealand and North American wine ranges.

The retailer had received numerous letters from satisfied customers of its house-branded Marlborough sauvignon blanc casks, he said.

Tesco sold cask wines from around the world through its 700 supermarkets and the New Zealand offering, along with another from Australia, was the most expensive in the range.

"You've got to understand that the UK market perception of bag-in-box is very different to the perception you have here," Reedman told the New Zealand Wine Exporters Forum in Wellington yesterday. "It isn't tarred with a low-quality image."

He said consumers appreciated the convenience of being able to buy premium wine in casks.

Equivalent to four bottles, they were easier to carry and shoppers enjoyed "simply putting the wine in the fridge and pouring themselves a glass every night for a couple of weeks and not worrying about the condition".

Reedman said the cost of the casks was a "massive purchase" given that British shoppers spent an average £3.74 on a bottle of wine.

"New Zealand should be very proud of the fact that it is able to sell a product for £20."

New Zealand wines have built up a strong reputation at the top end of international markets.

The exporters forum heard yesterday that at £5.88 they enjoy the highest average off-premise retail price of any wines imported into the UK. Australian wines are the second most expensive with a significantly lower average price of £4.32.

The UK is New Zealand's largest wine export market, accounting for 40 per cent of the $282 million exporters earned from international wine sales in the year to last June.

Tesco is the UK's biggest wine retailer with sales of over £500 million a year and has 37 per cent of the UK's New Zealand wine market.

Reedman said Tesco saw potential to grow New Zealand wine sales.

The company allocated 3 per cent of its wine shelf space to New Zealand wines even though they made up only 1 per cent of sales - an investment it hoped would eventually pay off through increased sales.