Who Sells the Most Wine?

Who is the #1 retailer in the wine world?  The answer is Tesco, the British-based supermarket company.

Tesco sells more than 320 million bottles of wine each year in Britain alone (one of four bottles in this important market). It is a wine selling machine, using every available mechanism to market wine and build the brand.

Tesco stores feature attractive Wine Walls, for example, tailored according to the demographics of individual stores. Wine displays are strategically positioned near the fish, meat and cheese counters as you will appreciate from your own experience. Wine tastings and wine-related events are organized by the no-fee Tesco Wine Club, which boasts hundreds of thousands of members.

Wine, wine – everywhere.

Tesco takes the everywhere seriously, so their quest to sell wine doesn’t stop whey you leave the store. Internet wine sales are an important retail vector in Britain since nation-wide shipping and delivery is not a problem as it is in the United States, where jurisdictional issues complicate every aspect of interstate wine sales. The Tesco Wine by the Case website provides  consumers with a rather stunning array of wine selections that range from a heavily discounted mixed case of “mellow reds” for £28 to a Vosne Romanee Domaine Hidelot Noellat 2006 Red Burgundy for about the same price, but for just one bottle. Tesco has captured about a quarter of all internet wine sales in Britain.

Buyers earn Tesco ClubCard points both online and in the stores. The loyalty card system carefully tracks the purchases of each customer (and notes non-purchases, too, I suppose), providing data to guide store strategy and the opportunity to produce individualized checkout coupons to encourage wine drinkers to buy more or better wines or perhaps to try something different. Tesco was an early pioneer in loyalty cards and is thought to use this data very effectively.

By Land, Sea and even Phone

Tesco has goes to great lengths to reach British consumers whenever and wherever the urge to buy wine might hit them. Tesco and its UK competitors have established substantial wine stores in Calais, France just minutes from Hovercraft ferry and Eurostar train stations. British consumers have long crossed the English Channel in search of duty-free bargains and British duties still make the trip an attractive excursion for some. Wine can cost about 25 percent less in Tesco’s Calais store and online ordering makes stocking up quick and easy.

Tesco’s latest (as of this writing) innovation is a smart phone app for wine lovers. Enjoying a nice bottle of Chianti at your favorite Italian restaurant? Want to know where to buy it? Well launch the app and use your phone to take a photo of the label on the bottle in front of you. High tech label recognition software will identify the wine, provide maker information and tasting notes and even search through the Tesco online inventory so that you can order a case right now for immediate delivery. Tesco and wine are with you anytime, anywhere.

Tesco and the other British supermarkets use wine to make money and to change the way at least some British shoppers think about grocery stores and even how they think about themselves. In the process, of course, these retailers have acquired a certain amount of power. Indeed, Decanter’s 2009 “Power List” of the most influential people in the world of wine ranks Tesco’s wine director Dan Jago at number six – a few places behind Robert Sands, head of the world’s largest wine company, Constellation Brands, and wine critic Robert Parker but ahead of French President Nicholas Sarkozy and E&J Gallo President Joseph Gallo. This power is put to a surprising number of uses.

That Tesco would use its market muscle to reduced wine costs in not unexpected. Volume purchasing has always been an excuse to press for lower prices. Tesco goes further, however. The New World wines in the Tesco lineup are shipped to Britain in bulk, is 20-foot shipping containers that contain giant plastic bladders holding thousands of liters of wine. The bulk wine is bottled once it reaches Britain, eliminating the cost of hauling fragile bottles half way around the world. Tesco has even started moving the bulk wine to its bottling plant using Britain’s historic system of canals, saving the expense of tanker truck shipment and lower the wine’s carbon footprint.

New Bottles for New Wine

Tesco is very focused on innovation and uses its power to achieve it. Tesco has pressed its suppliers to switch from cork closures to screw caps, for example, in order to eliminate the three to five percent loss that is commonly experienced due to TCA cork taint. Anyone who wants to get wines into the Tesco pipe had better not show up with a corkscrew (iconic brands excepted, of course).

Recently, Tesco has introduced the world’s lightest wine bottle in an attempt to further reduce production and shipping costs and reduce environmental impacts. The new 300g bottles are 30 percent lighter than Tesco’s previous lightweight bottle  and much lighter, of course, than some of the heavyweight containers that one sometimes finds on the Wine Wall. Structural concerns require that the new bottle have a new shape – somewhere between the high shoulders of the classic Bordeaux and the soft silhouette of a Syrah or Burgundy. Tesco estimates that use of this special bottle will have 560 metric tons of glass that it uses to bottle the more than 10 million liters of wine that it imports each year and sells under its own label.

You don’t think of supermarkets as being especially innovative, but it is pretty clear that Tesco is using its market power to encourage innovation in the world of wine. Whether or not you shop at Tesco (or at its U.S. arm — the Fresh & Easy Neighborhood Markets in the American southwest) you are probably affected its activist wine policies.

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6 responses

  1. As a former UPS student who now lives in the UK, I shop at Tesco, it is hard not to! However, I do not buy my wine there.

    While I think Tesco is introducing some laudable practices, such as using Britain’s canal system, I can’t help but think some of their practices encourage binge drinking and alcoholism, which I think are serious problems facing Britain. Frequently, they offer 3 for £10 specials, or low cost wine at less than £3.99 a bottle. Now, while most supermarkets are guilty of this practice, Tesco with it’s huge market share, is in a unique position to take a stand on irresponsible drinking.

    This isn’t meant to imply that people are unable to moderate their drinking habits, but some are, and those who are dedicated wine drinkers are not going to be buying these “special” bottles given the high rates of tax on a bottle of wine in the UK.

  2. Thanks for this. You’ve pointed out an important tension that affects many goods that have potential negative social effects. Private firms can provide wine efficiently and give consumers choice, but the profit motive gives them an incentive to push their products too hard, with sometimes dire social consequences.

    I wrote about this earlier (albeit in a different context) in my post on The Swedish Solution.
    http://wineeconomist.com/2008/10/11/the-swedish-solution/

  3. Here in Canada we always hear about how the Ontario Liquor Board (LCBO)is the largest wine retailer in the world. How does Tesco compare to the LCBO, Costco and the Swedish Government Liquor Board?

    Wine librarian – in my experience binge drinking is more related to spirits than wine. Wine (and beer) are too slow, too nutritious and not alcoholic enough compared to Red Bull and Vodka or Rum and Coke.

  4. Joe, in 2009 the Swedish Systembolaget sold the equivalent of around 250 million bottles (181 418 hl). However, just over half of this was sold as Bag-in-Box.

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