The UK market in crisis

Michael Saunders - photo by Cath Lowe

Michael Saunders is one of the leading members of the UK wine trade. In 1982, after having a budding career playing polo in Argentina cut short by that country’s brief war with the UK, he spent a few months working for Sam Aaron of Sherry Lehmann – “the father of the quality wine scene in New York”. He then joined the two founders of a new wine business in London called Bibendum and rose to become its CEO, while helping it to become one of the UK’s biggest importers and distributors. The company was sold in 2016 and, two years later, Saunders rescued it from the brink of bankruptcy, with the help of C&C, a giant beer, cider and soft drinks manufacturer. Today, he is back in his old role at Bibendum, while also serving as Chairman of the Wine & Spirits Trade Association (WSTA). 

MEININGER’S: How do you remember the UK wine scene of the 1980s? 
SAUNDERS: It was polarised. At one end, supermarkets started to come into the business, which sort of democratized wine. At the other, the fine wine business really opened up in London. The brilliant Farr Vintners [fine wine wholesaler] started to really anchor London as one of the world’s major trading hubs. It was a very pioneering time. Restaurants were opening that wanted to start moving into more artisan or unique wines that supported their vision for their cooking, rather than generic Burgundy or Bordeaux or Chateauneuf. 

MEININGER’S: How influential were the media? 
SAUNDERS: In the late ‘80s and early ‘90s, when Robert Parker gave a good score, it was like winning the jackpot. When a wine was really well written up The Times, we used to get calls going off the scale. That is not quite the same now. Points still do work, but it is not as stratospheric as it was. But at the top end, fine wine has become very global. If one of our top wines gets a good score in the Wine Spectator, we get calls overnight from all around the world trying to dip into the UK allocations.

MEININGER’S: Looking at the Bordeaux business in particular, why does a chateau need to sell through a broker to a négociant in Bordeaux, who then sells it to a merchant in London, who then sells it to someone in Singapore? How sustainable is that model?
SAUNDERS: London is effectively an excellent clearing house for fine wines because we have a trading mentality and are fantastically good at it. And we have always been more innovative.

Hong Kong spent a long time thinking about how to become the hub of fine wine in the Far East. So, they set out to create a whole system of warehousing and customs control and movement capabilities. You can do these things by central control, or entrepreneurially as we have done it in the UK. Our language and time zone help as well. But we are not unique anymore, because there are people doing it all around the world. We just happen to have had 40 or 50 years of doing it brilliantly. We also have a very long history of being great friends of producers from all around the world. Australian wineries raced to sell wine into Mainland China at higher prices. And guess what? All exports of wine from Australia to China have been banned. Be careful. You may find your new friends are not as consistently loyal as your old friends.

MEININGER’S: Do you think that is relevant to the British fine wine trade that super Tuscans, Californians, and top Australians are going on to the Place de Bordeaux? 
SAUNDERS: Obviously, the Place de Bordeaux is trying to compete through the négociant system. They have an advantage that they can draw finance against their wine stocks, which is very difficult to do in the UK. A lot of the non-European producers go into La Place believing it enhances their ability to reach collectors globally. I get that. And, to a degree, it does threaten UK companies who were supplying those collectors

MEININGER’S: What is the rationale for the UK to hold onto its position? 
SAUNDERS: There isn’t one. Full stop. This trade is in a degree of jeopardy, and I do not think enough of the principals in the UK have understood that yet. In the short term, it is threatened by the pernicious idea of introducing a European piece of legislation called the VI-1 forms for all importations into the UK. Unless it is under a hundred litres, you have to have a test for each shipment and paperwork accompanying it with a proof of origination. Now, the WSTA has had the introduction of the form delayed for six months – to July 2021 – but if you are a fine wine business, and you want to import 20 cases of Petrus, it means you are going to have to break open one of those cases and send a bottle off to be lab tested. There aren’t many labs capable of doing this, and how on earth you are going to get the proof of origination? If I go to Mouton Rothschild and say, “I am just shipping 20 cases of Mouton 1982. Can you give me proof of origination?” they are going to reply, “Well, no because we sold it into whatever system, however many years ago”. The fine wine trade will come to a grinding halt.

MEININGER’S: Could UK merchants simply move offshore? 
SAUNDERS: That is an answer, but you do not always know where you are going to sell a wine when you buy it. And what is the logic of government policy saying to the fine wine trade – the UK’s fourth-biggest food and drink export – “We do not want you here, go and apply your trade elsewhere”. If you look at the form, there is not a single thing on it that anybody wants. The government is just rolling over legislation. It will handicap the European producers because they will have to do it to export wine to the UK. But will be the UK consumer who pays. Just for our business, alone. I will have to employ at least another two, if not three, people to handle this paperwork. And the process might potentially reduce the number of wines listed from any producer.

MEININGER’S: Setting this kind of issue to one side, what is happening to the UK wine trade? 
SAUNDERS: It has polarized over recent years. So, you have got people who are doing a slightly larger size – Bibendum, Liberty, Berkmann, Hallgarten, Enotria & Coe – and you have a lot of people who are doing a brilliant job at the other end, either as importers or as independents. The middle ground is very, very difficult space to occupy. And I very sadly think that this year of the coronavirus is going to change the landscape of our trade in a way that it is difficult to imagine right now, and I say that with a very heavy heart. On a personal basis, Bibendum is very lucky now to be within the C&C Group. We are part of a FTSE 250 business that is supporting me and my team incredibly well, so I am shielded from some of the financial pressures. Obviously, it is not very easy for us nor any on-trade supplier. It is terrible when, through no fault of your own, your market is just taken away from you. 

I do not see that everybody is going to survive. I am afraid that over the course of next year, we are going to see quite a lot of businesses fall over. I do worry about the stability of the UK wine trade. It has not been very profitable for quite a number of years. It has never been a place where you are going to make a lot of money, but you need to make some money to survive. But I am not quite sure what we are going to do about it. There’s the risk that the very big brands are going to sweep up more before them. So, I sit here with a degree of nerves actually.

MEININGER’S: How could the government help? 
SAUNDERS: The WSTA and Miles Beale its CEO are trying to get it to understand that we have got an opportunity to do what Hong Kong did. We could actually deregulate whilst keeping all the consumer security in place and become a global worldwide hub that is highly modern and highly efficient through blockchain or through online forms. We are setting up a proactive working group to say to government to say, “You are looking at recreating the 19th century. We would like to help you to come up with a way of handling all your requirements, but in a way that will work for the next 50 or a 100 years, rather than stepping back in history.”

MEININGER’S: How much of your wine goes to the on-trade, and how much to independent retailers? 
SAUNDERS: On average, 65% of my revenue and about 40% of my volume goes to the on-trade and maybe 20% or 25% goes to the independents. I am very obsessed with supporting these businesses. There are nearly a thousand – of varying sizes – and they’re terribly important to the DNA of wine in this country. That’s why we pulled out of selling directly to consumers.

MEININGER’S: You’ve sold branded and private label wines to supermarkets for many years. How has that business changed? 
SAUNDERS: It is much more difficult to build a brand through the supermarkets now if you are not already an established player. The supermarkets looked at that and thought, “Well, hang on a minute. We are allowing someone through our shelves to build a brand and make lots of money, should that not be us?” If you are Accolade or Treasury or Gallo, you have got the distribution and you can tack new brands on to your portfolio and make them part of your overall proposition to a retailer. But to do it autonomously is really hard. 

MEININGER’S: Speaking of off-trade customers, a person who buys an $8 wine in the US will also sometimes spend $25 or $30. In Britain, it is very hard to get people in Britain to spend fifteen pounds.
SAUNDERS: I constantly try and get the supermarkets to try and stretch their offer a little bit. To the wider population, wine has been a very discounted offer. It has always been ‘ten pounds reduced to seven’, or ‘buy six get 25% percent off’. People will spend money – maybe not everybody – if they are presented an opportunity in the right way. Until 12 or 15 years ago, there was effectively no such thing as premium Provence Rosé. Along came Sacha Lichine, who says, “All right, I am going to be unashamedly expensive, but back it up with a real story, with real marketing, and make this category come alive.” One man transformed that whole category. Wine is still is very intimidating for a lot of people. Amazingly, here we are, almost 40 years later from when I started my career, we are still battling with the same issue. 
I remember when Tesco launched Kylie Minogue’s wine. Within days, it was their largest selling SKU. And years ago, we launched a private label for Tesco called ‘Great With’: ‘Great with Fish’, ‘Great with Steak’. It took quite some beating from commentators for denigrating the wine category. Actually, it sold brilliantly and it was a step towards democratizing wine, making wine selection easy for people who did not know about wine. It is still true that there is too much wine snobbism. 

MEININGER’S: What is your most optimistic picture for the UK wine trade over the next five years?
SAUNDERS: There is a thirst for information we need to satisfy, and we have to get people to spend more money on wine. We are going to be a lot more digital, and if that is played correctly it is fantastic for artisanal wines. Because you can put the information across in a way that is very digestible, up to date and clear. And there will be more personalization. I hope there will be a thriving independent community and maybe lower rents will lead to the emergence of a retail chain where staff can talk to their customers again. I think if we can get both those in play, that is great. The third element that I work extremely hard on is to make wine in the on-trade fun and accessible. Of course, some restaurants will have a really engaging sommelier who can give their customers something they have never heard of or that is a bit of a surprise. But we have to give the broader consumers in the on-trade the chance to spend less money on drinking better and more interesting wines in quantities that are digestible. It does not all have to be a 75-centilitre bottle. If we go out for lunch, it would be great to have a 50cl bottle of something really good. We have got to get out of the wine bubble, because we are competing with other drinks like hard seltzers and spirits where there is a lot more personalization, a lot more entertainment. Optically, it is a lot more fun than just uncorking or unscrewing a bottle of wine.

MEININGER’S: What about wine on tap? 
SAUNDERS: It works to a degree. But unless you manage it really well, it does have terrible fruit fly problems. I am more of an advocate for trying to bring some theatre to wine. We are not going to take consumers along the wine journey with us unless we make it more fun. That has been my long-term vision. Have I succeeded yet? No, I have not. Which is why we called the last big tasting we did ‘Not Another Bloody Tasting’, to try and say to people, it is not just a wine tasting, we are going to bring other elements that will hopefully make this particular journey more interesting and, frankly, more fun. Because yes, we are a little bubble in the wine trade. We need to pierce that bubble or else we are going to be victims of our own thought processes.

Note: At the time of writing, the question of Brexit and its consequences had not been resolved and could change at any moment, so it was not tackled in the interview. This interview has been lightly edited and condensed.