After a discussion with John E. Fells' new Managing Director, Ewan Mackay, we got a glimpse of what the UK wine market looks like from an importer's perspective.
Mackay joined Phils as CEO in September last year – succeeding Steve Moody, who became chairman – and his position in trading has changed markedly.
Previously the Commercial Director of Symington Family Estates in Portugal, he was based in Porto, so not only did he have to move from country to country, but he also went from representing the product point of view to seeing the market through the eyes of a distributor.
While Mackay's ultimate boss is the same – the Symington family is the majority shareholder in Phils – his new role “is a big change,” he told db during a meeting last month.
However, he feels he is well placed to deal with the issue, because, as he said, “I have spent the last 25 years talking to distributors all over the world, so I know the challenges they face.”
Moreover, he is keenly aware of the difficulties faced by producers, not least the long lead times for developing new products – something he says some distributors are not always sensitive to.
“As a producer, you might be asked to create a completely new product over dinner, and that could take two years, which is not fast enough for a distributor,” he said.
On the other hand, he always valued feedback from distributors, which led to innovations on the part of suppliers.
For example, recall how Graham's Blend no. 5 white Port was conceived for cocktails after a conversation between the Fells and Symington Family Estates, while the tawny 'Single Harvest' label for Graham's Colheitas emerged after a discussion between the Port producer and his distributor in Macau, who wanted something of a higher quality, but 'more understandable' than the term 'Colheita', traditionally used for a light brown, period port.
As for the UK wine market, looking at it from his new role, Mackay admits that the trading environment is not easy at all.
“There are more reds than blacks at the moment,” he said, adding, “There are more lagging regions than leading regions,” comparing the situation to this time last year, referring to fine wine merchants, restaurants, regional wholesalers and supermarkets.
Looking at the performance of wine in this latter segment of retail in particular, he noted a lack of brand loyalty among today’s price-sensitive consumers. “If you go from a price point of, say, £7.99 to £8.25, sales can fall by 40%,” he said.
His approach to the current challenges is to ensure “our service level is very strong”, while bringing on board new agencies, such as Hungary’s Royal Tokaji and Copenhagen Sparkling Tea, which Mackay describes as “a nod to the alcohol-free sector”.
“2023 was a very good year and we always knew this year would be tough, and it is,” he said looking back.
Speaking of the “cost of living crisis”, he said there was a lag between rhetoric and reality, with people now really feeling the pressures caused by, for example, increases in the cost of car or home insurance, or higher mortgage rates, which directly affect their ability to spend on non-essential items, such as wine.
For his company, transport costs have more than tripled on certain routes because of the Suez Canal trade disruptions, which he explains by the price of a 40ft container from China to London – a journey that used to cost £2,000 he says now costs £7,500 (a cost relevant to Phil’s gift business, which relies on materials from China).
Looking ahead, he is optimistic that “consumer confidence” will rebound in 2025, especially with expectations of lower interest rates and lower energy prices.
Fells believes securing a successful future in the UK will require “flexibility” as well as the ability to “add value” from both the customer and supplier side.
“We are here to build brands, not just sell them,” he said, and while he is not looking to expand Velz’s 48-winery portfolio much further, he does see some gaps, particularly in terms of the Italian distributor’s portfolio and, perhaps, the “right” Provençal rosé.
As for the ports sector, he says: “It’s the only sector where we are leaders in our category,” speaking of the Symington family’s strong presence primarily due to the Cockburn and Graham brands.
However, he said that fortified wine in the UK, “despite all the pressure and efforts, has taken a hit”, referring to the increase in tariffs last August on wines containing 20%+ alcohol/volume by up to £1.30 to £4.28 per 75cl bottle.
“We still don't know the true impact of this, because most retailers bought their stock in advance” – and got the required port for last year's Christmas sales period before the increase in duty was applied, he added.
In preparation for this year’s festive season, when the majority of Porto is sold in the UK, Mackay says Cockburn is planning a new look that will “challenge the consumer”, commenting that fortified wine is “a category that needs to be innovating all the time to keep gatekeepers excited and keep Porto on people’s radar”.
This “radical change” to the face, for Cockburn’s flagship Special Reserve line, will launch in the fall and is expected to be “radical,” according to Mackay.
While he added that repackaging is divisive, he also stressed that “most retailers are on board with this.”
