Portugal 180x180 - Portugal’s penchant for a premium “bargain”

A mature market is experiencing some lively changes in the way upscale wine is sold, according to our latest Portugal Landscapes 2019 report.

Despite being one of the most established markets for wine with one of the highest per capita consumptions in the world, the wine category in Portugal continues to grow significantly year on year. The evidence uncovered in our latest Portugal Landscapes 2019 report suggests that this is being driven in part by the recent boom in tourism and also by the economic recovery after years of financial crisis, which bodes well for Portuguese wine producers.

Wine markets, and more traditional markets like Portugal, do not change quickly or dramatically as we have found from our Vinitrac® tracking consumer data. Within this context, however, there is a particular notable trend in the Portuguese wine market: a significant reduction in the proportion of wine drinkers who are purchasing high volume, mainstream wine brands we measure. This shift is driven partly by the emergence of many new brands in the market over the past few years, contributing to the increasingly competitive environment.


Portugal discount - Portugal’s penchant for a premium “bargain”


Many of these newer brands are using quality cues and words such as ‘signature’ or ‘master selection’, leading to the consumer perception of these brands being ‘premium’ and often being priced at a premium level (e.g. €12), but discounted up to 70% in supermarkets. Our evidence indicates that consumers have been opting for these ‘bargains’ and are letting go of the bigger, more traditional brands. One distributor commented, “Many new ‘exclusive brands’ have been developed. These come with a premium look and are often misleading as their quality won’t reflect their base price selling at supermarkets”. However, many think this sales strategy is likely to be short lived as another trade expert comments, “These new brands have a short life cycle as consumers end up realising that the base price does not reflect the quality”.

Other markets have experienced similar cycles over the past few years, including the UK, where for a time supermarket shelves were filled with so-called half price brands, which in most cases were poor quality products which spent very little time at the “full” price, and were only bought when at 50% off. Most of these products have now disappeared, as consumers quickly learned what was really happening (often via social media).

One of the unintended consequences of this activity was that UK consumers started to grow used to the idea that wine could cost £10 (even if they never paid that price). Now that the half price promotions have disappeared, the UK’s £10+ wine retail sales by value have grown by 50% between 2016 and 2018, while the market as a whole was static, according to Neilsen data quoted by the WSTA, the UK’s drinks trade association.

Could the same thing happen in Portugal? The supply chain remains cautious, rightly concerned about the undermining of the price-value connection through unscrupulous “deals”. However perhaps producers and retailers should start to anticipate a silver lining of more premium sales when the discount party ends.


Luis 1 180x180 - Portugal’s penchant for a premium “bargain”Author: Luis Osorio

Email: Luis@wineintelligence.com


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