An epic challenge?

Constellation Europe president Troy Christensen may well come across as your typically laconic yet focused American executive, but he's darned enthusiastic about persuading UK consumers to appreciate his company's wines.

Yet while he acknowledges we Brits drink a decent amount of the stuff, including Hardys and Stowells brands, he feels that we need to drink more of the good stuff. And naturally this translates into the premium end of the market.

The wine price problem

Chicago-born Christensen, appointed to the top job at Constellation Europe in March after joining as chief financial officer last September, is the first to admit that in trying to persuade us to 'trade up' he has a task on his hands.

In the off-trade, cheap deals in supermarkets are attractive to the consumer but lead to suspicions over prices found elsewhere. Many shoppers who later visit a pub are left pondering why the price of a bottle of wine is often dramatically higher in their local, a situation that has not helped companies like Constellation when it comes to persuading customers to spend more on their favourite vintage.

Christensen acknowledges that suppliers have played their part in the problem. "In the past we've had a volume mentality," he says, "and when volumes go down you have a challenge on your hands."

There's no doubt that pricing is currently an issue, he believes, as is getting consumers to trade up to buy higher quality products. "We need to get people back to assessing price points and value, prepared to pay a bit more, and then a bit more for better wines," he says.

"It's not about getting them to move to spending £8 for a bottle of wine overnight, it's about creating a quality ladder which people can ascend."

Building strong brands is crucial and while he wants to get the off-trade and its customers to better appreciate the finer points of price and quality, Christensen also understands that in the on-trade there is a value proposition that needs to be put across more effectively.

"The on-trade is a profitable opportunity for us," he says, "and sure, it gets frustrated about the price differentials. That's a challenge in itself."

Nevertheless, the wine category has grown significantly, he says, "and we should all try to get the consumer to be more adventurous - and to pay more".

Wine gluts, such as have recently been seen in Australia - ironically now suffering a potentially crippling drought - haven't helped this situation, however.

That Punch deal…

But with its near market dominance Constellation has good channels to market in the UK. One of the largest drinks companies in Europe, it was formed in April 2004 following the integration of Constellation Wines Europe and wholesaler Matthew Clark.

Its own recent 50:50 Matthew Clark joint venture with Punch Taverns has raised a few eyebrows, especially among some licensees. But Christensen doesn't believe people should view the deal with cynicism.

"I'd put that attitude down to a lack of understanding regarding the nature of the joint venture," he says.

"The [£85m] cash injection from the joint venture will allow Matthew Clark to operate with greater independence and autonomy and provide excellent service to a wider range of clientele." This was an example of an "investment transaction", he says, one which would see the development of an autonomous business unit.

Concerns that Punch might gain access to market sensitive data are unfounded, he says. "The Chinese Walls around Matthew Clark are solid. For them to be anything else would be very dangerous," he says.

As well as explaining the merits of the Matthew Clark deal to wary licensees there are other items on Christensen's 'to do' list.

Putting its house in order

Number one is getting Constellation's UK operation into shape. The recent announcement to build what it describes as the largest bonded warehouse in Europe, together with a new bottling facility and related office accommodation, is just the first step.

The new site, costing tens of millions of pounds, will be close to Constellation's existing distribution centre in Avonmouth, near Bristol, and will see the creation of up to 100 new jobs once the switch has been made.

Building on the warehouse and bottling plant is expected to start in June, with the facilities being ready for business in early 2009, while the new offices will be built once this construction project is completed.

Christensen believes companies such as Constellation and the wine industry in general have to do more to get the social responsibility message of wine across, especially with the roll-out of smoking bans in the UK.

"Meanwhile we want to create a focus on quality and leadership in wine," he says. "We need to improve our position as global leader. We have a worldwide capability to deliver the best quality wines available but haven't leveraged that here. And we can't do this sort of thing overnight.

"We're seen too much as suits and spreadsheets, too deal focused, and we don't shout enough about what great wines we have."