There isn’t a day go by in the liquor world without an independent retailer asking a supplier to support a promotion, fork out for advertising in the local rag or give a better discount ‘to hit a price point.’ Such is the working of this wine trade.
The chains have brought in a very different way of doing business, the ultra efficient head office, computer generated orders, planograms and distribution centres and guess what, it’s working great.
Lets have a quick look at the inner workings of Dan Murphy’s: all ranging and promotions are negotiated at the head office in Melbourne, the individual store managers do not negotiate with any suppliers, order stock, set prices or even decide on ranging; their sole job ensure the store operates to its full potential – staff efficiency, good service, restocking and promotional compliance. Head office expects around 30% margin on most wines but will to drop that margin to around 20% or less for specials. The software behind their ordering tracks not only their own instore price and sales volumes but also the advertised specials of all major competitors in each state, giving them unparalleled information about the average sale price of any promoted wine. This software automatically generates orders for each store which are emailed or faxed to wineries and distributors each Monday morning and must be filled that week, as they do not accept back orders. Large volume wines are ranged in their distribution centres so orders are sent there, while smaller lines are sent directly to each store.
To promote in Dan Murphy’s firstly you need to have a product with sufficient demand in the market, they’re not interested in wines no one has heard of outside of the wine region. For X amount of dollars and Y discount will get you a professionally run national or state based promotion, for a set period and at a set price. For a few more dollars you can even specify where in store your product is displayed, eg on gondolas, end of isle shelving etc. Their strong software will predict with reasonable accuracy how much stock each store will need to start with, and a good thing about Dan’s is that they do back up a promotion with sufficient stock.
The pricing of big box retail is the constant discussion of independent retailers, and for good reason. They beat any advertised price by loading into their back of house software the price of all wines in competitor adverts each week; the system automatically generates the required shelf tickets and till price changes so first thing the next morning all competitor advertised prices are beaten on the shelves at all stores. They have weekly or fortnightly ‘category killer’ prices on selected big brands which are as sharp as a price can be and don’t make them much, if any, margin but do bring customers through the door. They are now increasingly advertising their own home brand products with seemingly dirt cheap pricing, though they would still be making a handsome margin; a few weeks back one of their adverts included no less than 6 home brand products – 3 New Zealand sauvignon blancs, a vodka, scotch and an imported beer! Just like they have with grocery, they are gradually luring consumers to their cheaper alternatives.
For small wineries, the big box retail chains do offer an excellent path to increase sales and exposure; they generally won’t majorly discount a wine unless someone else is already doing so, their promotions can offer excellent return on investment and their stores don’t require any ongoing visits. There is a risk that some independents might shun small wineries who are ranged in big box, and there is the worry that wineries do lose control of price, but given that nationally two out of every three bottles of wine purchased is done so from a Dan Murphy’s or 1st Choice, ranging in them makes great business sense.
Have a look at your local liquor retailer and question if they are satisfying their customers’ needs. Ask yourself what makes you go to certain retailers and not others, what would make you browse longer and how they could entice you to purchase more.
Inside any liquor store, your average customer want room to move, suitable range, sharp specials, friendly service, clean floors, prices on all products and orderly displays. For larger retailers which are destination venues, add plenty of parking, an accessible entrance and even trolleys, while at smaller retailers and drive throughs, the convenience factor makes a smaller range acceptable.
Let me ignite the wrath of independent retailers now by pointing out that the chains are experts at filling their role in the sales chain. What their shops lack in personality they make up by ticking every other box their customers are demanding. Liquorlands and Woolies Liquor offer just enough range, a few big brand specials and a simple layout – perfect for quickly grabbing a six pack of beer for the boys and a cold white for the girls. Dan’s and 1st Choice are everything a destination retailer should be, the Bunnings or Harvey Norman of the liquor world – somewhere you can get happily lost for hours.
They manage to tick all the right boxes by identifying their customer’s needs and filling them in a consistent and pleasant fashion. This is a lesson many independent retailers need to learn in order to grow, rather than spend so much time focusing on what the chains are offering and complaining to suppliers about not getting bigger discounts. Pick a style of venue and get a reputation of doing that well, whether it be convenience, boutique focus, exceptional range or exceptional discounts.
More often than not, the local drive through won’t need a big wine range, super dooper boutique wines on special or a wine club – no matter what all the sales focused wine reps will be telling the manager. Rather, a concise range that caters for the customer demographic is sufficient – and that is often taken care of by the core range of whichever banner group with which they are affiliated. These bottleshops make a great gross profit on single bottles of beer and RTDs, yet often dedicate 75% of their floorspace to dust covered wine.
The fine wine retailer often dilutes his brand by trying to match the chains with big brand discounting and increase traffic by installing a wall of RTD fridges. Fine wine buyers can be tempted to buy expensive imported beers but are turned off by RTDs. Conversely, RTD drinkers are not going to splash out on a $30 hand picked 7th generation winemaker crafted red wine to go with their 10 pack of bourbon and coke.
For us suppliers we must identify which of our customers has the current ability or the potential ability to grow and give them more focus and support than those poor retailers that are operating their businesses into the ground. Reps have the unique experience of visiting dozens of retailers each week and so can observe what retail strategies work, where they work and why they work; smart retailers listen to smart reps, so find a smart retailer and help him grow his business, which in turn will grow yours.
Lets leave the world of wine briefly and have a look at the beer trade. The 1990s seemed to be all about branding, getting the big brands front of mind by advertising and association with sports. Some time just after 2000 the marketing departments of the big brewers discovered China could provide them with ultra cheap gimmicks to give away with purchases – stubby holders, bottle openers etc all well branded, and lapped up by consumers.
Soon it became apparent that niche markets could actually be of value, with micro breweries gaining shelf space although not that much overall market share. Extra flavour at an extra cost seemed to be the area of growth, and this has continued today with premium segments of the market showing the best growth.
Pure Blonde heralded a new way to approach niche marketing and has opened up the flood gates for numerous imitators, which leads me to the reason for this post. Coopers has come out with their own low carb offering, Coopers Clear.
Coopers Brewery is a superbly run operation with classy marketing, excellent products and a commitment to steer clear of the gimmicky approach many of its larger competitors have followed over the last few years (has anyone won a VB Pop Up Bar yet – crafted from wood and forged from steel my arse). In many ways, Coopers approach to branding has been similar to that of a boutique winery – focusing on the uniqueness of the product, its production and the company’s history.
When Coopers ‘62′ lager came out last year, the product did smack a little of trying to be something that Coopers is not – refined, classy, chique and modern; an era of change had begun. A beer with no label does look good, but it doesn’t make for good sales – sitting in a fridge behind a bar it just looks like a bottle with a label missing, sitting next to lots of bottles with labels. Just ask Carlsberg – they made the same mistake a few years ago. But I digress.
Coopers Clear is branded in the same colours as Pure Blonde and comes in a clear bottle. It is a complete change of direction for a family owned company which has always focused on classic beers without pretension, though this is an understandable change given they’ve got to make a buck too. The point I’m creeping towards is that if a company like Coopers needs to change direction to move with the times and consumer tastes, do wineries need to think about doing the same?
Wine is full of carbs and a few glasses puts you over the limit. On the other hand, ladies want to have a few glasses of wine without feeling guilty about stacking on weight, have a good time with their friends and then drive their drunk husband home. That their people is a ‘niche market,’ satisfied by low carb and low alcohol wine that hopfully doesn’t taste like yellow acidic water.
Fosters has already built a fairly strong portfolio of low carb/low alcohol wines – Yellow Jewel, Rosemount O, Lindemanns Early Harvest, though their sales don’t seem to be breaking any records. Other wineries are following suite and it’ll be interesting to see where this new direction will take us. Whilst I can’t see Rockford coming out with ‘Alicante Bouchet Light,’ there’s no reason for other small wineries to make a statement and create wines for ever more weight and drink driving conscious consumers. If big burly blokes are moving to low carb beers, how hard can it be to get soccer mums to drink low carb wines?
After any downturn we are rewarded for our patience with the recovery, who’s arrival is heralded as the solution to most of our sales problems. The catch cry of many winery’s seems to be, ‘We’ve weathered the storm, once things are back to normal we should be ok.’ Logic states after all, that as consumer confidence and spending increases, so will purchases of luxury goods such as wine – but I fear it’s not going to be that simple.
The downturn has had some unexpected side effects by changing the basic landscape of our trade, meaning our supposed recovery ’saviour’ will lead us towards new and uncharted territory. Let me know your thoughts on what follows.
First and foremost we’ve seen wineries discount to maintain sales volumes, effectively spoiling lucky consumers with increased value – the same product for less. The recovery might herald an increase in discretionary spending but it certainly does not mean that prices can then automatically return to their pre-downturn levels – a new norm has been set.
Next we have the consumer’s natural response to belt tightening – trading down. Habit is a powerful thing, so persuading people that they should stop buying $12 wines and return to the $20 bottles they enjoyed 2 years ago is going to be no mean feat.
Finally, the downturn has been a boon for the supermarket chains, with their slick ads, uber discounting and most importantly, their ’save save save’ advertising campaigns. Smaller booze budgets have seen consumers forgo the convenience of their local bottleshop to head over to big box in order to ’save save save.’ Getting them to return to a fine wine specialist or local hotel is hurdle one, but there’ll now be a consumer expectation that those supermarket prices are replicated to a certain degree throughout the trade – and that’ll hurt everyone’s margins.
All we suppliers can really do is continue to add value to our customers and role with the punches as the ‘new’ wine trade unfolds.
Who’s a spoilt bugger – our customers, that’s who. Yes, they often whinge about how suppliers don’t support independent retail enough, complain that buy deals aren’t as good as they used to be or moan about price rises, but we still love them. There isn’t a month in the year that a retailer or restaurateur isn’t invited to a couple of tastings, a winery visit and a sporting event by their suppliers – we invest bucket loads of money trying to gain a customer’s favor in the hope that it will translate into increase sales.
Customers get flown to the Jacobs’ Creek Golf Open by Pernod Ricard, go to every sport’s grand final thanks to Fosters and Lion Nathan, fly to an island off the Queensland coast curtosy of Jim Beam, are taken to wineries for boozy tastings by all and sundry and entertained in the finest restaurants by visiting winemakers. Each week, reps with winemakers in tow visit customers to show off new release this and repackaged that, while behind the counter sit half a dozen sample bottles that other reps have graciously left.
That’s just the way the trade works. From the outside it looks like a roart, from the inside it feels like a never ending cycle – but is it all worth it? It won’t take long for today’s boozy lunch to blur into last month’s boozy lunch and be forgotten. If you take a customer to the races this year, there’s an expectation that the same will happen next year. If your winery visit is a quiet, civilised affair, does it get trumped by the booze fest at the winery down the road?
It’s a shame, but we’re definitely getting less return for spoiling customers than in the past – in fact there’s almost an expectation that to do serious business you have to provide some serious added extras. Finding a hook that customers can’t say no to, that experience that other supplier’s aren’t offering and at the same time, an activity that provides the opportunity to relationship build is harder than ever. Perhaps it’s time to turn the tables; rather than spend that money on customers, spend it on the sales team after a big month and feel comforted that at least they’ll appreciate it.
So there’s a wine glut– too much Aussie plonk and not enough thirsty mouths around the world willing to gulp it down. What makes this problem worse is there’s too much foreign plonk going around too.
Imagine my surprise when I saw a lady wonder into an independent bottleshop last week, pick up a six pack of white wine, put a $10 note onto the counter and walk off. A-gasp that we’ve entered a world of wine at $1.66 a bottle I strolled over to the case stack in question and on seeing the packaging my jaw dropped – Product of South Africa.
The shining light of capitalism lets no one hide in the shadows, even our domestic wine trade. Introducing Cheetah Wines, $2 a bottle or 6 for $10. Apparently it didn’t taste too bad – good value for money the manger assured me, – for God’s sake, it’s hard enough to find bottled water at that price, but fully imported table wine… Interestingly enough, the cheapest Aussie wine was $3.99 a bottle, double the price.
Times, they are a changing. Its time to get used to seeing in store specials of cheap imported wine; Dan Murphy and 1st Choice already do it and the independents aren’t far behind. If there’s a buck in it then there’ll be someone selling it and if it’s cheap, there’ll be people buying it. But does anyone make any real money selling wine at $2 a bottle?