All change at Co-op

25 June, 2010

? It’s a hectic time for the Co-op. The multiple now numbers 3,000 stores, following its acquisition of Somerfield in March last year. Around 800 stores are in the process of being refitted and changed over to Co-op fascias with the roll-out programme expected to be finished in 2011.

Integration of the two wine ranges is also well under way with the final line-up set to be unveiled in August. Judging by the range shown at the Co-op’s recent tasting, it’s clear many former suppliers to Somerfield have lost out, highlighted by the fact that only one brand, a Sancerre from Fouassier, has so far made the cut from its 360-strong range.

Paul Bastard, the Co-op’s long-standing wine development manager, refuses to be drawn on the precise detail of how many suppliers have lost listings due to the merger. However, he stresses that while some brands have fallen by the wayside, suppliers may have picked up contracts for own-label, which will make up 140 SKUs from the Co-op’s final portfolio of 450 wines.

Bastard says: “Somerfield had a limited supply base for its economies of scale. We’re still in the process of integration now but it’s almost been beneficial to be the last category to be integrated as it’s a gradual process.

“We’re not as heavily branded as some of the other multiples, so we have kept our own way of doing things and didn’t switch our approach.”?The Co-op is looking to increase its Fairtrade offering, with a “minimum of six Fairtrade wines in every single store”.It will also identify a number of premium stores to focus on fine wine.

“We try to offer good deals for our size of store, and have an interesting range.We want to always have something people are going to enjoy, whether they are

spending £4 or £10.

“We might not be favourite with suppliers which have the big brands but we don’t have the space or inclination to stock more. Those on the buying team are all strong characters with definite ideas of wine and try to push the boundaries as much as possible,” he adds.

The range will see more space given to both Old and New World offerings. “There’ll be a few new Italian reds –

Italy has been doing well for us anyway, led by Pinot Grigio, but we’ve sourced some which have got a bit more age and they are all showing very well.

“We’re giving more space to New Zealand – and Chile is doing very well too.”?Australia is the Co-op’s bestselling country and “at times” South Africa can be number one in white wines, according to Bastard. The average bottle price is £4.10.

Like Sainsbury’s and Asda, Co-op is attempting to move away from three-for-£10, although some will remain and other multibuys will shift up by £1.

“We still get consumers who want to pay £2.99. There will be the odd refugee three-for-£10 deals but we’re going for three bottles for £11. It doesn’t sound very sexy but really that’s where it should be. But depending on the Budget we may put it up even more.”?While the Co-op ethos remains the driving force post-acquistion, Bastard says it’s also used some things from Somerfield to improve the Co-op’s efficency. He identified its logistics, stock managing and pricing systems as worth replicating, so these are being put into Co-op stores.

Bastard says the Co-op has also changed its approach because of Somerfield’s attitude to sparkling wine.

“We’re not a destination shop for Champagne but we’re changing that tradition.

“We’ve always had them behind the counter or not on free flow. Somerfield always put it on free flow, so we want to get it into the chillers for a more convenient shop. Champagne has slowed down for certain brands but overall it’s growing by 30%.

“We could still sell more Champagne but there is the risk of it being stolen, which is a worry for small stores especially. We’ve got to be a bit brave so we’re looking to work on a store-by-store basis.”?There are still four in the Co-op buying team and none of the Somerfield buyers were taken on.

“Everyone at Somerfield was given the opportunity to come over. There was a freeze on recruitment in Manchester across the whole of the business.

“People in Bristol [Somerfield’s former base] knew from the start it would be closing down and they would be relocated. The wine-buying team in Bristol was offered a relocation package, but no one wanted to move so we kept the original team.”?Bastard admits it’s been a difficult year. “Currencies have been really tough, you have to buy ahead. Australian wine has seen increases of £8 a case – that’s a huge increase. You can buy cleverly ahead but you run out of stock.

“It’s about getting customers to understand that we have to balance the books.Retailers aren’t people who give away wine – anyone can give it away.”?Bastard says suppliers from Chile, New Zealand, Argentina and South Africa are questioning the validity of the UK market because they can get better margins elsewhere.

“Some of our suppliers are absolutely with their backs to the wall.

“We negotiate as hard and fairly as we can, then currency rates can change overnight and six months of negotiations are wiped out. It’s very frustrating.

“I wish all negotiations were on the liquid but so much is on dead money. It’s such a shame well over £2 on any bottle isn’t anything to do with the wine.

“It used to be if the peseta was strong, you could buy in francs, or if the franc was strong you could buy in deutschemarks or lire and so forth. One wasn’t always being pulled by circumstance.”?The year ahead is going to continue to be gloomy, he predicts.

“I’m surprised 2009 held up as well as it did. Christmas was the last hurrah as the government was never going to take risks when gearing up for elections. It was a phoney period.

“I can’t wait to get back to what it used to all be about – whether it’s

been a good harvest, and if

there’s enough wine.

I suppose that’s been a good thing, we have had enough wine despite a deep drought in Australia. We’ve had some good-quality harvests in Bordeaux and not had anything disastrous.”?When asked about any further acquisitions in the pipeline, he says with a wry smile: “It’s not been ruled out but it’ll have to be when we have finished this process. We’re quite busy at the moment.”




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