Retailer relations

11 July, 2008

Relationships between suppliers and retailers are more strained this year, but most remain upbeat about future partnership prospects

The pressures of the duty hike, credit crunch and general rising costs are straining relationships between retailers and suppliers. Forty-two per cent of suppliers say relations are more strained than they were last year - a big leap from last year's 35%.

Just 3% say relationships are more relaxed than before - down from 14% last year. Meanwhile, 55% say the situation is stable, which is a slight increase on last year's 51%.

"The bond between existing suppliers and the retailers gets stronger each year, and to break through is becoming harder and harder. Once you do break in then the pressure begins on margin and costs," says one supplier.

"Current conditions are tougher than they have been for 10 years. Only those suppliers with a balanced portfolio and brands that are relevant to today's consumers will succeed in the current climate," says another.

But while suppliers say relationships vary from retailer to retailer, most are positive about the future.

Brand Phoenix director Steve Barton says: "With the economy and tax burden now what they are, the partnership between retail and supply to ensure the consumer remains loyal to the wine category will be absolutely crucial."

Stratford's Wine Agencies commercial manager Neville Harris says: "The pressure has been growing for about a year and much discussion has been going on as to how best to manage cost increases and slowing sales in the market.

"With harder trading conditions it's more important than ever to have strong and open relationships between suppliers, agents and retailers." He adds: "There are a few tense suppliers and retailers around at the moment, but I believe that, if we hold our nerve and keep talking to each other, we'll come out the other side stronger for it."

"When you can work with a retailer and both sides put in the effort, it's fine," sums up Paul Letheren, of Off-Piste Wines.

Desperation

Suppliers have a strong sense that retail margins are being increased, and there is a sense of desperation in the market at the growing pressure on costs and price points - but our poll shows margin demands have actually dropped since last year in all areas but the multiple grocers.

That could reflect preferential treatment for some suppliers, or it could be that retailers are responding to the squeeze their suppliers are feeling.

The poll also found enormous variations in margins, with multiple specialists ­ranging from 26% to 47%, multiple ­grocers from 20% to 40%, independents from 20% to 55% and wholesalers from 6% to 35%.

"Increasing year on year", "upward trend" and "considerable increases ... which have proved a challenge to manage" are just some of the comments suppliers have made.

"There's no apparent relaxing of margin expectations, just even harder negotiations in view of cost increases - wine, glass, fuel - and hardening of foreign currencies," says

Harris .

"It is becoming very difficult indeed to support these retail margin requirements in line with the price points," says one anonymous supplier.

"At 20% discounting or three-for-£10 it is nigh on impossible to make any margin at all for producers or agents. Something will have to give. One can only hope that the consumer will be prepared to accept higher standard price points that will allow us all to live."

But for some, average margin demands are less relevant than the different profits retailers can make on established products compared to new ones.

"In many cases these may well now be declining in the current ultra-competitive retail environment," says Mentzendorff managing director Andrew Hawes.

"I personally don't buy this retailers demanding more and more margin angle. We supply both developing brands fighting to gain a foothold on the ladder and more established brands that we have invested in and built a franchise for over decades. The situation is very different - that's life."

"We shouldn't be surprised to see our key distribution outlets wanting to increase their margins - this is normal business practice and in most cases a huge proportion is reinvested to drive future wine category growth, so in fact all suppliers should welcome this," says Thierry's commercial director Matthew Dickinson.

"The key challenge is, how do suppliers also increase their margins in a time of rising costs and downward pressure on retail price points?"




Bookmark this


Site Search

COMMENT

Donald Trump: the US has much to learn from history

The reasons Donald Trump should not be left in charge of a shopping trolley, let alone the keys to the White House, are plentiful and well-documented – from his use of the word “bigly” and lamentable business legacy to his dubious post-modern feminist principles, quite astonishing lack of political acumen and, most worrying of all, his bewildering hair. 

Click for more »
Upcoming events

Polls

Is blended Scotch overshadowed by single malt in retailers?

  • Yes
  • No
  • Don't know

Facebook

Twitter