Supermarket range cuts put suppliers under pressure: OLN Wine Report

29 May, 2015

Eighteen per cent of suppliers have lost listings as supermarkets scale back their wine ranges, and another 23% say their margins and prices are coming under increasing pressure, OLN's exclusive Wine Report poll of UK agencies and distributors has revealed.

One supplier says: “Ranges are being squeezed so supermarkets are expecting more profit and investment from those brands that are still listed.”

Buckingham Schenk managing director Craig Durham adds: “It’s much harder to defend and supply single wines from one winery in this age of supplier and collection point rationalisation.”

De Bortoli business development manager Mark Wilson says: “Commercial wines are under price pressure and more interesting wines are being lost.”

Others say it is too early to judge as retailers are still reviewing ranges.

Outgoing Pol Roger managing director Nick James says: “I can see some very big problems on the horizon for suppliers whose margins and facings will be increasingly reduced. Without support funding from the producers there are certain to be some casualties.”

But many suppliers are staunchly positive about the changes. Forty-one per cent remain unaffected, and another 12% say they have gained listings.

Australian Vintage general manager for the UK and Europe Julian Dyer says: “When supermarket buyers edit their ranges, they do not intend to reduce choice, but instead to make the ranges easier to navigate and shop. There are always examples where there is duplication of range which does not enhance the customer offering.

“The trick is to edit the core range tightly, so ensuring there is sufficient space for, and depth of, innovation and excitement, which the category needs. If this is done well, then what is at risk of removal is duplicating or underperforming lines, which it is difficult to argue should be kept.”

He continues: “Successful lines and brands will thrive, allowing room for innovation. Where I see the squeeze is on tertiary lines that have no own-label or branded relevance. A lot of them don’t sell off promotion anyway and, as we move into a retail landscape where everyday value is more important, those wines and brands that have a loyal following will be successful. As a brand owner and producer, we have to earn our right to shelf space by delivering the sales and excitement.”

Innovation is key to hanging on to listings in these challenging times – 72% of suppliers say they would introduce innovations to maintain listings that are under threat, while 36% would promote more, 25% would cut supply costs, 14% would cut their own overheads, including staff numbers, and 11% would reduce their own margins.

Another 19% say they would advertise more to preserve listings.

One supplier says: “We can’t keep taking margin cuts or offering deeper discounting, it doesn’t do the producer or agent any favours in the longer term.”

“We want to drive business by driving innovation,” says GM Drinks managing director Marc Patch. “Support backed with quality products that drive volume is far more important to both you and the customer than a simple race to the bottom with price reductions.”

“There is no silver bullet,” says Australian Vintage’s Dyer. “We cannot expect wines to sell just because they are listed. Our job as producer and brand owner is to help our off and on-trade customers by supporting our brands in a compelling and coherent way, over the long term, to ensure the rates of sale are strong and there is good customer demand. There is little point trying to react at the last minute, by then it is too late or at best will be a sticking plaster.”




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