Marks & Spencer's beers, wines and spirits strategy analysed

16 September, 2016

Wine has always been an integral part of the Marks & Spencer proposition. It enjoys an exalted position, with producers clamouring to climb aboard its prized supplier podium. Wine accounts for a massive 85% of total BWS at the retailer, but BWS trading manager Gary Brooking and his team are also focused on developing the hitherto underperforming beers and spirits sector of the business. “We’re taking beer to a new level,” Brooking tells OLN. “We’re starting from a small base, but it’s a significant focus for us.” 

The team is beginning to deliver on this strategy – the beer SKU count has increased from 97 to 300, while sales have increased 30% year on year, according to Brooking. M&S won Beer Retailer of the Year in OLN’s International Beer Challenge, and it is not resting on its laurels.  “We’re bringing in more modern styles and putting real focus on quality beer-making, from traditional single hop to modern craft,” says Brooking, who is convinced the increased focus on the retailer’s Simply Food format will drive rapid growth in beer.

M&S now has more than 850 stores in the UK, serving 32 million customers, and 57% of its business is food and drink. Recent financial reports have focused on the underperformance of clothes, but food and drink continues to thrive.

New chief executive Steve Rowe places great importance on this sector of the business and is eager to roll out Simply Food formats. In the past 12 months M&S has opened 75 of these stores, and by May 2017 it expects to add a further 250 with plans to expand by another 100 in each of the following two years.

This should benefit BWS in which spirits is another focus this year, with sales up 10%. Overall BWS performance is strong, with latest 52-week Nielsen data showing M&S value growth at 7.2%, against an off-trade market growing at just 0.8%, and a market share of 5.4%.

Wine remains at the heart of its offer. There are 650 SKUs in the range, with an average churn of 20% per year. Choice, innovation and award winners are the three acknowledged pillars of its range, according to Brooking, who points to an impressive recent haul of trophies and medals from prestigious competitions to back this up. M&S introduced more than 65 new wines at its recent press tasting, pushing the boundaries in terms of innovation and regions, with the launch of two New York State wines and a Bolivian Tannat/Malbec, together with a further 20 English wines.

With convenience at the heart of expansion plans, around 80% of total range is in this sector, with three clusters, depending on size and demographics. In a smaller space, with minimal customer shopping time, it has forced the team to look again at merchandising. Line level detail – which involves analysing the performance and availability of every SKU in the range – is discussed and agreed at weekly meetings by buying, supply chain and merchandising teams.

Brooking heads up a team with quality and exclusivity firmly at the heart of its agenda. “We don’t stock big brands. We never have and we never will. We don’t want to be the same as everyone else.”

M&S is built almost exclusively on own-brand. The resource structure is unique, with buyers working in tandem with three winemakers to secure the very best juice. Seventy-five per cent of all M&S wine is custom blended by the winemakers, with only 25% – including Champagne – selected from a raft of choice producers.

“With our supplier partnerships, we have access to the very best,” says Brooking. “We start and finish with the quality agenda. The buyers travel with the winemakers. They blend wines to an M&S style that the customer wants. This is a different approach. Every category is reviewed once a year. Each country gets a full review every two years. We begin with customer data and plan from there.” Unlike some multiples, more than 60% of the range is from the Old World.

M&S pricing has traditionally been viewed as premium. With the core strategy now focused on convenience, the retailer knows it needs to compete on price, as well as offering new styles, quality and innovation. Rowe has stated that the scale of promotions throughout the business will be reduced, so value is now a fundamental part of the strategy.

Dine In meal deals, where shoppers get combinations such as a main dish, a side, a dessert and a bottle of wine for £10, are a core mechanic. “This focuses on introducing new food concepts, backed up by great value for money wine,” Brooking says. “We currently sell 13 million bottles a year as part of this offer.”

Promotional participation sits at 25%. Buy six and save 25% is a standard retail mechanic, but M&S recognises that many of its stores do not have a car park and introduced a periodical buy three and save 20% deal. “We are seeing customers picking up a couple of favourites, then taking the risk of discovering something new,” says Brooking. 

The company is also investing in a major revamp of the department layout. So far 20 stores have undergone refits to provide a “softer, more wine merchant look and feel, with better theatre and easier navigation”. A further 30-40 refits are planned for this year. More focused customer communication includes clearer on-shelf signage and redesigned own-brand back labels with shorter, relevant information across the entire range within 12 months.

M&S’s average bottle price is £7. Sixty-five per cent of the range and 80% of sales are now under £10. Brooking is delighted that 35% of the medals recently won are for sub-£10 wines. “We know we have to be competitive,” he says. “We are investing in price without compromising quality and are working closely with our supply base’. 

Good availability is central to success, given the focus on convenience. The business is investing in new systems at its bonded warehouse and nine regional depots designed to react more quickly to seasonal spikes and to the changing habits of shoppers. Every supplier is measured, with availability reports by individual SKU, at the start and end of the day.

Close communication between buyers and the supply chain is fundamental to the success of any retail business, but in the majority of multiple BWS retailers responsibility for these areas is split. At M&S it is integrated with Brooking covering both. “It’s crucial the teams work together,” he says. “We are entirely accountable for getting product on the shelf. The teams sit together, work together – it’s a symbiotic relationship.”

M&S works with more than 150 wine producers, one-third direct, the remainder through UK agents. “We don’t try to cut distributors out if they add value,” Brooking says. “But we challenge them constantly.” The team prides itself on strong partnerships,  a collaborative approach and net pricing negotiations. However, it is always on the hunt for new, ambitious producers.

Brooking criticises would-be suppliers that fail to spend sufficient time understanding the M&S business. “Too many apply a scattergun approach,” he says. “They need to be more targeted and concentrate on the areas where they can shine.” He say many suppliers do not listen keenly enough. “Get into our stores, talk to our customers, understand what they want, then come and talk to us. Ask about our plans, don’t tell us yours. Far too many suppliers don’t.”

Kingsland and Liberty are cited as best in class. “They get it, they think end to end about what makes the business work,” says Brooking. “We need to be increasingly agile. We need to work with suppliers who tick the boxes on our quality agenda, but deliver at the highest level on availability.” 

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