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General Wine
Supermarkets, Waffle, Plain Speaking, Grange 2008
Wednesday, 10th July, 2013  - David Farmer

I cannot think of a more dangerous time to be a supplier of goods or a more dangerous and exciting time to be a retailer. The post war business upheaval has seen a shift from supplier power to retailer power. Add in the general mayhem created by the digital revolution which shifted power to consumers and what was once the chain of business has been turned on its head.

The stories now break quicker than I can analyse the implications. Consider some recent news.

On the 15th May Coles released its grower relationship booklet 'Backing Aussie Wine' with the head of liquor Tony Leon saying; "Trust us, work with us and we will go out of our way for you" and "We want to let small producers understand that we are reasonable fellows and we want them to learn how to deal with us."

I assume the criticism the chains are taking about expanding their own label offering is making them sensitive so Coles is trying to diffuse the issue.

This booklet was launched by Winemaker's Federation of Australia president Tony D'Aloisio who I am sure wished he was elsewhere. Mr. D'Aloisio congratulated Coles for its support to the Australian wine industry and went on to say:

"Of the off-premise market of Australian wine, 75 - 80 per cent is the two major groups, so on any stretch they are an important customer to our wine industry.... Initiatives such as this that really promote Australian wine and push the supplier relationship are extremely important - and we support it."

Perhaps he recalls this exchange back in June, 2012, as told by Cameron Houston, The Sun Herald:

The departing chief executive of the Winemakers' Federation of Australia, Stephen Strachan, said the supermarket giants had created a culture of fear and intimidation among local wine producers.

"If you're an individual company that speaks out against them or says anything publicly that criticises their tactics, they would have no hesitation in giving you a holiday from their shelves and that is what's creating a culture of fear and compliance in the industry'."

The Coles booklet lists the following companies as supporters; "Bay of Fires, Brown Brothers, Chapel Hill, De Bortoli, Devil's Lair, Fabric Wines, Grant Burge, Littore, McWilliam's Wines, Peter Lehmann, Project Wine, Rosabrook, Tyrrell's Wines and Zilzie Wines".

Seeing the name Brown Brothers reminded me of this exchange as reported by Eli Greenblat, June 7th, 2012, Sydney Morning Herald;

At a First Families function this week, Mr. [Ross] Brown was reported to have said the retailers - he is understood not to have named Woolworths and Coles directly - were buying up surplus wine and then placing a label on it to suggest to shoppers a wine of higher value:..... "I call them hollow logs, because they masquerade as brands but in fact they are just a label which has none of these values that traditional family wine companies bring to the market." Mr Brown could not leave it there and went on; "There is nothing new or different coming out of that [private label] wine space, it's all wines that have been developed by the serious wine producers and then copied."

These are interesting thoughts by Mr. Brown about his largest customers so they must have made up. I might add in passing that it's a bit rich for Mr. Brown (Brown Bros), a company which has made a lot of money selling volumes of sweet nothings at full prices for 20 years, to call the kettle black. In my opinion if ever a range of wines needed half price competitors it is those of Brown Bros. and I'm sure the supermarkets will be doing just that.

Alas the simple truth is that with over 2500 producers selling wine only a very tiny number will ever be sold by the chains. And those who are favoured would not want to bet their future on the relationship. The buyers at supermarket chains will not be held to any P.R. booklets about grower relationships and will continue to do what they damn well want. And I have no problem with that as their focus must always be on customers and what is best for them, and that is spelt out in big letters as, lower prices.

As I have related a number of times a brand may or may not provide you with extra quality and for the privilege of this safety you pay what I call a 'brand access fee'. At times this fee is too large and what the chains see with the wine trade is a business riddled with pricing anomalies.

Which leads me to a great story, and one that editors of newspapers find vastly amusing and trot out regularly; can the wine expert and the amateur tell the difference between a very expensive wine and a much cheaper wine?

This story played out against a background of the release of the Penfolds Grange 2008 with reports about who was selling it for the lowest price. This now ropes in overseas retailers as they also see this as great attention grabbing sport. Of course Coles and Woolworths had a few price skirmishes but the headlines this year were won by the Adelaide Advertiser which decided to see if a panel of drinkers could distinguish the glory of Grange from much cheaper prices. They couldn't which created a terrific story.

So much for thoughts about supermarket bullying, private labels, backing Aussie wines, and tasting abilities but another recent story is worth recording as at times the wine trade needs some light relief. Perhaps they are pleased like I am to see a chain fall flat on its face. The U.K. chain Tesco in its search for global domination has closed its Californian, Fresh and Easy stores after dropping a cool £1 billion. They spent years planning this expansion and while I have scanned the reports I'm still not sure what they did wrong. As I said at the start it's a cruel time to be a supplier and not so simple either for the retailer.

Still I can offer little comfort to the wine producers of Australia as selling locally is now a nightmare and not even consumers with all the power they now possess really understand enough to alter a trend which is leading to a dramatic reshaping of the Australian wine business. It may be small comfort but at least the currency has cracked.

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Thursday, 19th August, 2004

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Wednesday, 23rd June, 2004



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