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What The Market Says
It's 2010 Not 2000
Friday, 28th May, 2010  - David Farmer
"Wynns Coonawarra Shiraz has not increased in price in 15 years and is cheaper if you wait for the special"

How liquor is sold has changed over the last ten years. Woolworths and Coles control the customers and thus dictate to the liquor trade. Our large wine, beer and spirit groups have steadily lost power and have made their situation far worse by giving the two giants preferential trading terms. They did this perhaps because they thought they would be looked after, perhaps they had no choice as the big two chipped away year after year to gain an advantage. Now to show how pleased they are both groups are rapidly building their own exclusive range of products.

This of course is a world-wide phenomenon particularly with groceries. The beer margins of Fosters are around 50% and you can be sure this annoys both of the chains. As for wine companies, they are now just factories making well packaged wines that compete with the supermarkets exclusive brands. They can make a profit but for Fosters and Constellation it can never provide a return on what they paid for their businesses. Great chunks of money have been lost yet the growing strength of Woolworths and Coles and the consequences has been plain to see for over fifteen years. What made our large wine companies ever think this was a good development and they could all co-exist?

The current wine oversupply has made it easier for both chains and a range of 'cleanskins' and house brands has destroyed most of the large company low priced brands.

As reported in the Sydney Morning Herald, 1st March, 2010; "And the Woolworths chief [Mr Luscombe]..........said winemakers should have known the grape glut would help spur growth in private-label wines, adding it was not wise to blame shopkeepers for the competitive squeeze. ''Don't point the finger at the retailer,'' he said. ''You need to search your own backyard to understand why you made the decisions.''

It is not possible to regulate supply and demand but let's look at the consequences of excess production in a region such as Marlborough, New Zealand. Until three years ago it was rare to see that popular beverage, Marlborough sauvignon blanc under $10.00 a bottle. Indeed supply was tight which made it a very profitable business to be in. As more and more vines were planted the inevitable happened. The needle of supply and demand swung. I am regularly told and read similar views, that when demand catches up the discounted wines will disappear and prices will rise.

Alas those days are gone as Woolworths and Coles and even bigger overseas supermarket chains have other ideas. It is called penetrating deeply down the supply chain, meaning for wine that the last person they will shake hands with will be the grape grower. They do not want to own vineyards so they will let the grower make a reasonable living. They have had a taste now and will decide how much of the profit they return to the customer. In their eyes a wine brand is not worth much-why, because they control the customer.

Consider the unlikely situation where one company owns most of the wine region. Then supermarkets would have to stock the brand and take the producer's terms? The best of the soil at Coonawarra, the famous cigar shaped terra-rossa, is 90% owned by Fosters. While it is true that what is Coonawarra wine is clouded by a boundary much larger than the cigar so the term is greatly devalued, I note that Wynns Coonawarra Shiraz has not increased in price in 15 years and is cheaper if you wait for the special. Recently I saw Wynns Red Stripe Cabernet and the Wynns Shiraz in the Bayfields Sydney catalogue selling at $9.99. So much for owning the region.

Bloomberg reported, 22nd May, 2010 that Wal Mart, "the world's largest retailer, is seeking to take over U.S. transportation services from suppliers in an effort to reduce the cost of hauling goods."

The deep penetration continues as big retailers take profit away from suppliers, keep some for them and pass on some to customers.

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Friday, 5th September 2014

Coles Liquor Shows Signs of Life

Friday, 1st August, 2014

The Dog Days of Being an Independent Retailer

Monday, 24th March, 2014

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Thursday, 27th February, 2014

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Thursday, 20th February, 2014

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Friday, 31st January, 2014

WHAT THE MARKET SAYS ARCHIVE 2013
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Friday, 22nd March, 2013

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Friday, 15th March, 2013

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Friday, 8th March, 2013

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Monday, 11th February, 2013

WHAT THE MARKET SAYS ARCHIVE 2012
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Tuesday, 11th December, 2012

The Liquor Wars - Matt Skinner Appears

Monday, 19th November, 2012

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Wednesday, 31st October, 2012

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Thursday, 28th June, 2012

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Friday, 15th June, 2012

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Tuesday, 29th May, 2012

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Thursday, 3rd May, 2012

WHAT THE MARKET SAYS ARCHIVE 2011
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Sunday, 20th November, 2011

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Sunday, 20th November, 2011

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Tuesday, 8th November, 2011

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Tuesday, 16th August, 2011

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Tuesday, 16th August, 2011

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Tuesday, 12th July, 2011

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Monday, 21st March, 2011

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Monday, 14th March, 2011

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Monday, 21st February, 2011

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Monday, 21st February, 2011

WHAT THE MARKET SAYS ARCHIVE 2010
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Friday, 11th June 2010

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Friday, 28th May, 2010

Grange Spin from Peter Gago

Friday, 21st May, 2010

What are Wines Worth and Pointing Wines

Friday, 26th February, 2010

Killing the Champagne Brand

Tuesday, 9th February, 2010

Champagnes - the New Leaders at Harrods

Friday, 5th February, 2010

Two Co-Branded Yalumba Wines

Wednesday, 27th January, 2010

WHAT THE MARKET SAYS ARCHIVE 2009
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Thursday, 8th October, 2009

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Thursday, 24th September, 2009

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Thursday, 13th August, 2009

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Saturday, 1st August, 2009

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Saturday, 11th July, 2009

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Monday, 6th April, 2008

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Tuesday, 10th March, 2008

WHAT THE MARKET SAYS ARCHIVE 2008
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Monday, 28th November, 2008

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Wednesday, 19th November, 2008

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Wednesday, 19th November, 2008

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Sunday, 9th November, 2008

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Sunday, 19th October, 2008

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Monday, 13th October, 2008

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Sunday, 31st August, 2008

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Wednesday, 13th August, 2008

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Tuesday, 20th May, 2008

The Steady Decline of Tier One Wine Companies

Friday, 9th May, 2008

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Sunday, 24th February, 2008

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Tuesday, 19th February, 2008

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WHAT THE MARKET SAYS ARCHIVE 2007
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Friday, 3rd August, 2007

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Thursday, 2nd August, 2007

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Thursday, 26th July, 2007

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Tuesday, 17th July, 2007

Wine Slabs for Queen Adelaide

Tuesday, 10th July, 2007

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Monday, 14th May, 2007

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Saturday, 12th May, 2007

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Friday, 11th May, 2007

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Sunday, 6th May, 2007

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Tuesday, 24th April, 2007

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Thursday, 12th April, 2007

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Sunday, 8th April, 2007

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Sunday, 8th April, 2007

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Friday, 30th March, 2007

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Tuesday, 27th March, 2007

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Monday, 19th March, 2007

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Thursday, 15th March, 2007

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Tuesday, 8th March, 2007

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Friday, 23rd February, 2007

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Tuesday, 30th January, 2006

WHAT THE MARKET SAYS ARCHIVE 2006
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Thursday, 7th December, 2006

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Sunday, 3rd December, 2006

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Tuesday, 28th November, 2006

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Tuesday, 7th November, 2006

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Tuesday, 17th October, 2006

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Monday, 18th September, 2006

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Thursday, 14th September, 2006

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Tuesday, 29th August, 2006

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Wednesday, 23rd August, 2006

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Tuesday, 15th August, 2006

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Friday, 11th August, 2006

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Wednesday, 9th August, 2006

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Thursday, 22nd June, 2006

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Friday, 26th May, 2006

Rosé Raises Its Ugly Head

Wednesday, 24th May, 2006

The Release of the 2001 Grange and Old Memories

Thursday, 11th May, 2006

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Monday, 17th April, 2006

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Friday, 7th April, 2006

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Tuesday, 21st March, 2006

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Wednesday, 8th March, 2006

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Wednesday, 8th March, 2006

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Tuesday, 21st February, 2006

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Tuesday, 31st January, 2006

An Insight Into Clean Skins

Tuesday, 31st January, 2006

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Friday, 16th December, 2005

Big Box Number Seven

Thursday, 15th December, 2005

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Sunday, 9th December, 2005

BEATEN!

Tuesday, 6th December, 2005

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Wednesday, 30th November, 2005

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Friday, 11th November, 2005

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Friday, 13th May, 2005

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Saturday, 16th April, 2005

The Release of the Penfolds 2002 Bin Reds plus a Great Riesling

Monday, 28th February, 2005

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Friday, 28th January, 2005

WHAT THE MARKET SAYS ARCHIVE 2004
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Wednesday, 21st November, 2004

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Wednesday, 17th November, 2004

Glug visits the Adelaide Wine Show

Friday, 8th October, 2004

Shopping at Liquorland

Friday, 1 October, 2004

A Great Kiwi, A Great Italian And More 2002 Reds

Wednesday, 29th September, 2004

The Barossa Wine Show, September, 2004

Monday, 25th September, 2004

A Quick Trip to Dan Murphy's

Friday, 24th September, 2004



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