Retailing has its challenges but if you can buy the same products as competitors at a lower price you start the day a long way in front. The options then are; charge the same price as everyone else and make more money or become aggressive with prices to sell more and extend your advantage.

In liquor retailing Woolworths and Coles start each day with a big buying advantage. Sometimes they sit and make more money though usually they are cheaper than the independents while periodically they have a spasm and lash out with price crushers.

Why the producers allowed this to happen has been discussed on Glug. The large International spirit producers do not care and the two local brewers also shrug their shoulders, no doubt taking the view that the sale still happens as the beer will be purchased somewhere.

A Sydney publican sent me the following Dan Murphy advertisement. I have written beside each product the full cost price that the publican pays. Now add an amount for the selling margin which might be 40% for wine and less for beer and spirits and you have the approximate retail prices in the liquor barn next to the pub.

Dan Murphy local advertisement, Sydney, March 2014.

This is an unstable situation and with Woolworths and the much smaller Coles running the show it leads to the diagram prepared by Citi Research. In 10 years the chains have gone from retailing 30% to 70% of liquor (off-license). Others suggest they sell around 80% of wine. The trend line would suggest this will grow and we know Dan Murphys (Woolworths) are opening more stores and while they have thrashed Coles, Wesfarmers are a huge group and they will be back to take share off someone.

From Citi Research: The market share of Woolworths, Coles and Independents.

This of course will make the predicament of independents worse. Does it matter?

A viable, thriving retail sector offering consumers diversity of product and with this opinion is a thing of the past. How much that is worth I do not know though one thing is certain a bottle of wine is cheaper now than ever.

I was looking at liquor advertisements from 2000 to 2004 the other day and it was very apparent that wine prices have not gone up in 10 years and many well known lower end brands like Rawsons Retreat, many New Zealand whites, McGuigan, Rosemount and Lindemans wines have gone down by 20%.

The price storm by big chain retailing has been working its way back to the producers by stripping out profit and this is far from over.

I noted the following position advertised by the large wholesaler of spirits, beers and wines to the independent licensed supermarket and liquor stores, ALM (Australian Liquor Wholesalers) a division of Metcash which read:

Position Vacant, Senior Marketing Manager - ALM/Metcash:

"Senior Brand Marketing Management opportunity with responsibility to develop and execute strategies to strengthen the success of our retail brands in the liquor marketplace. Working with some of Australia's most well known brands in the independent liquor space, including Cellarbrations and The Bottle-O Network, you will own all facets of the marketing function including market research, product planning, marketing communications, advertising and consumer insights"..... "Key to your success will be your ability to support our network of independent retailers through the effective execution of key marketing strategies that create consumer demand and drive growth".

This must be the position from hell though if you enjoy learning it might be fun watching the Citi Research trend line for a few years.

If you do the same job as well as those around you but get less pay you feel aggrieved that it is not right. I'm not sure what your reaction should be when you can never buy as well as the big goliath down the road and he is coming to get you. The truth is there is no solution and no help is coming.