The Auswine Forum

It's a bit grim that retailers pay a higher wholesale price than they can buy the goods for at Dan Murphy's. One guy paid $34 wholesale for something he could by over the counter at DM's for $31.

The independents need to create a union to increase their bargaining power.

the most frightening aspect was that the producers actually factor in a higher cost to the independents to offset the money they lose by selling to Coles & Woolworths.

I unfortunately missed it last night due to another committment.

I think there should be a (late) repeat of it tonight if like me others are interested in watching it.

Cheers,
Ian

I don't really see how this is grim? It is great for the consumer.

Independents still have an important role to fill - offering vastly superior customer service and a range of more boutique and higher quality wines for the common sewers out there.

I found the entire program rather interesting, especially the effect that having an Aldi store in a particular market has on the prices at the major chains.

I think the program interviewed the wrong people. All it established was that the majors are using their market power brutally, but legally. Where were the interviews with the legislators (ie politicians) with the ability to actually do something about it?

Did anyone notice in the news today that the federal government plans to introduce laws concerning creeping acquisitions. Co-incidence?

I thought the real problem identified by the program was the (legal) ability of the majors to pass on "rebates" including the cost of promotions for loss leaders. I think it is a bit much for a company like Coles or Woolies to say "We are going to use your product as a loss leader, and you will wear the cost". And fancy small producers having to pay a "rebate" to get paid on time.

Rant complete.

This has been going on for a long time and not just with wine.

I know several restaurant owners who buy all their softdrinks from supermarkets as it is way cheaper than they can buy it wholesale. The same for people we know who run a country general store. In fact they buy a heap of their stock at supermarkets on monthly trips to the city.

It's a big bad world out there in wholesale/retail land but where the independents will always win is that they get to carry artisinal wines which just do not get onto the shelves in the chains due to volume constraints, and many people, especially those who would haunt these boards will always shop there.

Davo wrote: ...those who would haunt these boards...

I wondered what I was doing here

Ratcatcher wrote:It's a bit grim that retailers pay a higher wholesale price than they can buy the goods for at Dan Murphy's. One guy paid $34 wholesale for something he could by over the counter at DM's for $31.

The independents need to create a union to increase their bargaining power.

the most frightening aspect was that the producers actually factor in a higher cost to the independents to offset the money they lose by selling to Coles & Woolworths.

Yeah I saw that show last night a real eye opener, very sad to see how the Elephant just runs over the ant

Yeah, it was quite an eye-opener but I guess we all knew some of the info that was presented - what pissed me off most was the "rebate" suppliers have to accept to get paid within a specified timeframe. But then, if I pay my property rates to the local council by the due date I get a 5% rebate. Works both ways I suppose.

My desired-wine purchases have increasingly been from e-tailers or direct from smaller wineries over recent years - even the best prices from the likes of DM and 1st Choice are mostly little less than from e-tailers unless bought in quantity and even then the extra saving over the bottle price is usually less than $1. Their regular prices are usually higher than e-tailers'. Convenience is a factor too - getting wine delivered to my workplace where I park the bike in-building, makes it easy enough to just occy-strap a case on the gearsack rack to bring directly home.

Cheers

daz

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Sean wrote:Their main competitor is supposedly Vintage Cellars, which is owned by Coles, but they definitely don’t run their business the same way and have not been as successful in my opinion.

No it's not, Vintage Cellars has a different model with higher prices and margins. 1st Choice was the liquor retailer set up by Coles to take on Dan Murphy after the Woolworths takeover, but has struggled to capture a sizeable market.

On the other hand Woolworths in their right tried to take on Vintage Cellars a few years back with a higher priced/higher margin chain (forget the name). This didn't last long and a number of those stores were relabled to small Dan's or closed.

Interestingly the first VC is about to open up in Geelong; in the old Bannockburn Cellars store in Geelong West, one block away from a well-establised Dan's. Bannockburn Cellars was 'the' shop in Geelong back in the Randall Pollard/Steve Egan days, even with the big competition, but went into sad decline. It'll be interesting to see how the do there.

Sean wrote:The reporter had spoken to a Sydney bottleshop owner who complained that he could walk into a Dan Murphy’s store and buy major brand beer and wines for less than the wholesale price that he paid. The reality is he is never going to sell those things as cheap as Dan Murphy’s and the question I have is why isn’t he delivering better service, dealing with small wineries (who can’t get shelf space at Dan Murphy’s), taking advantage of the grape glut and selling a good-value, quality “store label” line of wines and building a better relationship with his customers on the internet or by using other marketing methods like direct mail or newsletters??

Maybe there just aren't enough of the likes of us who find out about and are confident enough to buy the small-maker wines?

And maybe a lot of the independents and small e-tailers just aren't good enough.

There are about 150 e-tailers with active sites in Australia and most of their sites are pretty crappy. I've bought from about 20 of them and mostly buy from about 5 of them as they have the best range, service and prices. I do buy from DM occasionally when they have wines I want on super-special or occasionally on a price match, but over 90% of my purchases are from e-tailers or direct from wineries. 1stChoice don't get my business as they require a dozen purchase to get the good price and I can just go to DM and get the same price in a 6-pack buy.

I don't think the DM/1stChoice model allows them to efficiently deal with small makers and premium imports (other than high-volume lines). So there is a sizable market left for the smart independents who free up shelf-space by deleting the major company lines that they can't compete on and filling it with own-imports and small maker wines.

I'm pretty happy with the current arrangements.

Red Bigot wrote:
I don't think the DM/1stChoice model allows them to efficiently deal with small makers and premium imports (other than high-volume lines).

Agreed, when the Geelong DM opened the Fine Wine Manager there had to go into intense battle to stock Geelong regional wines beyond the DM standard range. He finally got his way, and they move well.

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Hi Sean,

The first 1st Choices I've seen are big Murphy-ish barns based on big box retailing. The did have a bit of marketing bling with kiosks etc, but basically it was a Murphy with a different colour scheme, competing for that same 'we're cheapest' market.

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Well I haven't watched the program so can't really comment on it but on the basis of what's been posted, I would like to add my views, and experiences as a wine wholesaler in the past in ACT and Sydney. I read numerous articles of how big players are hurting small independents and yes in a way I have sympathy for them, but what I experienced with them, I actually don't feel sorry for them with very few exceptions whether they purchased wines or not. A lot of independent stores can be as nasty and arrogant they can get. One of retailer in ACT trying to by-pass me to purchase wines directly from winery after I introduced wines to them. Suppliers are doing it tough too as they are struggling to get paid on time from independent stores.

As RB said, "Maybe there just aren't enough of the likes of us who find out about and are confident enough to buy the small-maker wines?"
I would like to add a lot retailers don't have much confidence either even though they like the wines unless you offer them rebate or big discounts. It is more of I had to be in a so called "the group" then deal is done.

Unless you hear from 2 sides plus suppliers, it is very easy to get misled.

David

I used to shop around for all the bargains but to be honest with you , the shop i buy my wine from is small, and the guy is extremely great at what he does so for me i pay the extra 2 dollors a bottle for taylors cabernet , yes its more but hey i would never have tried so many great boutique little wineries that no one really knows about,

I hate the way the multi nationals know very little about the wine they are selling and This Particular wine guy has tried every single bottle that has graced his shop floor so for me 2 dollars a bottle is very cheap

Regards Dazza

Sean, as Murray said, at least here the 1st Choice outlet mirrors the DM barn format, doesn't have a good a range as DM but is more conveniently located for me. So I use it to buy quaffers price-matched to DM "specials" prices which are always lower than 1st Choice "specials" on the same wines. Liquorland is more equivalent to BWS, smaller outlets, higher prices.

Like Brian, most of my wine purchases these days are sourced over the internet from etailers or cellar door.

daz

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I've no qualms about buying from DM or 1stC because they're the sources of only small proportion of the wines I buy and they're just another source supplying the liquor market. I do gain a sort of satisfaction using the price-match to DM's prices at 1stC though because the latter's specials' prices are usually higher than DM's.

It was a bit of a surpise this evening though, to find that the 1stC regular price was only about $0.50 or so more than the DM single bottle special price for Gemtree Uncut Shiraz 06 - picked one up on the way home as a taster - but still used the price-match. In terms of rrp prices, 1stC is usually somewhat lower by a couple of $s or so on some lines, probably mostly the volume-sellers. While I was there today I did notice that there's still Wynns BL 05 at a bit over $25.

BTW, the Uncut 06 is pretty good but JH's 95/100 is higher than I'd rate it.

Cheers

daz

I think there are two very relevant issues here.

The first is Brian's comment that most don't have the confidence to try smaller (lesser known and marketed, I presume) makers. I think this is very true, but that description must encompass the vast majority of wine drinkers. therefore this other more discerning (read confident) group will have a minimal effect on the overall market.

My second issue is the nature of a narrow supply market. I have seen this in a couple of retail areas. For instance, only twenty years ago you could purchase high end outdoor adventure equipment from quite a few sources, and innovation was high. Many of the manufacturers were serious users who were trying to perfect their own equipment and ended up supplying us all with great gear. As the nature of the industry changed we have seen the ability of these small players to enter the marked subdued, to say the least. This has resulted in less innovation around user features and far more variation in fashion and marketing niches.

Forgive the diatribe, please, but my point is: will this see greater stress on smaller wine makers and take some of these people out of the market? Particularly when coupled with the difficulty of smaller players to access reasonable(?) water supplies (these appear to be becoming more and more the domain of the larger agricultural players, a situation I can't see changing in the short to mid term). If so I for one do not see this as beneficial. Getting better prices on a narrower range of (fairly) available wines just makes me into a drinker, not a seeker of experiences.

I might be over reacting to what is simply market forces, but this trend is becoming worrying in the way it give those very market forces greater leverage over social groups.

Cheers,

Mark

Having worked for a farming lobby group, the 4 Corners 'expose' was old hat. I have been involved in a number of efforts and inquiries aimed at trying to get the big brother Coles and Wooolies duopoly off the back of the little guy.

But despite the efforts, and the behind close doors comments, no official inquiry has ever uncovered specific wrongdoings on a large scale, and I tend to agree. Sadly many of the arguments advanced by farmers, small businesses etc amounted to little more than just wanting more for something without any regard to it's market value, and hey who doesn't want something for nothing.

You have to hand it to the big supermarket chains, they have used globalistation to their advantage. They make it well known to most of their suppliers that the goods they stock are easily substitutable, and this is backed up by the fact that demand is fairly inelastic in most sectors. Take fruit and veges for instance, the price of carrots here (WA) are held down by the price of importing them from the East, or from overseas, or what is known as import parity. The supermarkets have spent millions on ensuring all avenues are acquisition are open to them, and by being so dominant they extract a market rent for it. It's simple economics.

Wine is no exception. While you have your top end stuff, some of which would never see the inside of a bottleshop unless it came via the secondary market, and much of which is priced at export parity because it can achieve higher prices due to offshore demand. The majority of wine is commodified and operates the same way as the carrots in the above example.

I have worked for both Woolies (BWS), Coles (VC's) and an independent, and the notable thing I have seen the big chains do in the last few years, is cutting out the wholesaler. This is particularly apparent when it comes to importing wine from o/s (the globalisation thing). The independents are also doing it.

This is excellent for the consumer, ie me. I have bought a stack of Bordeaux from Dan Murphy's, a stack of Spanish wine from Dan's and VC's, and the other day I bought some superb Clavel Cotes du Rhone 2005 from a local independent who has started importing himself.

However I tend to shop around, as the big chains are hamstrung by there inability to change there product range as quickly as the independents.

Take VC's, their stores are mapped out, as they have expensive computer tracking systems to show which are good sellers, what are there best margin makers, what 'rebates' they are getting off suppliers etc, but after a while I find their list tends to stagnate, particularly their imported range. Dan's is the same, but better on price and range, but it suffers from aesthetics, and when you consider VC's was designed to coax women in to buy wine (half the buying public), there may be something in that.

Independents on the other hand can make a decision that day on a new wine, and be stocking it within a week. They still need the Goundrey's Unwooded etc and they are still looking for a bargain, but the best always have something that will set them apart from the chains. They are also often staffed by passionate people. They are often innovative and if they aren't you may be able to buy wine at their imminent closing down sale. Take the trend of bottle shops that now have bars, so you can not only buy your wine, but for a small surcharge (think corkage) you can also drink it on the premises, something I can't imagine doing under the neon glare at Dan's.

I find there are many small businesses looking for protection from the big chains, but really they are seeking protection from competition and the innovation of their competitors. This is dangerous ground for policymakers, as we don't want to make laws which are too prescriptive. Having seen the failings of heavily regulated markets, I think that the current system still provides enough rewards for people who are innovative, and are prepared to work hard.

Jules wrote:
I have worked for both Woolies (BWS), Coles (VC's) and an independent, and the notable thing I have seen the big chains do in the last few years, is cutting out the wholesaler. This is particularly apparent when it comes to importing wine from o/s (the globalisation thing). The independents are also doing it.

Sounds good in theory unless you are either a wholesaler or a small/new winery trying to get your product on a shelf somewhere.

And what I find particularly galling is that a lot of the wine seen on retail shelves, including the big chains, would not be there initially if not for the hard work of the wholesaler promoting it in the first place.

[quote="Wine is no exception. While you have your top end stuff, some of which would never see the inside of a bottleshop unless it came via the secondary market, and much of which is priced at export parity because it can achieve higher prices due to offshore demand. The majority of wine is commodified and operates the same way as the carrots in the above example."

Thanks, Jules. Your posting is a balanced and focused assessment of the real situation. Yes, wine is a commodity, always has been, and what the market is adapting to now is that different ways of marketing the commodity are required. Hence the evolution of (for instance) Auswine and other e-tailers. This provides a range of options for each person to meet their wine requirements - everyday drinking possibly from DM, BWS, VC, etc - specific taste in wine to be met by (r)e-tailers, and also that relationship with specialist wine shops and cellar doors (and I suppose we can also include the auction market as another player).

They've all been there before - only the balance has changed.