SA wine distributors at risk
Wine distributors in SA appear to be at risk of being squeezed out the market as major liquor chains move to deal directly with wineries.
Finlaysons wine partner Will Taylor told InDaily the trend was putting pressure on the traditional supply chain model of producer to distributor to retailer.
“That model has come under severe pressure and intense pressure on distributor – the middle man,” Taylor said.
“We have seen some distributors go broke and others try to force changes to their trading terms with their principals, in a desperate effort to claw back margins eroded by the squeeze from major retailers and difficult economic conditions,” he said.
The big supermarket chains have become aggressive and dominant players in Australian wine retailing with both Coles and Woolworths running huge chain networks.
Today, global supermarket giant Aldi has launched its Australian discount liquor website, but it won’t be distributing to SA until it opens a planned 45 supermarkets in the state in the next few years.
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Aldi is currently lobbying the Queensland Government to change its liquor licensing laws, which currently restricts off-premise licences to pub owners.
It has not made any public comment on the recent proposals by the State Government to allow wine sales in supermarkets, but has indicated it would like to sell alcohol in retail stores in South Australia.
“I expect that as we roll out our stores in South Australia and WA we will accompany that with liquor,” Aldi Australia managing director Tom Daunt told The Australian earlier this year.
Although Aldi Australia has a good reputation with suppliers, industry observers says that a move for supermarket chains to deal directly with wineries is putting pressure on the traditional supply chain model of producer to distributor to retailer.
Taylor, who will be taking advice on the issue around the country in the Finlaysons’ Wine Roadshow, said the oversupply of wine and general economic downturn had also put intense pressure on the industry.
“This is a global thing, which has had a number of ramifications: firstly there have been a number of movements between portfolios because distributors have been dropping underperforming brands and taking support back to established brands that are easier to sell.
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“That makes it tough for wineries unless they already have a powerful brand, on top of which distributors are also putting more of the marketing expenditure back onto wineries to improve their margins.”
Taylor said more wineries were now looking to also grow their market and sell directly to consumers through mail outs and cellar door, or in some cases forming joint ventures to self-distribute wines.
“There is now less reliance on distributors with that whole industry shrinking and that independent distributor level of the market -people are looking to get around it.”
However he said there would always be a need for distributors to manage smaller wineries and on premise sales.
Darren Erbsland, from Adelaide-based George Street Wine distributors, said he believed some distributors were on the verge of going under.
“You get a feel for brands and you can look at a brand with a fair amount of accuracy and there are quite a few distributors and I don’t know how they are still in business,” he said.
“Some I know are using personal wealth to keep propping [the business] up and there’s a few that have a couple of good size brands but are very vulnerable because I know those brands are chain dominated and at some point the winery will pull the pin.”
George Street had moved to focus on the “on premises” side of the business supplying mainly to restaurants and basing their business on a good relationship with wineries.
He said rather than fielding large orders, the restaurant side of the business meant he had regular weekly sales.
“We identified early in the piece the way the market would be heading with the chains and decided to focus strongly in the non-supermarket trade; it’s a difficult market but once you are there you can own it.”
He said that the smarter wineries were moving completely out of the supermarket chains.
“We’ve got a couple of brand that don’t supply any of their wines to the chains. [Adelaide Hills winery] The Lane is huge in restaurants and we look after independent retailers.
“It can be a catch 22 if you are already in the chains, The Lane had that philosophy from the outset, and while at times it might be tempting to go in the chains market they’ve stood by their guns and didn’t cave in and now are better for it.”
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