Go here for Woolworths and Coles – Masters of Wine Part 1, and here for Part 3
The Dan Murphy Dynasty
Dan Murphy is reaching the height of imperial power. They not only want to run the show but by their authority lead by telling customers what are the wines worth drinking. We are the new Evans and Halliday. All wine-writers are irrelevant. Gourmet Traveller Wine, Winestate are all to be made irrelevant. Indeed all other judging as in shows is to be made irrelevant. The ultimate position for a retailer. No other opinion matters. Just do as we say.
These are the words of David Farmer, GOM of the discount wine business. We checked Woolworth’s presentation to investors, and here we find David’s fears confirmed: Dan Murphy’s is indeed on track to become the ‘Authority on Liquor’ in Australia ‘through a stable team with specialised skills.
We shared a coffee with David in Tanunda a couple of months ago, where he talked about what it was like to sell wine to Woolworths at their Blacktown headquarters. It went something like: ‘You have 2 minutes to tell us why we should buy your product.’
The big guys account for 77% of all wine sold in Australia
You do wonder about people at times, people who should be smart but seem to have missed out on some essential ingredient. ‘WINEMAKERS’ Federation of Australia chairman Tony D’Aloisio has raised the prospect of market share limits on retail giants Coles and Woolworths,’ reports The Australian, ‘amid industry concerns that they are using their market power to strong-arm producers on price.’ Where’s he been hiding these last few years?
‘Mr D’Aloisio said the industry would push the Coalition for tighter controls on the supermarket chains, which account for 77 per cent of wine sales in Australia. … ‘The retailers are using their market power to get better deals for themselves and better deals for consumers,’ the article goes on, ‘but the issue is whether in the long term that gives rise to a public policy point that if it’s too aggressive or goes beyond certain bounds, consumer choice is reduced and ultimately prices go back up.’
Oh really? You’ve noticed that already, Tony? Just 77% of the wine market controlled by the two big families of the retail mafia, and you’re worried already?
It’s easy to beat up on the big guys
I’ve done it too (more here), and they’re bastards – make no mistake. Real bastards who make the mafia look like boy scouts, but what about the people who buy from them? Yes, it’s the every-day punters pushing their overloaded trolleys through the checkouts of 1st Choice and Liquorland and BWS and Dan Murphy’s who have made these guys the powerhouses they are.
Of course, they’ll be the first to complain that they’ve been deprived of choice. Just like those folks in American country towns who bemoan the fact that Wallmart has killed off all the local stores. Some see ALDI muscling into this cosy scene as a good thing, and it may well turn out that way, but ALDI is another chip off the discount store block. Yes, it’s another choice but does ALDI care whether you go there to buy wine or toilet paper? Just like COSTCO? Yes, they sell fine wine too.
It’s easy for the big guys to buy the little guys
‘Consumers should be worried, too,’ writes Max Allen in the Australian. ‘We are losing diversity and competition as the duopoly increases its share of the market. Independent merchants across the country are closing down: two of Australia’s leading retailers, Randall’s in Melbourne and Ultimo Wine Centre have been bought out by Coles; others are sure to follow.’
Dear Max, independent merchants across the country aren’t closing down. They’re selling out to Woolworths and Coles. There is a difference: they’re taking the money offered, and they’re happy to leave their customers in limbo (which is worse than hell, we’re told). Max has also worked out that ‘a staggering 77 per cent of domestic wine sales are now through outlets owned by Coles and Woolworths.’ Once more with feeling: this didn’t happen overnight, guys.
As always, ACCC chairman Rod Sims agrees that the issue ‘demands closer scrutiny,’ and that ‘there’s a clear, massive imbalance in market power, and when you’ve got such an imbalance you can run into unconscionable conduct.’ So what did the ACCC do last year when Woolworths decided to take over Cellarmasters? It said: no problem, go right ahead.’ Whose side are you really on, Rod?
Max Allen adds that Woolworth’s muscle extends beyond its retail stores – Dan M’s, BWS etc. – to Cellarmasters and Langton’s fine wine auctions. It also owns the Dorrien winery in the Barossa and contract bottler Vinpac International. As we pointed out a year ago, Woolworths has become a major wine producer, set to do to vignerons what it’s been doing to farmers for years.
Dorrien Estate is one of Australia’s largest wine and beer producers, according to Woolworth’s presentations to investors, and will play a key role in the company’s goal to ‘double its own brands as a percentage of total sales in 4 years.’ (stated in 2011)
It’s easier than you think to steer clear of them
Wines made by or for the supermarkets are increasing their presence on the cheaper shelves. In the UK, supermarkets have developed their own trusted house brands, much like the big London merchants did decades ago. Down under, the chains have gone for private labels masquerading as independent labels, adding deceit to insult. You have to read the fine print to discover that the label is the work of a creative brand manager. More here http://whomakesmywine.com.au/thelist.html .
There are two ways you can avoid all of this nonsense:
- · One is to support your local wine merchant if you still have one
- · Another is to buy wine online from a greater variety of sources
Local wine merchants have vanished at a rapid rate in the big cities. In Sydney, independent chains like Chambers somehow survive, and the Porters franchise is still with us, but neither is really competitive. A few young Turks have bought local wine outlets here and there, most of them smart enough to work around the big guys.
John Cox at Bonds Corner Fine Wines is a good example: he has a big sign up saying he’ll match any price the big guys come up with. He means it too, but he doesn’t actually sell any of the wines they sell. Yes, it’s a little bit cute but what would you do in his position?
Annandale-Cremorne-Northbridge Cellars do the same thing, stocking an interesting range of wines you won’t find in Dan Murphy’s or Vintage Cellars. They’ve also set up a functioning website at last, which Bonds Corner has yet to do. Same goes for Melbourne Street Fine Wine Cellars , a store with a great selection and competitive prices but no website. Even little Mosman Cellars now has a functioning website. Please let us know your favourite independents in other cities at info@bestwinesunder20.com.au
Online shopping offers a more level playing field
Why? Because independent operators can achieve decent sales volumes and offer decent discounts. The leading lights among these are Kemenys, Winestar, Winelistaustralia, MyCellars and Wineonline, who’ve all optimised their websites for easy online shopping and simple shipping. More and more smart consumers are working out that shopping for grog online beats pushing trolleys around supermarkets and parking lots and schlepping the heavy loads home.
Why go through all that when you can have cases of wine and beer delivered to your door for nothing or next to nothing? We’ve provided more details in this short guide: Buying Wine Online – the smart way to shop. We’re sticking with operators who sell branded wines, but there are others who sell their own labels – Back Vintage and Glug – or mystery wines or branded wines that are a mystery – Wine Market and Get Wines Direct .
Some of our friends like the deals offered by the last two, but we find their promotions a bit aggressive, and their deals a bit hard to check out. And it turns out that Wine Market is owned by Woolworth’s too.
The Bottom Line
The good news is that there’s plenty of choice for people who’re smart enough to shop online and buy wine a 6-pack or dozen at a time. ALDI has gone online as well, with a compact range of wines at pretty sharp prices. The Liquorlands and BWS shops only survive because they’re next to supermarkets and catch the shoppers who grab a bottle on the way past. They have no idea that they’re being robbed.
The bad news is that Woolworth’s Dan Murphy division is a very slick operation, so much so that Coles tossed in the towel about a year ago and just gave up trying. Dan M now has 175 stores, which are reasonably pleasant places to shop and staffed by fairly helpful people, and Woolworth’s liquor business is going gangbusters:
· 16 new Dan M stores were added in FY 2013
· 38 new BWS stores were added, and
· Total liquor outlets had grown to 1,355 at end of FY13, not counting almost 300 hotels.
How long that will last before hubris sets in is anyone’s guess. Meanwhile, we can only urge you to support the independents who compete doggedly with the big guys.
Footnote
On September 25, Daily Wine News ran a story under the heading Grapegrowers applaud Woolies decision to sign Code with them. It quotes WGGA (Wine Grape Growers Australia) executive director Lawrie Stanford who said: ‘while the supermarkets are often cast by supplier industries as bullies in the marketplace, the willingness of a major retailer to sign up to good commercial practices with growers sets an example to a significant part of WFA membership who have been slow to do so.’
Apparently, a large number of wineries have yet to sign the voluntary agreement, prompting Stanford to deplore how few of them ‘support their own industry code with growers, [and]illustrates the fact that many wineries are not competitive in the business of forging formal and meaningful partnerships with the growers who are vital to the success of their businesses.’
The competitive element comes from supermarkets that are buying bulk wine from grape growers for their own brands. For Woolworths, signing the Wine Industry Code will primarily affect their winemaking business Dorrien Estate. The code will cover more than 150 growers suppling around 15,000 tonnes of grapes to Dorrien Estate each year from all around Australia.
Kim
