This is a rant that was originally sent out as a Newsletter in July 2011. It prompted a lot of conversation for us and we feel it’s worth posting here. We’ve updated and edited it slightly (vat rate has changed etc.):

How do we compete with the large chains? Is it a matter of educating our target consumer? And if so how do we do that? Do we need to rely on word of mouth to promote our services (as opposed to advertising to promote our brand) and if so how do we maximize on this?

Ten years ago the independent off licences of this country had about a 50% share of the total off-premise sales of wine, beers and spirits but in the intervening years this has been steadily eroded to about 30% and continues to slide. Who have they lost out to? Well it’s of absolutely no surprise to know that the shift has been towards supermarkets and convenience stores such as Centra, Spar, Londis etc as well as newer arrivals Lidl and Aldi. Every time one of these opens it just continues to nibble away at what is left of the market for independents. If you were a true economic liberal you might just say ‘hard cheese, it’s the market that dictates’. We think the reality is more sinister and that the drinks business, particularly the wine side of it, is in danger of monopolised by a small number of extremely powerful retailers who not only control the domestic market but who also, due to their significant buying-power, have an adverse effect on grape production and winemaking.

Supermarkets are liable to mislead people regarding the true cost of a product. Below cost selling, a tactic to get customers through the door, is misleading as to the true value of a product. Items that are made in respectful and authentic ways naturally cost a certain price and if for example you find a bottle of wine in a supermarket at €4.99 or even €3.99 (and they do exist) you should question not only the quality of what is in the bottle but also the production methods that have been used by the winery to manage to get the juice into the bottle and for there still to be enough margin to satisfy the large retailer. A bottle of wine at €3.99 attracts 23% VAT, so remove 75 cents from the price. It also is subject to import duty of €1.97 (ex vat). Remove transport costs of approximately 20 cents and we get to €1.07. What are known as the dry materials cost at the very cheapest about 50 cents per bottle for the glass, the label, the capsule, the closure (plastic / cork / screwcap) and the carton. By now we have arrived at €0.57 and we haven’t taken into account advertising and promotion let alone a margin for the retailer or the producer. The message is pretty clear; wine can be had for cheap, but we are led to believe that this is all quite o.k. and that everyone is happy. Substitute wine with meat say and it isn’t nearly such a palatable idea. Think of what smoked salmon has become in the last 20 years, or going further back, even the humble chicken. Both used to be a luxury product, eaten on very special occasions and usually of very high quality. An average chicken on the supermarket shelf is apparently only 30 days old and pumped with goodness knows what to get it from egg to shelf so quickly. Smoked salmon fills lunchtime sandwiches, is mass produced and fed a diet of antibiotics. These foods are practically affordable on a daily basis if you buy the cheapest quality. Who was responsible for this degradation of such wonderful foodstuff – the salmon and chicken farmers or the large retailer, or maybe the consumer? (Do we deserve what we get?)

the steep terraces at Côte-Rôtie where alll the vineyard work has to be done by handThere are apparently means afoot to get wine producers to state on the label all the ingredients that have been used to make a wine. This could potentially help the smaller, quality focused grower (for example someone in Côte-Rôtie, see image, here all the work in the steep terraced vineyards has to be done by hand.) How palatable will it be to the consumer to see that their favourite bottle of cheap white wine has additions of ascorbic acid, sugar, pectolytic enzymes, sulphur dioxide, tartaric acid, cream of tartar, bentonite, maybe a touch of copper sulphate and some more sulphur dioxide. Admittedly some or all of these may be used by quality focused growers but rarely in the systematic way employed by large scale industrial growers. In fairness it should be said that despite the chemical sounding names not all these added ingredients are ‘bad’ but it does take away from the romance of it all.

The other obvious issue regarding the retailing of wine and the difference between the small independents and the large scale retailers is the level of service. Unless you are exceptionally well-read on the subject of wine your chance of picking up something really interesting in a supermarket has to be severely limited by the fact that no one is on hand to advise you. Therefore the obvious choice is to reach for a recognisable brand, instantly putting you into a zone of bland, heavily manipulated wines. The dedicated independent on the other hand has often spent years honing their range, and their knowledge of that range, in order to better guide you, the consumer. An independent merchant could well carry up to a thousand different wines but if he or she is any good they will have probably tasted the vast majority of those.

We should never underestimate the desire of the large groups to wipe out the competition and we all know it’s not just in the areas of food and drink retailing (however the availability of cheap alcohol is another whole kettle of fish – just to mix the old food and drink mataphors up a bit – and another day’s blogging). Their thirst to do so though leads them ultimately to join forces with the large scale producers. Imagine there are, say, 300 branches of supermarket inIrelandand each store sells twenty cases a year of a given wine. That means for the Irish arm of this supermarket alone a winery needs to be able to supply 6,000 cases or 72,000 bottles in a year. Most small or medium-sized producers don’t even make that amount.

Individuality, high quality, knowledge in wine and great service is not going to be found amongst the shelves of a supermarket. However it is more likely than not, be found at your dedicated local independent off licence or wine shop.

A fewmonths after we had first sent out this in newsletter form two other very interesting blog posts appeared, sparked by a Lidl promotion. One by Kevin Ecock (which was then followed by an article by Conor Pope in the Irish Times) and the other by Liam Cabot, of Cabot & Co in response to that article, both well worth the read.