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Virtues of independence

Published:  22 December, 2016

The independent sector continues to carve its own footprint, increasingly punching above its weight

With approximately 800 wine shops in the UK, the independent sector of the drinks market may be small in size compared with the reach of supermarkets and national wine retailers, but it continues to carve its own footprint on the retailing map, increasingly punching above its weight in terms of high-value selling power. 

The sector is also an ever-increasing attraction to smaller producers seeking a less cut-throat, more premium route to market in the UK. Hal Wilson, of Cambridge Wine Merchants encapsulates their importance: "Independent retailers represent over 95% of all [individual wine labels] sold in the UK, and we need to work more collaboratively to help each other build this sector."

With a high demographic, and an average retail price well above the supermarket norm, the independent wine sector has thrived on offering a point of difference to wine-interested consumers. Across the country, the past few years have shown a groundswell of support for indies in all manner of sectors, from clothes to artisan foods. 

As Damon Quinlan of Swig observes: "There is increased demand for authentic products with integrity and personality, and people's desire to shop local."

However, this needs to be tempered with the commercial reality of making the business profitable.

Adapting to survive

The industry has seen a year of change in 2016, and independents have reacted and adapted in different ways. The crucial factor is that sharp-minded indies can and do move quickly. 

"We have a great advantage over other sectors of the trade, in that we are able to respond swiftly to customer requests, new trends and changes in the economic infrastructure," says Ben Stephenson of Hangingditch in Manchester.

The challenges facing independents continue to grow. The impact of Brexit barely needs referral, but is starting to hit hard; a poor harvest in Europe will only exacerbate matters. 

"The supermarkets have more power to restrict price increases than we do," says Megan Haley of Corks of Cotham. "So we need to focus on quality and service." 

Indies are taking varying paths on pricing, with some holding and taking the hit until after Christmas, but many have been forced to move prices upwards. As Ruth Yates of Corks Out reflects: "It's far more difficult for indies to buy forward, and almost impossible to negotiate with UK-based suppliers."

This is where strong supplier/producer relationships come into play, with indies working closely with their direct producers to minimise the impact and work out the best short-term strategies.

"We don't want to join the race to the bottom," insists Mimi Avery of Averys Wines. "We were prudent with our hedging, and are currently managing to hold prices for our customers."

Embracing differentiation

Robert Boutflower of Tanners Wines expresses his concerns even more boldly: "People are looking at their weekly spend even harder. There is a perception that we are all selling the same stuff, so we need to educate and convince.

Even more importantly, we need to retain those drinkers that are moving away from wine, with the attraction of craft beers and spirits."

Service, differentiation, education and, above all, innovation are keywords for indies.

"Merchants unwilling to embrace new ideas and new technologies are likely to struggle in a market that continues to need invigoration," says Yates. 

Stephenson shares her view: "It's important to look at each area of the business critically and not be afraid to question what you're doing. What worked five years ago may not be where you need to be tomorrow."

The hybrid model is a rapidly evolving one, embraced by many independents, including Hangingditch, the Oxford Wine Company and Vagabond. Bristol-based Corks of Cotham recently opened a new shop on the Harbourside. 

"We don't do any food yet, but the wine bar side of the business is already accounting for 30% of this outlet's turnover," says Haley. 

Equally important is the need to embrace new trends; craft beer and gin being the zeitgeist of the moment, with savvy businesses pairing with local distilleries and breweries. 

Service, knowledge, investment in staff, delivering a unique customer experience and proactive involvement in the local community are all key elements of the offer, regardless of the location. Alternative routes to the consumer, such as online and wholesale are also increasingly important elements in an indie's arsenal.

Differentiation is a key part of the mix, with independents far more agile and swift to respond to trends than supermarkets. 

"We have to catch the wave and go with it. Currently it's English sparkling wine. People outside the wine industry are talking about it now, which is fantastic news," adds Boutflower.

Purchasing power

Recent range rationalisation in supermarkets means that producers have to look elsewhere for listings, which plays into the hands of the independents. "Artisan producers need a showcase," says Haley. 

Stephenson adds: "Price pressures will mean that supermarket wines will get even blander and customers seeking real choice in quality and value for money will come to us."

Portuguese wine supplier Nick Oakley was equally forthright: "For every wine that a supermarket drops, there's an opportunity for the independents."

In the past indies may have appeared to be small fry to producers and brand owners, but now they evidently wield increasing power. With this comes a need to sharpen business acumen and flex negotiation muscle. While established relationships and loyalty are crucial in this sector, the independents now hold the balance of power. They are now the fulcrum for many producers who are reliant on them for distribution. So with this comes a requirement to maximise those opportunities, converting enthusiastic passion into hard-nosed business nous. 

"We all need to be more savvy and more commercial. We need to be nimble and need to buy smarter," Stephenson agrees. 

Keeping stocks low, focusing on logistics, plus a re-evaluation of margins and key price points, and investment in knowledgeable staff will be central to the commercial success of the independent sector in 2017. 

Customer service, embracing points of difference and new ideas will also be key to survival. Independents now have real buying power, and need to use this element of their armoury in combination with their outstanding customer service. Suppliers need to take heed and work accordingly.