Subscriber login Close [x]
remember me
You are not logged in.

Friday read: Retail sales boom belies range stagnation

Published:  17 July, 2020

With supermarket wine sales soaring, buying strategies have altered dramatically, as Angela Mount reports.

Covid-19 has cut a scythe through the drinks trade, with hospitality decimated and independents adapting to new formats, while online has led with a dramatic uplift in sales.

Meanwhile, supermarket sales of alcohol have soared, with growth of £956 million year-on-year across in-store retail and online, according to latest Kantar data.

In addition, alcohol sales were the fastest growing category in off-trade retail last month, up by 50% (Kantar YoY, four weeks to 17 May), well ahead of overall grocery at 19.1%.

Within this, discounters performed ahead of supermarkets, with 15% growth, while Symbol stores and franchises were also up 33%, and online sales soared by 90%.

But it was the convenience sector, in terms of bricks and mortar shopping, which truly reaped the benefits, delivering 44.5% growth over the same period.

Moreover, the customer shopping landscape has altered dramatically, with a move to local stores, fewer trips and higher basket spend. The latest Nielsen figures reveal that 25% of customers are shopping more locally.

One upshot is that retail buyers have never been busier and keeping wine on the shelves has been top priority.

“I have never experienced anything like this,” stated one buyer, who preferred to remain anonymous.

“Our usual long-term plans for range reviews and promotional strategies are out of the window. Right now, long-term planning is almost week-to-week, focussing on how quickly we can get stock in. We are working with suppliers whom we trust, and that have supported us from the start.”

Prospective producers and suppliers may have to wait as range reviews have been delayed and current ranges are pretty much frozen.

Availability is at the core of the daily routine. To the frustration of would-be suppliers, the current scenario is very much one of status quo. Why change source of supply and risk untested trading relationships, together with the logistical complications, when there is a trusted supply base in place?

The buying infrastructure has changed irrevocably alongside consumer shopping patterns. In smaller stores, ranges have been rationalised, to maximise space for fast selling lines. In larger stores, there has been a marked change in merchandising for the same reasons.

Merchandising layouts have also altered to deal with short-term issues, such as the ban in April on South African exports. While exports reopened, Cape Town’s docks are still crammed, with berthing delays of up to 15 days. Many shipping lines have cancelled, or can’t get their shipments out of the docks, with service levels down to 42%.

“Backlogs of wine and citrus shipments will get worse before they get better; producers can’t get their product onto a ship and out of the dock,” one freight forwarder said.

The pattern of retail has also adapted exponentially. Initially, the majority of promotions were pulled, as retailers fought to keep stock on shelves. This has now eased, but there has been a distinct move to an EDLP positioning, although promotional activity has now resumed to some degree, based on availability. Consumers are looking for even more value, especially at every level, as recessionary pressures build.

Champagne sales have taken a plunge, as did the wider sparkling wine category. The latter is recovering, but with a marked move towards price-driven own brand. According to Kantar data, while spend on branded wine grew by 52% (YoY for the four weeks to 17 May), own brand sparkling wine accounted for a whopping 80% share of spend.

Bag-in-box has seen a massive increase in sales, across all demographics, with increased quality visible across all retailers and, with relaxed lockdown rules, cans are making a summer resurgence.

Key off-trade suppliers that are riding the wave successfully are those that planned well.

Paul Letheren, CEO of Off-Piste Wines, explained: “We have always held fairly high stocks, so we had a buffer and that helped in the early days. Inevitably everyone has had glitches, but the pattern is now established.

“Our job is to understand our customers, anticipate their needs, and help find a solution. There are always challenges in keeping up with supply, but with UK bottling for many of our New World wines, we have an efficient and reliable system established.”

One thing is clear - it is unlikely that retail buyers will be changing their supply base any time soon. They can’t travel, and they have grown to trust suppliers whom they know are efficient and think one step ahead.

Kim Wilson, MD of North South Wines, explained: “At the start of lockdown it was a shock to all. It was obvious that we needed to leave the buyers alone, not talk about NPD, and simply focus on supplying their needs. New ranges are conversations for next year.”

Wise importers have invested in stock, to ensure security of availability.

“We are fortunate that our business spans across all channels. With the on-trade business closed we have been able to divert stock to the off-trade to fulfil demand,” said Mark Roberts, director of sales at Lanchester Wines.

What is extremely clear is that there has been a radical change in trading relationships, which was emphasised by Wilson.

“In the current situation, it’s about true partnerships. Everyone is going the extra mile, the industry is working together, paying on time, working together, supporting at every stage, for all our survival. Buyers are loyal and trust those who understand them, it’s about working collaboratively now,” she said.

It’s a sentiment echoed by Roberts, who added: “There is a sense of togetherness, almost a conviviality within a tough trading environment, a great deal more collaboration, openness, and working together. This would never have happened before.”

Retail buyers are in the eye of the storm. Suppliers who understand and support their needs have never been more important.