Monday, May 17, 2010

Discounting – nothing new under the sun

The other day I was re-reading a book I wrote in 1994 for the Australian Wine and Brandy Corporation: A History of the Australian Wine Industry 1949-1994. At page 42 I quoted Gunther Prass, then Chief Executive of Orlando saying ‘I remember the first discount I came across; in 1978 a discount of 5c per 4 litre cask to Tooth Wine and Spirits in Sydney for the supply of five semi-trailers of cask wine.’

What started as a trickle, rapidly became a torrent, and by 1982/83 was out of control. The Bulletin magazine (27 April 1982) commenced a major article on the state of the wine industry with the following: ‘Savage discounting of wine has become the ultimate marketing folly for the Australian wine industry. What started as a means of carving out a market share has turned into a deadly war of survival for the country’s 300 odd wine producers.’ I went on to write

‘During 1981 and the early part of 1982, GJ Coles acquired 54 Claude Fay’s stores (a chain which had itself come into being in the latter part of the 1970s), 14 Liquorland stores and the Colonial Cellars’ chain – all in Sydney alone. Woolworths had acquired or opened 36 outlets in New South Wales, while by April 1982 Myer already had 90 outlets across the country, having purchased the San Remo and Crittenden’s Fine Wine stores in Melbourne.

If the buying power of the chains put huge pressure on the wine companies, it also put pressure on the independent fine wine retailer, and established a cyclical pattern which has continue through to the 1990s. The smaller independent retailer either has to excel with the quality of its service, advice and wine selection; form an alliance with other similarly operated stores and hope to gain leverage against the wine companies and wholesale distributors; or accept the offer-which-cannot-be-refused from a corporation seeking to have the best of both worlds – up-market fine wine stores and real bulk buying power. More than a few such aspirants have leant that the best of both worlds is not easily attained, with a consequent merry-go-round of ownership.’

And to think that 30 years later we are wailing (justifiably) about the collective power of the Coles and Woolworths groups.

1 comment:

RB said...

"The smaller independent retailer either has to excel with the quality of its service, advice and wine selection."
I buy nearly all my wine from independents who match that description, or direct from wineries. The only wines I buy at the chains are for tasting samples or very occasional high-quality wines put out as loss-leaders too tempting to resist.

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