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A Better Way to Distribute Grange

During my recent tour of South Australia, I had an appointment at Penfold’s where I was lucky enough to be able taste the newly released icons, including St Henri, Magill, RWT, Bin 707 and Grange. The full tasting notes will be published in a later tour diary but in short, the wines were impressive and three in particular caught my attention.

Nothing fires the imagination of the wine buying public more than the annual release of Grange and the rest of the icons. To their credit, Southcorp does a fantastic job of promoting the wines and maintaining their pre-eminent market position. There are a series of road shows, tastings, dinners and a plethora of individual retailer special events where the buying public has the opportunity to taste the wines.

All of this does the brand and the aura surrounding the wines a power of good but in some ways, Southcorp is letting itself down with the retailing of the wine in Australia. Southcorp is now a global organisation and has to satisfy demand all over the world for their products, which is fair enough. However, unsatisfied demand in their tradition market, Australia, is the highest it has ever been and there are more than a few, very frustrated, upset, customers and retailers that feel they have either been forgotten or shafted by Southcorp.

Over the last month, in conversation and correspondence with many wine lovers and a number of retailers, there has been some “interesting” reactions to the distribution and allocation of the Penfold’s icons. The reasons for this are varied so some background will be provided to fill in the blanks.

International distribution is the first issue. We all know the 1998 Grange retail allocation in Australia sold out within minutes yet many wine savvy consumers know it was still available in England and the US, sometimes even on special, many months later! To make matters even worse, a large quantity that was shipped to England was quickly back in Australia and being offered to retailers at a higher price (by third parties). So, it appears there was excess stock overseas where it is not snapped up, and in some case sat on shelves for ages but a continuing shortage in Australia.

That is problem number one and it may be happening again. The reason I say that is, a prominent Melbourne retailer is offering UK labelled 1999 Grange in six packs with delivery due in about four weeks!

Local distribution is the second issue. A number of small retailers I spoke to received allocations of, for example, 1 x Yatterna, 1 x St Henri, 1x RWT, 1 x Bin 707 and 1 x Grange, there was no Magill. Other, larger retailers did better, but is this the best way to distribute such scarce stock locally? The small retailers I spoke to thought that getting one bottle of each was pointless and could not care less if they got one bottle or none. When quantity gets that low there is nothing they can do to market the product and do not make any real money from it. There is no point putting it on the shelf and even regular customers will not be satisfied with one bottle.

When Blass distributed the Platinum label in Australia, it was not sent to every retailer who sold their entry level products. It was restricted to areas (mainly specialised fine wine retailers) that could sell multiple bottles and had a chance to promote the product.

Given that an allocation of one bottle is seen by many as reasonably pointless, Southcorp may be better off saving up the hundreds of one bottle allocations and distributing a more meaningful quantity to some of the better specialist wine stores. Which brings me to the next point. Walk into any “plonk shop” in shopping centres, especially those next to major supermarkets and the chances are that amongst all the cheap and cheerfully quaffers, you will find bottles of 1995 or 1997 Grange. In many cases, these bottles have been sitting there for years, suffering all the temperature fluctuation and light damage that prolonged retail display produces.

Eventually when these bottles are sold, the profit margin would more than make up for the holding costs. Let’s face it, educated and discerning wine buyers would not buy these vintages from those sources, it would be purchased by the “special occasion” shopper or as a gift.

The two major supermarket chains in Australia are huge buyers of the low end Penfold (and other Southcorp products) so they must get a fairly large allocation of the Penfold icon wines. Where those wines are being sold in their multi brand retail chains is anyone’s guess, but is a laissez-faire attitude towards distribution best for Southcorp and its customers?

From Southcorp’s perspective, I am not sure they give a damn who they sell their wine to but is their current distribution strategy doing them the most good? Frankly, I doubt it!

As these are fine wines with big price tags, surely the best place (for a bigger slice of the distributed share) would be the fine wine retailers. If Southcorp were to send less overseas where demand is not so great; get rid of single bottle allocations to small retailers and better control the distribution though the big two supermarket chains, the chances are they would have a more satisfied customer base and a more solid retail distribution chain.

But then they can sell all the icons produced, so why worry if it is the best way or not.