The Changing Face of Wine Retailing

 

In a recent Drops n’ Dregs article titled “It’s Getting Harder Out There” I detailed a recent experience whereby I was rung up by an professional operator trying to sell me wine on behalf of a winery. The article had two unexpected consequences. The first was a number of phone calls defending this practice which led to the second, and that was a realisation that we are on the cusp of a change to traditional wine retailing.

 

Most readers would be aware that in Australia and the UK (and to a lesser extent the US) more and more wine is being shipped through large retail chains, especially the supermarkets, which in Australia are dominated by two main players. The supermarkets have already introduced cleanskins and offer a limited number of their own-branded wines. There is no doubt in time the supermarkets will sell a greater proportion of their own-branded wine as well as wines from the larger producers.

 

Own-brand wines allow a higher mark up for the retailer as buyers cannot readily price-shop because the supermarket has a monopoly on their own brand. Dealing with the larger producers offer economies of scale as well as the opportunity of squeezing volume discounts. For these reasons, it is going to become increasingly difficult for small producers to gain shelf space and move their product.

 

Judging by the comments which were posted on Auswine and Star Forum, the latter which resulted in a six page thread, many serious wine tragics (like me) are not particularly impressed with wineries, or their representative agents ringing up touting for business, but let's be realistic, wine tragics are not your average wine buyers.

 

Any business person knows the best customer is the one that you already have; repeat business is critical to any organisation and that is why mailing lists are so important to wineries. Sending out direct mail to your client list does produce sales but it is a passive method of selling. Many believe that the interactive nature of telephone selling, especially when selling to a qualified list of potential clients (as long as it's not bloody phone companies with call centres based in Asia,) yields far better results than direct mail.

 

According to Adrian Read at Cellar Force, a company which specialises in selling wine over the phone, "oils ain't oils” and not all companies involved in this activity are professional. In an e-mail to me, he said "Cellar Force have developed and refined a sales model that will help many small (and even some larger) producers survive the most competitive environment anyone can remember.

 

Our ‘winery representatives’ provide accurate, clear information and are quick to ring off if the call is unwelcome for any reason.

 

We work closely with wineries on how they are represented and see ourselves very much as members of the cellar door team. We avoid conflict with agents and distributors by focusing on back-vintage or other wines that are not commercially available.

 

Response rates are rarely less than 20% and (with small lists of loyal customers) can be as high as 80%. The model is dramatically more effective than mailed offers or newsletters.

 

We have been operating for more than a year and competitors have begun to emerge. They clearly do not all have integrity. It is clear to us that this model will continue to gain strength and acceptance as wine production and retail power becomes concentrated in fewer and fewer hands.

 

We have completed successful campaigns for almost 50 wineries, including Balnaves of Coonawarra, Glaetzer, Hanging Rock, Heathcote Winery, Moss Brothers and Primo Estate.”

 

Now if that sounds like a commercial for Cellar Force, whilst the text was written by them, The Heathcote Winery, who also rang me when they read my story, is certainly impressed with the Cellar Force’s sales results.

 

Adrian Read is right about one thing, this mode of selling looks like it's here to stay and it is likely to increase in both frequency and intensity over time. Whilst his company may “avoid conflict with agents and distributors” many wineries that opt for telephone canvassing will not be as selective. This action may cause grief with their traditional retail channels (small specialist wine retailers) who will probably drop these wines from their portfolios. So, in some cases it might do the wineries branding more harm than good. Careful selection and phone selling strategy will be critical, or wineries are likely to shoot themselves in the foot with their retailers.

 

Finally, the customers need to be considered. Whilst phone selling companies love to catch people at home, catching customers during a meal and asking them to buy their product, is a sure-fire way of ensuring they are ex-customers.

 

One thing is guaranteed, it will get even more competitive for wineries over the next few years and there will be many casualties.