Burning issues facing the trade in 2007

26 January, 2007

Graham Holter weighs up some of the biggest problems that drinks retailers must contend with this year

Pricing problems

Negative inflation in beer and spirits, wine hemmed in by psychological price barriers ... that's bad news for everyone except the consumer. But now it's more than a question of profitability. Retailers are facing a barrage of criticism over discounting and claims that such activity is irresponsible.

The attacks come from people with vested interests: the on-trade (rapidly losing market share to the offs); Scottish & Newcastle (which would like to make a margin out of the beer it sells to supermarkets) and Camra (which believes pubs are the spiritual centre of the world and the take-home trade the evil empire). But whether or not their attacks are justified, the government is listening to them. Supermarket chiefs are not allowed to get into a smoke-filled room to discuss price restraint, and nobody will take a unilateral stance.

The government can hardly insist on price inflation, but it does have ways of making life harder for businesses it thinks are misbehaving. Could a massive duty hike be one of them?

Footy cups runneth dry

The lack of a major international football tournament is a mixed blessing. World Cups and European Championships bring marketing activity, and some suicidal pricing on slabs of beer. Last year, many attributed volume uplifts to the sun rather than the action in Germany. The difference between a football tournament and a warm summer is that a tournament happens on schedule. This year, beer will rely on balmy evenings and barbecues to hit its volume targets.

Redefine 'off-licence'

Specialist drinks retailing is at a crossroads. Majestic and Bargain Booze define the (profitable) extremes; there are several hundred wine merchants who like to think they've identified lucrative niches.

Operators like Thresher, Oddbins and Wine Cellar face huge pressure from supermarkets and need to find USPs. Part of the appeal is always going to be convenience - but it's not something on which they have the monopoly.

All three chains have innovated recently with promotional strategies and retail formats. Will this be enough to hang on to, or indeed grow, market share? Has anyone yet stumbled upon a formula that can reinvigorate the middle ground? It's too early to be sure - and any complacency is very premature.

Make off-licences safer places to work in

How many retailers still regard injury or stress inflicted on store staff as a cheaper problem to deal with than adequate security measures? Sadly, far too many. Retail will always have a high employee turnover, but off-licences lose a lot of good people as a result of violence. In extreme cases, shop staff are killed; in countless other events, the trauma of a sudden confrontation with a masked man armed with a knife or gun is enough to force the victim out of their job forever.

Security screens are one solution, though they aren't suitable for all locations and they don't necessarily offer complete protection. CCTV is a given - if the police deign to watch the footage you capture. Panic alarms and double-manned shops also have a part to play.

But robberies can happen in even the best prepared shops. When they do, bosses need to do more to look after their staff and give them the counselling and support they need.

Sort out the duty chaos

There will be a Budget in March. The price of wine is likely to go up by 4p. Retailers won't want to pass this on to consumers and the suppliers will wonder how they can accommodate extra costs of 48p a case.

There will be the usual accusations that producers are being forced to cut corners and that retailers are using bullying tactics.

Isn't it about time we grew out of this? Will the world end if a 3.99 wine moves to 4.03?

The shelf ticket won't look quite so tidy, but that's something that manufacturers and retailers of frozen peas, sanitary towels and olive oil have lived with for years. If everyone did it, we could get away with it.

And then of course the DTI would come a-knocking, investigating conspiracies of a giant trade cartel. Solution: tell them it was OLN's idea.

Fire up wine growth

Why has growth in wine stalled? Well, it would be unreasonable to expect 6 per cent inflation for the rest of time, especially with utility bills, council tax and gym membership all soaring.

Plus, maybe - just maybe - people are getting a bit bored. You know there are wines priced above 6 that are twice as nice as two bottles of Porpoise Point at 3.99. Have you ever tried explaining this to your regulars, or allowing them to try the better stuff? If more people did, the wine trade would be back in growth.

Home Office bites hard

The Home Office has set out its failure target for test purchasing, in round figures: 0 per cent.

Nobody in drinks retailing believes this is likely or indeed possible, but the Retail Alcohol Standards Group has accepted the challenge. What else could it do? What would the government make of an industry which argued that a 5 per cent failure rate was tolerable?

The off-trade has a massive challenge on its hands. The most recent test purchase campaigns have resulted in failure rates of 32 per cent (winter 2004), 22 per cent (winter 2005) and 21 per cent (summer 2006). An optimist might suggest that the 0 per cent rate was a mere two decades away.

The campaigns are now increasingly targeted against shops with real or imagined "problems", which makes an improved performance even more unlikely.

Retailers who haven't already filled their stores with warning signs, retrained their staff and adopted Challenge 21 as a policy should do so now, and only accept PASS cards as ID. This is a year in which licences are likely to be lost as an impatient Home Office gets tough.

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