Hallgarten grows turnover but exchange rates hit profits
Hallgarten Druitt said it grew turnover by £1.8 million in the past year but profit fell £1 million due to the sterling’s plummeting value.
The wine supplier is about to publish a new price list in April and says prices have risen on by 3%-5% on average, with higher priced wines hit the hardest.
Managing director Andrew Bewes told OLN: “For us and our competitors on the supply side, we were hit massively by FX movement. Our turnover is up £1.8 million, but profit is down £1 million. That’s a classic squeeze. Overheads went up in terms of currency. That has put a lot of pressure on the supplier side in the UK. We have all had to re-price and issue new wine lists. That will smooth itself out over time.”
Hallgarten always takes cover for six months on currency, in March and September, so it was protected from the immediate impact of the Brexit announcement, but had to put up prices in October 2016 and will do so again this spring.
“New prices will come into effect with the budget, which hopefully won’t see a duty rise,” said Bewes. “In general the pound has slid 20% over the past 12 months against all currencies, but that clearly doesn’t mean a 20% rise in prices. In general prices have risen 3-5%. We have bent over backwards not to put on a blanket increase.
“With duty being a fixed rate, the impact of currency is higher on higher-priced wines. Where the wine element of the cost is only a small part they have only risen by 1-2%. On bottles where wine is more of it there’s a bigger impact on price.
Some of our producers have made a spectacular effort to re-price to help us soften the blow in some areas.
“We are having to completely restructure wine lists as a consumer has a set idea of how much he or she wants to spend. Instead of putting up prices, we are putting in new wines to meet the price points. We need to recalibrate.”
Despite profits being squeezed, Bewes said the firm, which is a mix of wholesaler and agency, is still profitable, has no borrowings and is in very good shape.
After Conviviality took over Matthew Clark and Bibendum-PLB and Enotria took over Coe Vintners, Bewes and his team “looked long and hard at what we do”.
He said: “With Conviviality, Enotria & Coe, Tesco-Booker, consolidation on that level will always create an air of change and of opportunity.
“We have never had such a large entity in the wine trade and this large a crossover of sectors, with a large wholesaler that’s also a retailer. That’s a game changer. It’s interesting times.
“We have absolutely decided we want to remain a wine specialist. We will not go down the composite route. Us, Liberty, Bibendum and so on all have the same goal. It comes down to a relationship and a fundamental understanding of what our customers are trying to do.
“We have to work on training, marketing, POS, to help our customers prosper. The difference comes down to being that little bit better and more focused than our competitors in a number of different areas.”