Into the deep: the new breed of discounter
One offers “big brands, big savings”, the other “top brands, bottom prices”. They’re the new discounters threatening to make their mark on the alcohol category in the same way that Aldi and Lidl have before them.
B&M Stores and Home Bargains have crept under the radar of many in the wine trade, with mention of their name bringing blank looks from some over the past few months.
One exception was PLB bulk buyer Gary O’Kelly, who tipped them to play a greater part in wine retail in the future when talking to OLN in May. “They both operate on overstocks or clearance of branded products,” he said. “But my feeling is this is changing as they expand rapidly and soon will need a more regular and perhaps private-label solution.”
B&M Stores and Home Bargains are a bit different from Aldi and Lidl for, while the continental grocery discounters have stormed the market with dumbed- down versions of the established British supermarkets, B&M and Home Bargains are gravitating to grocery and drinks from a different trajectory.
They come under the banner of “variety discounters”, with a disparate core product range including kitchenware, DIY, garden equipment, toys, seasonal goods such as Christmas decorations, and health and beauty. Both stock a range of packaged groceries but don’t go in for the complexities of fresh produce or frozen food.
Take a wander round one of their stores and there are striking similarities with the old Woolworths, Superdrug and the plethora of single-price stores swamping the high street.
Planet Retail reports that such variety discounters – also known as general merchandise discounters – have boomed in post-recession Britain. Overall store numbers increased from just over 1,000 shops in 2006 to 2,440 by 2013, with combined turnover up from £2.6 billion to £6.8 billion.
And the ongoing economic gloom gives them a platform. Nielsen says 59% of food shoppers are spending less than they were a year ago, and 83% are shopping in discounters because of price alone.
To date, the BWS presence for B&M and Home Bargains is limited to selected outlets and is usually an add-on feature rather than a core department. Visits to several branches of each group’s stores by OLN found no overt price promotion or advertising of alcohol outside or around stores, suggesting that, at least for now, they don’t view alcohol as a footfall driver in the same way the major supermarkets do. Departments have little in the way of category signposting or product information.
Locations are a mix of secondary urban shopping centres, edge-of-town retail parks and unloved town centre units.
At Cowley in Oxford, B&M neighbours 99p Stores, Iceland and Wilkinson, all retailers with budget-conscious shoppers in their sights. It’s a location the social profiling services used by credit agencies describe as populated mainly by C2DEs, skilled or unskilled manual workers, pensioners, casual workers and the long-term unemployed. Rents are lower than prime high street locations and B&M snapped up units where other retailers have failed and a deal can be struck (see box).
The B&M at Hayes in Middlesex stands apart from other retailers on a business park surrounded by catering and engineering businesses servicing Heathrow Airport. The socio-economic profile is slightly more upmarket to include C1s, but it’s not the habitat of doctors, dentists and university lecturers. Independent wine merchants in drowsy market towns needn’t lose any sleep just yet, but local convenience stores, mainstream chains and the multiple grocers will be keeping close watch.
Both B&M and Home Bargains call Merseyside home and trade in the north west of England where Bargain Booze is at its strongest. The reliance on clearance stocks means the BWS range is small for both, where stocked, but prices are keen.
At Cowley, red and white wines occupy a metre of floor-to-ceiling shelving each, with Casillero del Diablo at £5.99, Lindemans at £5.49, Echo Falls at £4.99 and Isla Negra at £4.79 – prices which vary from parity with current big four prices to as much as a £3 saving.
Beer seemed less competitive, with an eight-pack of Foster’s at £6.99, but the range was decent with a clutch of bottled ales from smaller British brewers. Spirits were limited to a few random lines on the top shelf.
B&M favours everyday low prices on well-known brands over promotions and it’s a formula which inspires high levels of customer loyalty. They may not be able to get the same brands every time, but they know they’ll get something they recognise at a bargain price.
Steve Barton, chief executive of Innovation Drinks and one of the team which built the First Cape wine brand in the UK, said: “They may not yet have the buying power of Aldi or Lidl to source private-label so it’s a strategy that will work well for them for the time being.
“Trading in overstocks is an efficient way for retailers such as this to offer well- priced brands their customers recognise.”
Three-quarters of sales in grocery discounters are own-label, and an area the variety discounters will have to conquer if they’re to compete with Aldi and Lidl. B&M does have own-label brands in areas such childrenswear, cleaning, homewares, DIY, toys, lighting and car care. It also has direct sourcing relationships for major brands with Pepsico, P&G, Unilever and Mondelez (Cadbury).
It doesn’t take a big leap of imagination to foresee major drinks companies joining that list before too long.
Both also have the potential to put a dent in the online ambitions of rivals. Home Bargains is already selling six-bottle cases of wine, including Black Tower and Echo Falls, online.
“What the discounters have recognised that the supermarkets haven’t is that consumers want to see a core range of brands they know at affordable prices,” says Barton. “That’s been the comfort zone of the consumer for years, but the comfort zone of the wine trade has been about range – having lots of wines. But that leads to clutter, confusion for the consumer and ultimately poor availability.”
Like Aldi and Lidl before them the new discounters are scoring by following the first rule of retailing – give the customer what they want.
TIMELINE: A BRIEF HISTORY OF DRINKS DISCOUNTERS
1959 Albery Gubay opens first Value Foods in Rhyl, north Wales, based on a buy cheap, sell fast model adopted from the US and Germany’s Aldi. Chain soon becomes Kwik Save. Off-licence sections trade as Liquorsave
1976 Tom Morris opens first Home Bargains in Liverpool
1978 The first B&M Stores opens in Blackpool
1988 Allan Whittle and Robert Mayor launch the Bargain Booze franchise, seven years after opening their own off-licence
1989 Aldi becomes the first continental discount chain to launch in the UK
1990 Dave Dodd and Stephen Smith lay claim to becoming the first single-price retailers when they open their pilot Poundland shop in Burton-upon-Trent
1994 Lidl follows German rival Aldi into the UK
1996 Netto of Denmark becomes third major player in grocery discounting
1998 Kwik Save bought by Somerfield
2004 The Arora family take over B&M Stores
2005 Aldi advertises in the UK for the first time
2007 Kwik Save enters administration. Rump of 56 stores sold to FreshXpress, which goes under two years later. Costcutter buys the brand name.
2010 Netto quits the UK, selling its 193 stores to Asda. 99p Stores announces plans to start selling half-bottles of east European wine at its signature price
2012 Costcutter relaunches Kwik Save in a c-store format
2014 Netto announces plans to relaunch in the UK in joint venture with Sainsbury’s. Iceland launches the Food Warehouse discount concept in Stoke-on-Trent. Booker opens first Family Shopper discount convenience shop. Lidl and Aldi approaching 600 stores each.