How the wine industry can beat rising energy costs
As costs rise for consumers and suppliers, what will this mean for the wine industry? Energy bills are expected to increase “at least 14 times faster” than wages this year, according to the Trades Union Congress.
TUC analysis suggests that, while gas and electricity bills are set to rise by 54% when Ofgem’s price cap is increased next month, average weekly wages are expected to rise by only 3.75% in 2022. And with further energy price rises anticipated in October, any benefit of average pay gains could be wiped out completely.
While consumers are feeling the pinch, the trade continues to face supply chain constraints, which in turn is squeezing margins for retailers. In a recent interview, Richard Lloyd, general manager, European operations and supply chain at Accolade’s bottling facility, The Park, told me that the cost of running his supply chain in the 12 months to July 2021 had gone up 10%. “With the scale that we are as a business, I’m talking tens of millions of pounds,” he said. “And the impact for retailers will be price on shelf.”
He also said that supply issues had altered the relationship between suppliers and retailers. “Previously, retailers would be very rigid with their promotional plans,” he said. “Now, they very much talk to us about ‘what have you got?’. “There have been huge problems with getting things out of the US and Australia, for example. So, we’ve said to them: ‘why don’t you change your promotional plans?’”
Lloyd told Drinks Retailing that retailers are going to have to rationalise their ranges as the “cost of everything is going up exponentially”. Meanwhile, some independent retailers, such as Dan Farrell-Wright from Wickhams (interview page 44), have been stocking up on the wines that make up their value cases in an eff ort to supply them at the same price for as long as possible. But there will come a time when those stocks run out. So the problem is that we’re left with a product that costs more and a consumer who has less to spend.
Farrell-Wright said the solution will likely lead to wine from “off the beaten path” making it into more fixtures, as both suppliers and retailers look for other ways to off er value for money. And, while independent retailers make a living out of finding gems for their customers, more shelf space might have to be awarded for practical factors, such as price and availability, as well as for taste.
Elsewhere, multiplies – including Marks & Spencer with its Found range – have already started championing less well-known regions. We can expect to see more retailers develop similar plans. As pressure on disposable income increases, giving consumers an extra incentive to spend – be it a good story, a hidden gem or a sustainability cue – will become ever-more important.