Selling the soul of the wine trade

Then you will come to a hill, Bear-No-False-Witness. Turn right away from it, for it is thickly wooded with bribes and bristling with florins. At all costs, gather no blossoms here, or you will lose your soul.

William Langland – Piers Plowman

Here’s a trend to follow. You don’t sell wine, you sell deals.

Blowzy bean-counters determine the content and quality of the list. Once upon a time you didn’t ask for discount, it was assumed that you were getting the most reasonable price. Now the opening gambit in negotiation - and I use the word in the adversarial sense of two opposing factions sitting across the table from each other intensely bartering - is to demand how much? How much will you give me in free stock, trips, equipment (verre du vin machines, for example) or sweet dosh in good old-fashioned brown envelopes? It is the right of the restaurateur or purchaser to ask without being bound to targets or any particularl loyalty. Business is a de facto auction; the restaurateur can play off wine merchants off against each other with preferential proposals.

Wine merchants (some of them, at any rate) have themselves to blame for playing along with this charade. There are several well-known companies that literally try to buy the business by throwing cash into every proposal. A financially risky strategy compromising margins it also creates false expectations for future arrangements with customers and queers the pitch for the wine trade in general. If you are giving away money, then the product is almost irrelevant. In fact, wine companies become trapped in a vicious circle whereby they have to find brand sponsorship to support the myriad deals and the more business they create the more they need to find. It is a win at all costs strategy, flawed ultimately in the sense that any contract they lose or any bad debt they incur will doubly condemn them precisely because they have put so much money in buying the turnover in the first place.

Strikingly, when the recession began to bite, these aforementioned larger companies made several of their staff redundant. There is something ethically distasteful about wine companies chasing massive growth for the sake of it (rather than growing organically) and sacrificing personnel to achieve their margins.

Here is an example of the shenanigans that go on when contacts are bid for.

A group of three local pub restaurants is currently signed up to a single wine company – the usual penny-pinching discounted prices plus 3% retro as gravy. A fourth site is purchased and the contract comes up for renewal. The incumbent company offers a continuation of the existing generous arrangement, another very large company tenders £5,000 for the full contract of the four sites, and then one of their rivals, a specialist in spirits, minerals and beers trumps that with £7,000. After some haggling the second company reduces their offer to £5,500 whilst the original wine company stumps up £2,000 to keep the wine business in the form of an opening credit note. The contract, by the way, is for one year only.

Who suffers? The honest wine merchants whose business is squeezed by the wine bribery of others, the customer who is being sold a pup, and finally the consumers who have to drink the narrow selection of overmarked-up mediocrity. It is counter-intuitive to sacrifice quality and loyalty on the altar of short-term greed. The restaurants that take their customers for granted are making a big mistake; their motto should not be “cheap as chips” but “better quality chips”. And the wine merchants who are driving down quality by sourcing and overly relying on mass-produced bland brands with all their attendant marketing budgets will find that this approach is not financially sustainable in the long term. A further unpleasat prospect emerges from this business battleground, the increasing likelihood that large scale venture-capital wine merchants will attempt to subsume smaller companies in order to take over their portfolio of agencies and clients.

Capitalism and the wine trade - it seems, for some reason, particularly vulgar and almost profane.

Posted by Doug on 17-Jul-2009. Permalink
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