Tesco attacks spirits market - but who is the real enemy?
Grey market operational teams within the major retailers have been de riguer for some years but many in the drinks industry were shocked to see it in black and white on their fax machines.
After quoting Tesco buyer Alan Beardsley accusing the big distillers of "ripping off UK customers" and demanding the producers to cut UK prices "now", the press release continued to name and shame three drinks companies.
It said: "Tesco launched the top secret import operation after attempts to persuade spirit manufacturers Allied Domecq, Maxxium and Bacardi-Martini to charge UK customers less failed earlier this year. European suppliers, fearing the distillers' commercial might, only agreed to supply Tesco after a series of discreet rendezvous in out-of-the-way car parks late at night.
This is not all: "Tesco buyers even had to disguise themselves as British tourists, swopping their usual pin-stripe business suits for jeans and brightly coloured shirts and leaving their tell-tale briefcases behind before potential suppliers would even agree to attend meetings. Unmarked lorries were even used to ferry the booze back to Britain to avoid raising the alarm."
John Le Carre eat your heart out!
Naturally the three companies involved are not amused. One executive from one of the UK companies, who wished to remain anonymous, said: "We don't want our name dragged into this sordid affair. This sends out a clear message to bootleggers' that this kind of practice is acceptable and used by respectable companies."
Paul Grimwood, managing director of Maxxium UK, distributor of Whyte and MacKay and The Famous Grouse, said the retailers were targeting the wrong culprit.
"At the end of the day the distiller has little control over the final price the consumer pays. If retailers are resolute in their stance of defending the consumer, they should turn their attention to the Government and not the producer.
"Tax alone accounts for 66% of the price of each bottle of Scotch whisky. That's almost £7 on a £10 bottle. Once you add in production costs, transportation and so on, the profit margin left to the distiller is very small.
"This high level of tax discriminates against whisky and all other UK produced spirits. We would urge retailers to work constructively with us to help end this discrimination against British produced goods and enable all of us involved in the drinks industry to offer the best deal possible for the consumer."
Sneaking around Europe looking for a better deal is not a crime, however. A Tesco spokesman said: "This an over-reaction to the issue. We have bought these products from bonded wholesalers and then paid the duty on all the booze we've bought. That is not bootlegging."
When asked if the cloak and dagger operations had involved staff members from the three drinks companies identified, he said: "We must protect the identity of our staff. All I can say is, they are people in Europe who are keen to meet with us."
Overall, Tesco's mission is to highlight the discrepancies between the UK and Europe. "We are trying to get a better deal for our customers. We asked the drinks companies to offer prices closer to the European market and we got the cold shoulder. Our aim is to see customers with smiles on their faces," said the spokesman.
Or is it? Tesco is under fire from Asda/WalMart in the UK and some analysts believe the drinks industry has been caught in the crossfire. "This reaction seems to more posturing about the grey market and the latest salvo in the PR war between Asda and Tesco," said Brian Roberts, a retail analyst with Retail Intelligence. "The idea of rip-off Britain is a key issue for retailers and alcohol and cigarettes are the obvious target. Tesco admitting openly to this sort of behaviour is more a misguided attack on the Government and the duty laws which retailers see as erroneous," he said.
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