The Losh Cause – Where the monopolies have got it right
The discount culture in the UK and other European wine markets has resulted in reduced choice and hampered opportunities to trade consumers up to better wines. In contrast, writes Chris Losh, the retail monopoly system in Nordic countries fosters greater discernment among consumers and encourages trial of new and interesting wines. Is there something the so-called 'free' wine markets can learn from their Nordic counterparts?
My, but the last six months have been an economic education. Capitalists, we have learned, might be good at providing the fuel to stoke a boat's engine, but they're not to be trusted with the navigation, which is why we've been steered full tilt into a large iceberg of debt.
Gordon Gecko's famous 'Greed is Good' speech from the film, Wall Street, would now, in the post-Credit Crunch 21st century, need to be rewritten something along the lines of 'Greed isn't in itself inherently bad, since it oils the wheels of capitalism, but it does need to be allied to a certain amount of moral and social responsibility'.
Sharpen up the microscope from global to local level, and the drinks industry is learning a similar lesson in the ultra-competitive 'shop window' markets of northern Europe. Supermarkets are engaged in a pyrrhic pip-squeezing exercise aimed at portraying themselves as the retail outlet of choice for the impoverished, while producers complain to the press that they can't make money, then sign up for heavy discounts.
The whole thing, frankly, is a mess - made all the worse by being eminently predictable. The drinks industry in general - and the wine industry in particular - failed to take advantage of the boom years from 1994 to 2007, when people, broadly speaking, had money and were prepared to spend it on wine.
But instead of creating an environment that encouraged experimentation or trading-up, the culture became ever more price-sensitive and discount-driven. The stupidity of the Australians in planting far too many vines far too quickly and flooding the market was a not insignificant factor in this, but the trend was set well before then.
As a result, markets like the UK, the Netherlands, Germany and Belgium have a deeply-entrenched discount culture, with consumers hopping uncritically from promotion to promotion. Are these people more 'wine-literate' than ten years ago? You'd have to say no. The opportunity to educate has been lost.
Moreover, in once-vibrant markets like the UK it's hard to see things improving any time soon. Press coverage in the national newspapers is dismal, with few columns much more than a list of half a dozen wines that happen to be on promotion that week and some not bothering even with that meagre level of information.
Meanwhile, supermarkets are quietly cutting their ranges. Interesting wines get the chop, leaving a hard core of facings that is, broadly speaking, the same in every retailer.
It is a deeply depressing scenario, and as I was explaining it to a group of Norwegian journalists a few days ago I was struck by their bemusement. They were all too polite to say anything, but you could see them thinking 'What a strange way to run drinks retailing'.
The irony is obvious. For years, those of us in what might be termed 'free' alcohol markets have derided the various Scandinavian monopolies as retail dinosaurs that have no place in the consumerist 21st century. Yet currently these monopoly-supplied markets seem to be significantly healthier than their free-market counterparts.
For starters, the drinks coverage in Scandinavian papers is far better than the UK. Most seem to manage a couple of pages a week, rather than a few token inches. They even have lengthy drinks programmes on TV - something that died out in my neck of the woods around ten years ago.
As for choice, there may only be one outlet, but the monopolies have vast portfolios of drinks, (Norway's Vinmonopolet has 10,000 products on its books), and though they're obviously not all available in every store, they are all orderable within a day or two, by staff who are keen and well informed.
Finally (and probably most importantly) price promoting is forbidden. A drink sets its price, and that's it. With deep-cut discounts and big-brand muscle taken out of the equation, consumers are encouraged to 'drink around' a bit and ask the staff to find genuine, rather than artificially-created, value for money. The biggest selling Champagne in the Vinmonopolet range is not a Grande Marque but Guy Charlemagne, a propriétaire récoltant in Mesnil sur Oger.
Take all of these factors together and they add up to a wine culture based on knowledge not price.
The UK government, for one, has been wringing its hands for years about binge-drinking; something probably not unconnected with the fact that pretty much all alcoholic promotions encourage consumers to drink more rather than better. The Nordic zone may have its alcohol-related problems, but at least it knows they are not directly encouraged by the system.
While there are many aspects of the monopoly system I do not like, at a time when we're all realising that untrammelled free-marketeering has serious negative side-effects, there are elements that we can take from these alternative models that might do us all a bit of good.
And what I would take from the Nordic model is a 'no price promotions' policy - or at least not one aimed purely at shifting volume. So, BOGOFs or 30% price cuts would be out, but perhaps buying two bottles of Brand A might lead to an incentivising discount to buy the more expensive Reserve facing. Retailers are forbidden by law from colluding to fix prices or agree a 'no promotions' policy. So any moves in this direction would need to come from the Government.
The retailers might not like it, but you could argue that they're largely responsible for getting the industry into the state it's in at the moment. They'll just have to find something else to drive footfall.
And it's a whole lot better than excise duty rises, which is the Government's current favoured (and utterly ineffective) tool for tackling the problem. For nations of promotion junkies it's time for a bit of socially-responsible, economically viable cold turkey.
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