Comment - The Losh Cause - It's Nifty to be Thrifty
A period of spend re-evaluation would be good for the wine industry
The ideas of rebirth from death, or purification through pain are as old as human life itself. And, certainly, this recession has been pretty merciless about sorting the wheat from the chaff. Poor businesses have gone under, over-leveraged ones have had to get economically realistic pretty fast, and even fairly solid businesses have had to reassess what they thought they were about. Those that are left now the dust has settled can probably congratulate themselves on being leaner, meaner and generally healthier than they realised.
Those that are left now the dust has settled can probably congratulate themselves on being leaner, meaner and generally healthier than they realised.
This Darwinian sifting has not been pretty, but the energy, borne of necessity, caused by the weeding out process has been stimulating. Restaurants that once didn’t have to lift a finger to fill seats have started offering innovative deals, while the tedious ‘premiumisation’ mantra of the early noughties has disappeared in a puff of junk bonds.
Having spent most of the last ten years extending lines upwards, drinks companies are having to fight in the less glamorous end of the market where, after all, the vast majority of sales are made. I’m sure that I'm not the only one who thinks that a dose of reality was long overdue and that a never-ending procession of over-priced wines, vodkas and Scotches was never going to be the way forward.
One of the ways in which the ‘new reality’ has manifested itself has been a more steely-eyed appraisal of spend. Drinks companies, particularly in the areas where it merges into high fashion, such as vodka and Champagne, have thrown money away on ludicrous ego-trip projects for donkeys years. But it’s been a while now since I received a lavishly produced (and utterly disinteresting) coffee table book or an invitation hand-stitched on the hide of a snow leopard.
Is the world a poorer place for this lack of bling? I don’t think so.
While some expense is so obviously unnecessary that a five-year-old could shave it from the budget, it’s interesting that a number of companies should be taking a similarly hard-nosed attitude to some trade shows. As one Burgundian negociant told me recently: "To get our whole team to Vinexpo for a week costs over EUR350,000 (US$427,560). You have to sell a lot of wine to get that back."
And, certainly, the number of high profile absentees from the otherwise successful London Wine Fair seems to grow every year. Obviously, at the moment, many of the stay-aways can justifiably plead temporary poverty. But it will be interesting to see how many of them decide they can live without three days in an exhibition centre once the economy picks up. After all, once something has been dropped from the budget, there is no guarantee that it will be reinstated again, even when things pick up.
Again, I don’t see this as a bad thing. A bit of rigorous questioning of assumptions might be painful, but it can also be cathartic. And, for an industry that often has a somewhat sybaritic approach to expenditure, a couple of years of more spartan living is probably long overdue.
I can’t, incidentally, let this column go without a few words about Sir Terry Leahy (the boss of Tesco)’s comments calling for an end to below-cost selling. The press were quick to leap on the evident hypocrisy of his statement, given the kind of deep-cut beer war his (and every retailer) is engaged in prior to the World Cup.
Admittedly, Tesco can be pretty cynical when it comes to playing the PR game. But I happen to think that in this case Leahy was right. One: something does need to be done about the flow of cheap alcohol in supermarkets, and two: the supermarkets can’t instigate such changes themselves.
No retailer is going to act unilaterally to drop promotions or alter their strategy – it would be commercial suicide. And they’re forbidden by law to get together and sit round a table to fix prices. All of which means that the only way we will see decisive change in this area is if parliament takes the lead.
We’ve had 13 years in the UK of a government that played to red-top prejudices by putting up duty, while lacking the imagination, courage or political will actually to do anything about really addressing the root cause of the problem.
And if the answer does not (evidently) lie in duty rises, then nor does it lie in a minimum alcohol price; rather, it lies in banning price promotions on alcohol.
Booze is not like bread or baked beans, and to pretend that it can be treated the same way is either naivety or cynicism of the highest order. Encouraging a population to buy drink simply because it’s cheap sends all the wrong messages.
So, Sir Terry Leahy is right.
This is a discussion that needs to be had, and it is the Government not the drinks industry or the retailers that needs to be leading it.
And, should Messrs Cameron, Clegg et al start making noises about banning promotional activity on drink, I’m sure the boss of Tesco’s and all the other main supermarkets will be in wholehearted agreement, won’t they?
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