The hectic start to the year in Australian wine industry – the abrupt fall from grace of Southcorp chief executive Keith Lambert hard on the heels of Constellation Brands’ virtually assured takeover of BRL Hardy – leaves one huge question to be answered. Will the ferocious discounting which has become the industry norm continue?
It appears highly likely that it will. Australia’s liquor, and especially wine, industry in the short time at least will be a war over a shrinking profit pool.
Despite the family connection of being a son in law of Southcorp’s principal shareholder Bob Oatley, Lambert’s exit was a consequence of the second profit downgrade in eight months itself attributed to the fierce discounting he initiated.
But the Australian retail trade has been revolutionised by the sudden dominance of the country’s two biggest supermarket groups, Woolworths and Coles Myer. If Coles is successful in its latest bid for the Theo’s Liquor chain, it and Woolworths will control about 38% of Australia’s A$9 billion, (US$5.3 billion) liquor industry.
With consumers increasingly buying purely on price and the chains using their buying power to shave margins wafer thin, whatever his next career choice, Lambert may well find himself facing his erstwhile critics with an ironic smile.
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