Roy Morgan report and the mighty Dan’s

Roy report

The latest Roy Morgan report on Australian alcohol consumption says $14.5 billion was spent in the off-premise sector in 2016. The supermarkets and their associated retail chains accounted for about 75 per cent of sales.  The remaining 25 per cent was made up of independents and pub/hotel bottle shops.

The mighty Dan’s raked in $4.3 billion of the total, an increase of 4.6 per cent on 2015. Add the other Woolworths retail chains, Woolworths Liquor and BWS, and the group had 49.2 per cent of the market, worth $7.1 billion (which ties in with the group’s 2016 accounts, in which the Endeavour Drinks Group is reported as contributing $7.59 billion).

Arch rival Coles had 15.5 per cent of the total market, almost 2 per cent down on 2012. Coles’ rival to Dan’s is First Choice, which lifted its share of the total by 0.5 per cent to 5 per cent.

Market share over time: supermarket liquor stores’ total alcohol retail share of dollars

Source: Roy Morgan Single Source (Australia), January 2012-December 2016. Base: Australians 18+ who purchased packaged alcohol last 7 days. * NB: Woolworths Group = Woolworths Liquor, BWS and Dan Murphy’s; Coles Group = Liquorland, First Choice and Vintage Cellars.

Aldi is making inroads, slowly but consistently increasing its share to 3.5 per cent ($500 million) from 2.4 per cent last year.

The big chains – Dan Murphy’s, First Choice, Liquorland, BWS and Aldi Liquor – accounted for $10.5 billion of the total alcohol spend. Other outlets:

  • Hotel bottle shops: $1.8 billion
  • Independents: $1.5 billion
  • Wine clubs: $700 million
  • Duty free stores $100 million

Alcohol retail dollars by store type

Source: Roy Morgan Single Source (Australia), January-December 2016, n=3,502. Base: Australians 18+ who purchased packaged alcohol last 7 days.

What makes Dan the man?

“Roy Morgan data shows that people who usually shop at Dan Murphy’s place above-average importance on a good range and a well laid-out store where it’s easy to find what they’re looking for. At the same time, they enjoy having a good look around liquor stores, suggesting a willingness to browse rather than just zone in on what they came for and then get out fast.  

“As with Bunnings in the hardware sector, Dan Murphy’s is such a category killer for the alcohol retail market, that it’s unlikely to face any challenges from its smaller rivals in the near future. But this doesn’t mean the smaller players can’t claim more of the booze market for themselves, by emphasising their unique strengths at the same time as they apply what they can from Dan Murphy’s success to their own business model.”

It’s good to get a listing in Dan’s but listing is just one aspect. Enter any store and the range is huge. A wine can sit there for some time, ignored and unsold.

A consumer has to navigate the retailing traps of cunning display and wine on promotion. Often the consumer lacks the time, or the interest, to explore.

After the success of listing, the producer somehow has to get his wine moving through the system, and that involves promotional dollars. Spending money on promotion is no bad thing, providing it can be built into the price that is passed on to the consumer.

Unfortunately, with wine, the consumer is mean, wanting a maximum quality for minimum outlay. Using Robin Bradley’s price guide 1983 we have picked four wines with the 1983 retail price and added nothing but average inflation to find the price they would be today. We compare this with the price they actually are at Dan’s:

Wine 1983 price With inflation Dan’s today
Tahbilk Cabernet 1980 $6.75 $20.82 2014 vintage: $18
Houghton White Burgundy 1980 $6.50 $20.05 White Classic: $8.99
Lindeman’s St George Cab 1973 $14.50 $44.73 2001 vintage: $44.99
Petaluma Chardonnay 1982 $14 $43.19 2015 vintage: $40

There are exceptions. Cape Mentelle Cabernet Sauvignon 1980 was $9 in 1983; with inflation it would be $27.76 today. The Dan’s price for the 2013 is $80. The 1983 price was before the 1982 won the Jimmy Watson in 1983, and the 1983 won the JW in 1984.

Cape Mentelle has gone on to win a lot more accolades since then, and is considered top of the tree, a luxury item, as are many other wines, including Penfolds. Why Tahbilk hasn’t progressed further than it has can be speculated on.

The Houghton story is one of pure neglect of a once great brand and lousy marketing. When Houghton had to drop the Burgundy name because of EU agreements, rather than take this old favourite into a new era, it replaced it with Classic, which didn’t appeal to changing consumer tastes.

Lindeman’s was lost as soon as it went into the Southcorp portfolio and the suits got hold of it. It was much the same story with Petaluma. Under Brian Croser it had identity as a wine, as he had identity in the wine industry. With consumers it lost ground when it went into the Lion portfolio.

This month Coonawarra winemakers and growers hosted a visit by senior Endeavour Drinks Group (EDG) leaders. In the release they put out there were a couple of telling sentences.

Burke Reschke of Reschke Wines: “The opportunity to showcase Coonawarra’s personalities and major attributes to Australia’s biggest wine retailer firsthand was a great opportunity. However, I think we took more away from the visit than they did. The detail and science in retailing today is astounding. It is also a moving target so current figures are always welcome.”

Pete Balnaves, president of the Coonawarra Vignerons Association: “Members really appreciated the ability to meet EDG in Coonawarra and found the visit valuable because it gave us important up-to date insights into what is happening in the retail landscape and its ever-changing customers.”

Producers, especially smaller players, often curse the evil demons of retailing. What they fail to realise is that those demons understand retailing and the consumer as well as wine. Producers, in the main, only understand wine.

Dollar dilemma

There hasn’t been a great deal in the media recently about the state of the Australian dollar. Yet compared to a year ago it’s about 6 cents higher to the US dollar and 12 cents higher to the pound. Exchange rates aren’t as crippling as they have been in the past, but must still be eating into exporter profits.

It appears the excitement about growth in China, and Asia in general, is overshadowing the difficulties of trade with the UK and US.

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