“There are no easy sales out there at the moment” seems to be a common sentiment. It’s a tough market and an unpredictable one, with a number of different narratives that reflect that the market is fragmented. WBM columnist David LeMire MW reports.
In Australia, different states are doing it relatively better or tougher than others, and then there are different price points, different varieties on the up or down, and different channels.
Some of the trends I am seeing and hearing about include reduced on-premise spending.
People are going out less and spending less when they go out.
Retail sales are also struggling this year.
Another observation, this one from Sweden, is that sales of premium wines in the $AUD50-150 range have fallen, but sales are holding up well for prices above $150 and below $50.
That suggests that the very wealthy are continuing to spend as normal, but those impacted by the costs of inflation and interest rates are trading down to more affordable price points.
How do we make sense of it all and navigate through these times?
What are the signals and what is just the noise?
What are temporary conditions that are a result of the economy, interest rates, cost of living, and what are longer-term trends that will continue once the cost of living crunch eases?
Here are a few thoughts to some bring some perspective:
Focus on the fundamentals
One observation that I hold on to during tough sales environments is that, for the most part, what we do in the sales and marketing of wines doesn’t change much with the conditions.
Fundamentally we are still working to build relationships, communicate stories, service the trade, and build the reputation of the wines that we make and sell.
There are no short cuts, although there might be some surgical cuts needed at times.
Deep dive into the numbers
While the challenge doesn’t change too much, the better understanding we have of what is going on out there, the better decisions we can make in these moments.
For example, if we are worried that sales are down for an SKU, and we consider stimulating the market with a retail promotion for that wine, have we understood what is really going on?
Are depletions down in retail, or do retailers have excess stock from previous orders, so they’ve paused ordering it from the distributor?
Are there issues between the retailers and the distributor that might have nothing to do with our wine?
Balance staying alive with long term brand health
By promoting with a price incentive, are we getting valuable share of mind with the reps and the trade, or are we compromising price positioning that we’ve worked on for years?
What is happening at store level, with facings, shelf positioning, floor stacks, fridge space, shelf talkers, neck tags and the price point?
And what is driving that positioning?
If we are talking about a price incentive for retailers, do we want them to keep the same price and take more margin, or lower the price and maintain existing margins, or hit a really sharp price point and drive large volumes?
How can we get our aims aligned with theirs, so we’re all pulling in the same direction?
Don’t forget, our customers are hurting too
I’m thinking in particular here about trade customers, but it also applies to consumers and DTC customers.
Understanding the situation they are in is always important, but especially important in a downturn.
Restaurant buyers are under pressure from owners to increase the margin return of the wine list.
They are getting offered huge discounts that are tied to volume buys. They are often working harder, with less support in their businesses, due to rising staff costs and lower turnover.
They are time poor, and while they would love to solve our problems, they have their own problems to deal with.
Review the long-term strategies, integrating new information
Another thing that I think about in times like these, when we seem to be dealing with so many markets that are depressed, is about those markets where I feel we should be doing better – by we, I mean Australian wine, our wine region, our winery and maybe specific SKUs.
Why can’t we all sell more in market x? Why is the Australian category not stronger there?
As one of my colleagues is usually quick to point out, usually in these markets our success reflects how much time and effort we’ve put into that market.
Have we visited at least once a year every year for the last 20 years?
If not, there’s the answer to why we’re not selling as much as we might like to be.
And that doesn’t mean we’ve erred. We’ve made the calls based on our resources, our assessment of the opportunity, and the relative returns compared with other opportunities.
Whether we were right or wrong in those assessments is another matter, and one that we should interrogate.
But it is important for us to be realistic about the potential for markets that we don’t invest in consistently.
There are some Australian wineries who do great business in less mainstream markets within the Nordics and Canada, for example, because they’ve identified those opportunities and prioritised them.
If we haven’t done that, we can’t really complain about not having success there.
Where can we develop competitive advantages?
For me, the thought process can be useful closer to home… how much effort have I put into Newcastle, Busselton, Cairns, the Central Coast or the Great Ocean Road?
Have I been to Orange, Geelong, Launceston, Mildura, the Mornington Peninsula or Mt Gambier lately?
Which ones should be on my list? Even closer to the centre of the capital cities there is a lot of business being done by smart operators who have been first to identify and develop a market where there is less competition.
The line from the movie Margin Call is that you need to “be first, be smarter, or cheat.”
The wineries and distributors who have been first have an enduring advantage, and there are many ways in which businesses can be first.
The key step is to translate the first mover advantage into a lasting, value maximising, unique proposition.
• Article first published in the September-October 2024 issue of WBM – Australia’s Wine Business Magazine. To subscribe click here.
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