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Are we seeing the first tremors round the base of the supermarket retail domination?

SO CONSTELLATION got its man.  Not long ago BRL Hardy looked like a gigantic wine company.  But the merger with Canandaigua and now the acquisition of Mondavi makes it an 80mcase company.

The sheer scale is mind-boggling and does rather beg the question of how big is too big? I read a few years ago (and please tell me it’s not true) that most wine consumers drink only three brands a year.  In which case consolidation still has a way to go before anyone starts to notice. 

While it’s legitimate to have some concerns about the direction of the industry, I think that the reshuffling of the giants will allow gaps to open up for the more nimble-footed smaller operators.

In the same way that the dominance of supermarkets has provoked a renaissance of farmers’ markets, so I think that the creation of ever larger, increasingly aggressive wine megacorps supplying evermore lupine supermarkets will, paradoxically, favour the smaller, independent merchants.

The more homogenised the wine offering becomes in the multi-grocers, the more people with any interest in wine will start to buy at least some of it elsewhere.  And empirical evidence suggests this is already happening.

It’s seen in the success of people like Stone Vine and Sun, a small, newish, specialist independent merchant in the UK, whose list is full of French wines of real character.  Its recent London tasting was, truly, a joyful experience and shows what most people are missing out on by buying only in the supermarkets.

The Which? Wine Guide agrees, this year delivering a stinging rebuke to the multis for their refusal to try to push people over the £5 price point – and for the impact this reluctance hashad on wine quality.

All empires expand up to a certain critical point, when they either reinvent themselves or begin to implode.  I wonder if we might just be seeing the first tremors round the base of the supermarket retail domination? 

All systems go

Talking of retail domination, sometime around the date that this magazine comes out Sweden’s prosecutor general will pass judgment on the seven managers and assorted importers of the Systembolaget (Sweden’s drinks monopoly) who stand accused of accepting bribes in return for promoting the sales of certain brands.

Since all promotion of alcohol is banned in Sweden, this is a serious matter, and the case has been a big story in the daily papers there.  Not, incidentally, that anyone in the wine industry seems particularly surprised.

There have been rumours about corruption in the monopoly for years.  One Chilean winery I spoke to got so disillusioned with having its tenders for listings rejected, while clearly inferior products from a nearby winery were accepted, that it submitted a US$30 wine for a US$5 position as a tester.

It, too, was rejected… But arguably more dramatic than the case of the Monopoly 7 are the external factors putting pressure on the governmentrun retailer.  Most significant of these has been the decision by neighbours Finland and Denmark to cut their duty earlier this year.

This was a pre-emptive strike aimed at heading off crossborder shopping from their countries, and it’s had a dramatic effect on Sweden.  Sales, which were growing nicely at 5%-10% a year, have slowed, with border stores badly affected.

Norwegians (who saw their duty cut a couple of years ago) have stopped travelling to Sweden, and now the Swedes themselves are going to Denmark.  It all spells trouble for the Systembolaget.

The organisation may have done a terrific job in introducing good quality wines to the Swedish market, but the model of high tax plus monopoly retailer looks ever more like one that belongs to another era.

Many Swedes still believe that alcohol sales should be controlled by the state.  But losing a significant proportion of sales (and duty revenue) to neighbouring countries tends to concentrate the minds of those in power.

Surely, in the next couple of years the government will either have to lower taxes from SKr22/litre (£1.70) on wine or loosen the shackles on the Systembolaget.  Will it happen? Well, let’s say that since the prime minister’s wife is head of the monopoly the decision is more than usually political!


Returning to the Mondavi purchase, what of the joint ventures such as Opus I (Napa), Seña (Chile) and Luce della Vite (Tuscany)? My guess is that Philippine de Rothschild will not want anything to do with Constellation and will buy the remaining Mondavi shares to wholly own Opus.

Eduardo Chadwick of Errazuriz is likely to be more tolerant with regards to Seña since his company is already happily associated with bigname distributors.  As for the Frescobaldis, Lord knows.

But, with dozens of family members to keep happy, the negotiations are likely to be protracted and, being Italian, not short of emotion…

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