Wine industry consolidation ‘likely to accelerate’, Bibendum boss warns

Consolidation within the wine industry is likely to accelerate as the dust settles on the “seismic” changes in the sector, a leading distributor has claimed.

Bibendum-PLB CEO Michael Saunders

Speaking to the drinks business on the anniversary of Bibendum-PLB merger, chief executive Michael Saunders said the full implications of changes over the last year would not be felt until the middle of 2016 – but he warned more consolidation was  likely over the next few years.

“A lot has happened in the last year, not just with us, but it was the first of a number of moves,” he said, pointing to the raft of  mergers and acquisitions across the sector as well as the range culling and pricing reset in the multiples.

Further consolidation of both producers and distributors was “necessary”, he said, as there is still not enough business or profit to go around. “My guess is that it will accelerate over the next few years, driven not by the industry itself, but by what the customers wants – to deal with fewer people. If all the trade wants to have fewer suppliers – and I’m not just talking about he multiple retailers – what happens to all the others?”

Access to a route to market was likely to become increasingly important as a result, he noted. “It is quite fragmented already, so unless you’re built like a Bibendum-PLB, a Hatch Mansfield, an Enotria or an Liberty Wines, it’s difficult to access those markets.”

Medium-sized distributors occupying the middle ground could therefore be in dangerous spot, he warned. “There is a space for thriving quality niche operators, but it is an area of concern if you are too big to be small but too small to be big,” he argued. “But every business needs to understand where its future is – if it can’t see a path for continued or increase prosperity, then maybe it is hitting the time to go into the long grass.”

Saunders argued that the effect of the multiples resetting prices would not been seen until after the Christmas trading period – and the results were likely to trigger a second raft. “The first moves have been made, but it would for tempting fate for that sector to say it was done. No-one quite knows in any market – but especially in that market – what will happen, but I don’t think it will stay the same as it is now.”

“It takes educated guesswork to see what the ramification for them are. But my guess is that we will see a second wave of changes – it is absolutely not ‘done’,” he said. However it was good there was the confidence to make changes, and there was a fresh honesty in the ranging with the return to round pound pricing. “The high/low system we have been operating for so long was a bit silly – do consumers really believe that a Pinto Grigio being sold [on promotion] for £4 is really a £9 wine?”