Suppliers are tackling industry pressures together to survive
Suppliers from across the wine sector have revealed what a supportive business ecosystem might look like and why fighting problems collectively can help everyone to pull through challenges. db reports.
Speaking at the DB Conference last week, leaders from across the wine trade examined the value of working together, weighing up the potential for connectivity and collaboration to drive market growth. But is the concept of an ecosystem right for everyone? Many agreed, it depends upon the business, but highlighted the reasons why it made a lot of sense.
Communication and cooperation
Describing how vital communication and cooperation was to the sector, Wine Owners co-founder and CEO Nick Martin said: “I’m going to start with the analogy of a town. A town is an ecosystem built around a community, with an administration and suppliers and shops and cafes and restaurants. That ecosystem depends upon people cooperating. It depends upon the baker supplying the cafe and all the rest of it. That, in essence, is the core of what a business ecosystem is. The question is: ‘If you cooperate and work together, can you create more value?’ Particularly in the wine industry, I think it’s pretty clear there is a need to communicate. There is a desire to sell wine between each other, as well as to your addressable markets. The better that you communicate and cooperate, the more you’re likely to sell.”
Katie Keating, managing director of Flint Wines, which imports wines from about 200 wine producers from around the world and represents them in the UK, agreed that working with others and making friends and connections is important.
Keating explained: “At Flint, we want to be everybody’s friend, because journalists are very important to us. Our trade partners are very important to us, our private clients are very important to us, and our team is very important to us. As a consequence we always talk about having three sets of customers – our actual customers buying wine from us, our suppliers (for whom even in a weak market we feel that we’re competing to be able to represent them here in the UK and we’re competing for supply in this very mature and very longstanding market) and then also on our team where we’re competing for talent to have the best people on our team in every single role. We have about 35 people on our team now. But we think that people and relationships are really what make this industry go round. The ecosystem, for us, is probably in ensuring that we’re connecting the right supply and demand and with the right team to be able to do those things.”
Pressures from working capital and margin compression
Also adding his views, Mitch Fowler, CEO and co-founder of wine and spirits industry funding and supply chain platform Ferovinum, noted how there were a lot of challenges that could be faced together. Using the analogy of slaying dragons for tackling each issue that might arise, Fowler highlighted how effective wine businesses could be if they could see that everyone else was also fighting to stay alive.
Fowler said: “Our village feels a little bit like the island town in The Hobbit, where there’s one Smaug dragon flying around the village and then there’s at least 10 healthy, very well-fed, dragons that have emerged from their various mountains and they all have different shapes. So, you have two clients – or three clients if you include your team – and those dragons are problems for your clients. Your suppliers need to be represented in the market, and your sword is doing that well for them – you slay that dragon for them. And the same for your customers.”
Fowler admitted: “For us, our biggest dragon is working capital” and added: “Let’s talk about another dragon that’s turned up for the trade recently which is margin pressure across the industry. I’ve never really seen anything like the pressure that our industry is feeling right now in terms of margin compression. To deal with that particular dragon you need to trade well. Often, trading well and looking after your suppliers and paying them upfront, ordering what you need for a year and taking advantage of parcels when they turn up puts huge pressure on your business in terms of working capital. So, we turn up with our sword and stab that dragon for you and turn your inventory into a ‘just-in-time asset. But to do that well, we need to interact with your business very efficiently. This means that partnerships with businesses like Wine Hub that have systems of record that help our clients manage their businesses really well in terms of information-flow and connectivity, make it easier for us to do our job.”
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Fowler said: “I would encourage everyone in the room to really focus on your dragon and focus on the sword that you take to that dragon. The fewer dragons you have, the better. The problem is we’re so smart that we try to fight every dragon at once. I think if we want to survive as a village, focusing on our dragon and our swords, and letting each of our fellow village members do the same maximises our chances of survival.”
Wine industry veteran Simon Farr agreed and added: “I think collectively, there’s a hive mind aspect to it, but there’s also an efficiency aspect – in terms of the transactional frictional cost of doing business. I think we all are becoming more aware of the lack of velocity in trading. So the more that we can get the stock to turn through the system, the more we can do that with the least amount of frictional cost there is.”
Collectivity can generate business
Farr revealed: “I always use the Savile Row analogy. It doesn’t hurt that all these tailors are next door to each other, and I think they realise that there are a huge amount of hazard limits there, but there are also huge amounts of benefits with collaboration.”
Martin noted that collectively representing an industry doesn’t always have to be about competition, but does have its advantages because it helps guide others to you. He mused: “We’re in a classic SME market and if you’re in a market like that it doesn’t hurt to gather around other people that are like you, whether it’s Savile Row or 57th Street in New York where you go to visit all of your all of your saxophone woodwind shops, or Denmark Street in London is where you go for your guitars.”
Standing up for the sector, Fowler pointed out that “the wine industry is full of really intelligent, really innovative, dynamic people who are here because they love the industry. They’ve often done well in another industry and come here because this is cool. This is about a product that helps humans sit around the campfire, tell stories and bond. So they’re here because they want to be here and we’re all innovators”.
Using the digital tools available
Farr insisted that “the other great thing is that we now have the digital tools to make it much easier for us to connect in the ways that are useful to us and know to not bother with the ones that aren’t”. That, he suggested, shows how the industry and the people in it are adapting to its needs over time, reading situations better and becoming more agile and effective at networking and building relationships.
Martin observed how even though “there are businesses who think that in order to be successful other people have to be less successful. Or, in order to have more customers, other people ought to really have a smaller share” but, he assessed, “they tend to be much larger businesses”.
Is working together always the answer? As Martin attested: “You’ve got to consider: Are you creating value? Is it better to collaborate and cooperate than trying to do it all on your own?’ Are you going to be more successful? Are you going to ultimately deliver a better experience to your customers?” Then, he suggested, each business owner needed to make the decision that is right for them.
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