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Wine agency suppliers to be hardest hit in Tesco range cull

Published:  02 February, 2015

Tesco's pledge to cut ranges by 30% as part of a massive overhaul of its entire product base will hit wine and spirits suppliers, especially those on the agency side, and is likely to be followed by the other major supermarket chains, industry experts have warned.

The wine and spirits trade will not escape "drastic" cuts to Tesco's product range, as chief executive Dave Lewis implements his far reaching turnaround strategy for the group. Harpers sister title, The Grocer, has revealed this week that Tesco has brought in management consultants, the Boston Consulting Group, to spearhead what is massive range review of up to a third of products across 40 categories, including BWS. The move is part of Tesco's focus on introducing a simplified pricing strategy based on improving availability on key lines which will help it go toe to toe with the slimmed down product ranges of the hard discounters.

The proposed range slashes are now making their way down to wine and spirits suppliers, has learned.

BCG will apparently use Dunnhumby Clubcard data to complete the review.

One wine supplier, who said the major retailers account for 60% of its business in the UK, said the range reduction will be "pretty much across the board" with the Big Four. "They have had it so good for so long that they got too fat. The discounters have a different business model and the Big Four will have to respond by cutting overheads," our source told 

He added that rather than suppliers questioning the strategy, they would be better served by coming up with propositions that respond to it. The source added: "From Tesco today - there isn't a lot of clarity on what their plans are."

He also predicted a knock-on effect across the supply trade - and as retailers will require fewer suppliers, there will be greater consolidation. This will hit agency suppliers harder than those who have producer links, he maintained.

If suppliers are pushed out of the multiple sector then it means they will turn more to specialist players like Majestic, Oddbins and the independent sector.

Greg Wilkins, managing director of Brand Phoenix, which supplies exclusive wine lines to the multiples as well as it own First Cape brand from South Africa,  told the 30% reduction in ranges was "probably about right". "Imagine trying to find the soft drink you wanted amid 750 other soft drinks? Wine is not so different to other categories that we can throw out that rationale. It's not about dumbing down. You can have a sophisticated range of products, just not as many."

But he warned the major retailers face the "danger of going too lean" when cutting ranges, as they still have to remain a "full-shop retailer", unlike some of the discounters.

He said he had already been through the rationalisation with Tesco, and given Brand Phoenix already has a "very focused range" at Tesco it had not been "affected materially".

Simon Doyle, general manager of Concha y Toro UK, said the Big Four were "all trying to find the balance between choice and availability", which posed "enormous" logistical challenges. He said he did not see cutting ranges as a "major issue", given brands should have a "clear job description" in the first place.