Soapbox: Battling the behemoths

By Harpers Editorial

Published: 17 November, 2022

Nick Gillett, MD of Mangrove UK, on the uphill battle smaller brands face with ever more powerful players dominating the industry.

The story of David and Goliath is being played out left, right and centre in the alcohol industry just now. I won’t whine my way through the quagmire of sticky stuff that is the current trading environment – we all know that only too well. But this is being compounded by questionable practices that work to the benefit of the UK’s supermarket chains and spirit conglomerates, and risks putting young, creative (and smaller) alcohol producers out of business.

How do independent brands meet soaring demands which require money, time and resources that only the behemoths of the industry can afford?

Let’s start with the off-trade and, specifically, supermarkets. I appreciate some may only have a small violin handy for these, but it has to be acknowledged that supermarkets, like everyone else, are under pressure to generate larger returns for shareholders in the current climate. But this can cause myriad practices that are exclusionary of smaller alcohol suppliers.

Across supermarkets, shelves are ‘pay to play’, with volume deals that simply can’t be met by smaller brands. Contracts made with the world’s largest drinks companies might include exclusivity clauses, minimum quantity order, and marketing investments that are beyond the reach of smaller independents. And okay, some of the UK’s grocery titans do have commitments to local or small business procurement, but these are all too often offset by an associated ask for suppliers to guarantee investment in marketing or support that’s only truly affordable to the big global drinks players.

Over the festive period, I expect we’ll see heaps of discount deals on alcohol to entice consumers, but these create big demands on suppliers. The behemoths can afford to meet these demands and negotiate using rung-tier pricing structures. But if you’re an independent, you can’t afford to trade at a loss for the sake of being present on that elusive supermarket shelf.

To me, there’s a fine line between advantageous business practice and unfair business practice, but with the way supermarkets are filling their shelves you have to ask whether we’re in danger of crossing the line as an industry.

I’m not crazy – if you’re a consumer, and you get a brand you like, at a price you like, then happy days. But if you think that supermarket has curated an offering just for you, you’re wrong. It’s more than likely a simple selection of big brands that can afford to pay to play. Whereas small and bespoke alcohol retailers are fast-becoming places of education and discovery; sellers that are curating ranges built up from innovators and creators. You’re unlikely to find a discount here, which does give us hope.

When it comes to the on-trade, there are often similar frustrations. While restaurants and bars might pay lip service to brand choice and quality, the existence of listing fees and practices which see products sold below the cost of production suggest otherwise. Listing fees are banned and regulated in other parts of the world, which I’m not necessarily saying is the answer, since how do you then gain that all-important presence when you’re in a brand-building phase?

What, then, is the answer? Government interventions might help to a degree – you could always regulate alcohol promotion, minimum pricing, and listing fees. But I think there’s a simpler solution and it’s one of principle. In today’s environment, where cash is king, principles all too often go out the window. Sustainability, creativity and diversity can be less easy to quantify when we measure success through the value of a deal and the bottom line.

I say turn that on its head. If we continue on this path, we’re going to see a reduction in consumer choice, a reduction in interest that ultimately alienates discerning customers. And beyond that, the global drinks players might just find they have to reinvest in R&D because all these smaller brands they’re buying to diversify the portfolios have long since disappeared.

Lord knows we need a silver lining. And thankfully there is one: not everyone is driven by price. The hospitality industry is a living, breathing thing that focuses on experience, taste, interaction and discovery. There are successful independent retailers who are driving education among discerning consumers, and as for the independent drinks brands – you’ll never stifle their ability to create competitive, fresh products.

Ultimately, in a free market economy there will always be deals to be done, and those operating at scale will continue to dominate. But in the end, brand-building is the best way to create consumer connection – not discounting. And as a result of this, I’d say in the long term, David has just as good a chance as Goliath.

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