After years of trying to beat the supermarkets at their own game, with price cutting, wide product ranges and staff training in wine, specialist off-licence chains have been losing the battle for take-home drinks.
It is only now that they seem to be hitting back with new-style outlets (MW November 8) and the first signs that “branding” is becoming more than just nailing a different name above the door of the stores. Some observers predict that the restructure in the industry will lead to as many as ten per cent of off-licences closing.
Over the past 20 years supermarkets have increased the amount of space they dedicate to selling alcoholic drinks. Wines and spirits can now account for between ten and 15 per cent of a supermarket’s turnover, according to supermarket sources.
The convenience of sweeping a few multipacks of beer and half a dozen bottles of wine into the shopping trolley means the supermarkets now take about 60 per cent of the 6.5bn spent on take-home alcohol in the UK.
In contrast, the two largest specialist off licences, Thresher and Victoria Wine, with more than 3,000 outlets between them, are thought to make profits of less than 10m and sources suggest are hampered by chronic under-investment. Their share has grown only through acquisitions of other specialist chains.
The off-licences have been caught out by the same seemingly unstoppable supermarket juggernaut that has been devouring everything in its path – first the grocers, the bakers and butchers and more recently petrol retailers, opticians and dry-cleaners.
The supermarkets’ desire to dominate the beer and wine business was further underlined earlier this year (MW 12 April) when Tesco inquired about buying the Seagram-owned Oddbins. The company apparently wanted to exploit the chain’s brand to build its in-store strength in beer and wine, but it baulked at the proposed 60m bill.
Observers now see the opening of Thresher’s first Booze Barn store at London’s Staples Corner retail park last week as evidence of a new era in the fight-back against the supermarkets.
Victoria Wine’s intention to open its own warehouse-style drinks outlet shows the specialists are determined to win back the initiative. One of the Victoria Wine stores will be positioned next door to a supermarket literally to take the fight to them and also act as a monitor on the impact the outlets might have on supermarkets.
However, critics say the opening of drinks sheds by the two biggest players is merely a continuation of the specialists’ mistake of trying to mirror, rather than out-think, the supermarkets in a game that they cannot possibly win. The last time Thresher tried such a concept, “Corks & Cases” in Coulsdon in 1984, it closed after one year.
To complement the big-barn strategy, the largest chains – Thresher with 1,600 shops, the 1,500-strong Victoria Wine and Greenalls with nearly 500 – are experimenting with new branded formats to seduce consumers away from the supermarkets.
Earlier this year the Allied Domecq-owned Victoria Wine opened stores which are an off-licence version of the brewer’s Firkin pub brand. It is seen as one of the first signs that the company is planning to push new branded concepts – previously it has only had Victoria Wine Cellar as a sub-brand.
But the development of the Firkin concept is a positive sign – if a very cautious one – that the chain is looking at ways of segmenting its customers and targeting them through new brands.
The third-largest player in the market, Greenalls Cellars, claims to have embraced the branding issue most seriously. Previously the bulk of its 476 stores were all branded as Cellar 5, which is a standard off-licence competing with the supermarkets on price, range and service.
But under managing director Nader Haghighi, who spent 14 years at Thresher, the company has developed five new concepts, each aimed at a different target market. Many of the Cellar 5 stores are being converted to one of the new concepts – Wine Cellar, Berkeley Wines, NightVision, Blayneys News & Booze and Greenalls Food Store – or are being closed as new branded outlets open.
“The market has to diversify and innovate to make the specialists live again,” says Haghighi. “Segmentation is the basic market philosophy, but it needs innovation. It is not just about giving a different brand name – you have got to fulfil customers’ aspirations.”
One of the latest developments from Greenalls is the addition of cafÃ© bars in its Wine Cellar chain – located in areas with a large number of AB consumers. The bars let consumers try out wines – for a corkage charge of 2m – and aim to give them an added reason to visit an off-licence. Other new concepts include NightVision, which combines a Blockbuster-style video shop with an off-licence. The newest chain, Blayneys News & Booze, crosses an off-licence with a newsagent.
Thresher has its stores branded under six different names, though critics argue that while they may have different brand names, there is little real difference between them. The offer of a Wine Rack store or a Bottoms Up is little different to that offered by the Thresher Wine Shop. The Thresher Drinks Cabin is just a standard Thresher off-licence with a different name.
Consequently Thresher has turned to advertising to position itself against the supermarkets. The ads, through agency Barker & Ralston, attempt to show the off-licence as a good place to browse for new wines with trained staff who can advise on choice. The agency’s planning director, Rupert Hopkins, says the supermarkets have succeeded in taking some of the pain out of shopping, but have been less successful in making it a pleasurable experience. “The environment of supermarkets works against the enjoyment values of wine, and it is hard for them to make it pleasurable. There is another ball game, and that is the direction in which the off-licences have to go, such as browsing in a wine shop, which can be the best fun you have for under a fiver,” he says.
The specialist off-licences are uniquely positioned to resist the supermarket steamroller and could show the way for others to hit back at the superstores’ plans for overall domination. But they must act now.
Both Thresher and Victoria Wine have the backing of powerful parents in the shape of Whitbread and Allied Domecq respectively. But the chains need fresh investment to find a successful formula for converting off-licences into destination stores for consumers. However, it will require a leap of imagination and maybe even a little bravado to take the first steps in developing brands.