George Pitcher: Globalisation is flawed if it halts street-level progress

As global giants jostle for position in mega-mergers, urgent street-level deals, such as Castel’s recent offer for Oddbins, are being held up. By George Pitcher

One of the big problems with globalisation is that, while Western governments and multinational companies believe it to be a tremendous idea, no one has tried very hard to try to make it work at a local level.

This is not, admittedly, the greatest problem facing globalisation. That accolade must go to the decision of the most powerful nation on Earth and its allies to go to war in an Asian country about the size of Texas – an initiative that has left the Arab world stroking its beard thoughtfully.

But, whatever optimistic and premature claims have been made for globalisation at the political level (and may now be up for review), I haven’t ceased to be startled by how ill-prepared the world has been for commercial globalisation, while those with an interest in it have enthusiastically claimed otherwise.

The most enthusiastic advocates of all have been the Internet mob. They were largely knocked back into the box they constantly claimed to be thinking out of when the dot-com bubble burst so spectacularly last year. But there are plenty of major corporations, uncorrupted by the infantile ravings of the dot-com gang, that would still have us believe that the world is a single market, with the dollar its common currency, even if the evidence before our eyes contradicts this claim. For businesses at a street level, if the world is a single market, then someone has forgotten to tell its inhabitants.

The examples are legion: from Western corporations whose working practices obstinately fail to understand Islamic cultures to fast-food joints that attract violent iconoclasm as symbols of US imperialism, to international mergers that become bogged down in local regulatory disputes.

But let me alight on one trading paradigm – one very close to home – that demonstrates how flawed the principles of globalisation are, without recourse to all the drama, politics and clichés of the anti-globalisation movement, with its G8 summit riots and dogs on strings. When the massive media and leisure conglomerate Vivendi Universal was formed last year through the merger of Seagram and French group Canal+, it became contingent on agreement that Diageo and Pernod Ricard would acquire Seagram’s wine and spirits interests. One year on and we’re still waiting. The deal is bogged down at the US Trade Commission, which opposes the Seagram deal on the basis that Diageo (with Bacardi) will have monopolistic brand power in the rum market if it adds Seagram’s Captain Morgan to its portfolio.

Meanwhile – and this is what I mean by a street-level issue in the UK – Castel Frères, the French wine producer and owner of the Nicolas chain of wine retailers, has an offer on the table to acquire off-licence chain Oddbins from Seagram. This deal can’t be completed until the whole chain of conglomeration up through Diageo, Seagram and Vivendi is unwound.

Now, I have no idea whether the Castel offer for Oddbins makes sense, either financially or in market terms. Oddbins has been estimated to be worth £65m, while Castel is said to have bid only £52m during the summer. This is little more than the peanuts by the till compared with the £5.5bn or so Diageo and Pernod would fork out for Seagram, but it may be the sort of penny-pinching that bodes ill for Oddbins.

Castel’s Bordeaux marketing has always seemed rather plodding to me, its Nicolas shops downright boring, while Oddbins has prospered as a 240-odd branch chain with a potent marketing mix of knowledge and range, rather cleverly (like Hackett in tailoring) dropping its bin-end, cut-price image along the way.

But, as I say, I don’t know enough about Castel’s plans to comment much on the quality of the proposed deal. What I do know is that Oddbins should be allowed to get on with its life in difficult retail markets without being held up by the equivalent of world powers arguing about territorial sovereignty (in this case market shares) on distant continents.

At about the same time that the Vivendi deal was struck last year, precipitating the kind of international engineering that makes the Hapsburgs look like parish councillors, Oddbins announced a joint venture with Sainsbury’s for online wine sales. There is one announcement of this, dated October 2000, on Seagram’s website, but, unsurprisingly given the uncertainties over ownership, no corporate mentions since.

I can confirm the joint venture is operational; visit Sainsbury’s website. It’s called The Destination Wine Company and trades as Taste for Wine, with some assistance from Sainsbury’s joint venture with Carlton TV.

I hope it is going well, but I have my doubts. We may learn more this week when Sainsbury’s announces interim figures. Early indications suggest it has been having difficulties with its website, with complaints of peak-time overload and the like. But the chain reports that online customer numbers have increased by 30 per cent over the past three months.

Whatever the circumstances at Sainsbury’s, Oddbins is a good company that needs, and deserves, investment. In part, it needs the investment to fulfil its online potential. It can’t be the only example of a company battling against cut-throat retail markets while the global giants that control its destiny slug it out in worldwide markets like international statesmen.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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