Wine suppliers can't complain about tough supermarket deals

A host of leading Tesco wine suppliers have said they are not surprised by the supermarket’s £250 million accounting black hole – but say suppliers must “push back” harder against buyer demands.

Most suppliers say account managers need to better understand the “rules of the game they’re playing” in dealing with all supermarkets, but added that ultimately, if they are not happy with demands, they can and should walk away.

Supermarket wine

Supermarket wine suppliers should take responsibility for tough deals

As supplier/retailer relations come under the spotlight in the wake of Tesco’s accounting error, suppliers say account managers need to ‘understand the rules of the game’.

Agreeing to onerous deals with retailers can guarantee business in the short-term but causes longer-term problems, said one former supplier. “From there it’s an inexorable slide downwards. [Suppliers] feel aggrieved, but they should be most annoyed with themselves,”

Matthew Dickinson, former commercial director at Thierry’s Wine Services, told Harpers.co.uk: “Over the last 10 years suppliers have given fees relating to positioning and pricing discounts – a whole different basket of things – but there’s nothing illegal in that. It’s all part of the commercial transaction outside of the standard price and purchase side. It’s not unusual.”

As retailers have got more sophisticated, so too have the deals they make. For suppliers who are faring well at Tesco, they would “find a way to make it [deals/upfront fees] happen, and you would get your reward a couple of months later”, said one supplier.

Some also say wine gets a much easier ride than other categories - Dickinson states that while the dairy industry would really struggle against a supermarket’s dominance, “in wine we have a relatively evenly-balanced field.”

Suppliers also need to take greater responsibility, Dickinson said: “You need to go into a meeting understanding where your limits are. Suppliers must be armed with where they can get to, otherwise they will lose money. Many people are extremely unprofessional, and go into meetings without having planned. They will get a poor deal.”

“The closer you get to retailers, the more they try it on,” said another experienced supermarket wine supplier. But he is circumspect, saying “he doesn’t blame them for pushing their luck”. “If you’re selling £10 million through Tesco, that £10 million is a drop in the ocean to them. But to you it’s huge. That gives them a huge amount of power.”

Bernard Fontannaz, founder of Origin Wine, was philosophical: “If it doesn’t work for you – you might as well be delisted, in other words, get out of the kitchen if you cannot take the heat.”

New product development is key, according to Fontannaz. “You have to innovate – it’s not all about price, it can be pricing with some flair. That forces you to be more in tune with consumers.”

Read our special report: Multiples and suppliers uncovered

 

 

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