Discounts 'hurt winegrowers'

17:00, Sep 26 2012

The outgoing chairman of New Zealand Winegrowers has accused the Kiwi supermarket duopoly of slashing prices on nine out of 10 bottles of wine just to get shoppers through the door.

Stuart Smith, who steps down as chairman of the industry body and as president of New Zealand Grape Growers next month, has suggested a ban on alcohol pricing in advertising to make supermarkets rethink their heavy wine promotions.

Smith, who is also co-director at Fairhall Downs Estate in Marlborough, said the industry was hamstrung because 70 per cent of all wine sold in New Zealand was through the country's two main supermarket groups - Progressive Enterprises, operator of Countdown, and Foodstuffs, which operates the Pak 'n Save and New World chains.

“Of that, 90 per cent are sold on promotion whereas it is 25 per cent for other goods,” he said.

“I'm sure some [wines] are selling, on occasion, below cost.”

The supermarket chains were slashing prices on all varieties including premium wines by as much as 50 per cent, which was heavily impacting returns to wineries. Wineries choosing to have their products displayed on aisle-ends were hit even harder, as they paid a fee for the space, advertising costs, and then a till or scan fee for every bottle that was sold.

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“Out of the bottom of that falls a little bit of money that goes back to the winery,” Smith said.

One way of mitigating against blanket discounting across the category would be to ban pricing on advertising.

“It's my personal opinion. It would dent a lot of the effort to sell on promotion,” he said.

“Brands are important in all goods and people should have the right to build and promote their brands, but promoting on price is a bad thing.”

Foodstuffs spokeswoman Antoinette Shallue said the group worked hard to get the best deals for customers but was committed to paying a fair price to its suppliers.

“The wine industry has just gone through a long period of oversupply which would have reduced the base price for grapes and the overall return for producers,” she said.

“This growing phenomenon is beyond our control but has been hugely beneficial for consumers who have been able to enjoy a large degree of choice at relatively low prices.

“Recent grape yields suggest the days of oversupply may well be coming to an end, so consumers may start to see a slight edging up of wine prices in the future,” she said.

Progressive spokesman Luke Schepen said Kiwi shoppers looked for discounts across all categories.

“There's a wide variety of [liquor] retailers that are very competitive and that's why you do see Kiwis picking up wine or beer on promotion - it is a fact of a competitive market,” he said.

Smith said individual winemakers were unlikely to speak out. “They can't go down the road to the other supermarket. We have no choice . . . that's the reality.” Fairfax NZ

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