Supermarkets are further reducing the number of wine suppliers they use and are expected to get tougher with brands as it becomes harder to make a profit from the fixture.
Grocers were increasingly questioning the role of some brands in their wine aisles, one supplier told The Grocer, warning that brands outside the top 10 would have to invest to avoid losing their spot to retailer-exclusive wines.
Last month, Morrisons told suppliers it was seeking greater volumes from fewer suppliers, The Grocer has learned. Industry insiders believe that it has reduced its wine supply base by 35% to 40%.
It follows similar moves by Tesco. After cutting around a third of its wine suppliers 18 months ago, it is understood to have made further cuts earlier this year.
Wine brands need to justify their space on shelf, said John Osborne, sales director at importer PLB. “In most instances profitability is not there, which makes it extremely difficult to invest in price as well as achieving significant above the line spend to behave like a real brand. This is a difficult decision for any brand owner,” he added.
Promotional space was becoming less profitable against the backdrop of rising duty and unfavourable exchange rates, said First Cape sales director Steve Barton. This meant retailers were taking a hard look at the commercial viability of their ranges.
Barton added that retailers were beginning to give more space and facings to top-selling items from a smaller number of brands
“Supply chains must be cut back, particularly in New World wine, because you’ve got too many suppliers in too little space and profitability on gondola ends is getting stretched,” Barton said, adding that activity was needed in the wine aisle to drive purchases.
Morrisons and Tesco declined to comment.