De Bortoli Wines, a family-owned wine group, has said that the deeper penetration of private label wines across shelves at Woolworths and Coles is putting the industry under pressure and harming profits.
De Bortoli’s managing director Darren De Bortoli told local media that the industry was feeling the heat from supermarkets giving less shelf space to branded wines as against private label wines that are offered at big discounts.
He argued that this pressure coupled with the high Australian dollar and the growing grape surplus was pushing rival winemakers to supply wine at greatly reduced prices that eventually found its way into private labels.
“It's tough because of their [supermarkets’] approach to private labels and the fact there are other wine companies being very aggressive in that area, someone has to supply wine to private labels,” he said.
“In a lot of cases [with private label wine] the quality is a lot lower, but it will take a while for the consumer to cotton on to that,” he added.
This is not the first instance of a senior industry executive going after the supermarket chains.
In August, Heinz CFO and executive vice president Arthur Winkleback said that the two supermarket chains in Australia created a hostile environment for manufacturers that squeezed the latter's margin for the last year.
Woolies the bigger culprit, but it denies any undue pressure
In his media interview, De Bortoli said that Woolworths was the more gung-ho of the two chains when it comes to private label wines and that Coles was certainly more supportive of branded wines.
This is reflective of the statement made by ex-Woolworths boss Michael Luscombe who said last year that he saw private label wines as the biggest growth area in liquor for the coming few years.
Woolworths, however, denied that it was playing favorites with its own private label wines, and called the trend a reflection of changing consumer tastes in the country.
Claire Kimball, a spokesperson for Woolworths, told FoodNavigator-Asia that the Woolworths Liquor Group ranges includes 6,130 domestic wines and 225 private label wines.
“The private labels constitute less than 4%. These 225 wines come under 17 brands,” she said, adding that the wines the retailer stocks in individual stores vary according to customer demand.
“Ultimately it is the customer who drives what makes it onto our shelves. Our private label wines deliver exceptional value for money and as a result are popular with customers,” she said.
Jim Cooper, a spokesperson for Coles, told this publication that the number of private label wines in Coles’ stores in Australia has remained broadly stable over the last two years.
Cooper added that Coles does not have a target for private label wine sales, and that the customers decide what products they want to see on our shelves.
“Most private label wine is sold in the entry level category, where customers are less concerned about brand names and more focussed on value,” he said.
“We are committed to ensuring our customers can buy the wine brands they know and love in our stores, as well as choose from a range of great value private label wines,” added Cooper.