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...sold through its website.
Delhaize’s main asset is not only its network of stores - 169 company operated supermarkets, 191 franchised supermarkets and 218 convenience stores – but also its great image as a wine retailer, patiently built over 6 generations. This image is extremely precious in Belgium, where supermarkets and hypermarkets sell two thirds of all wines consumed and customers tend to think that a retailer who sells fresh produce and fine wine is a good place to do one’s shopping. In these terms, Delhaize is ahead of its competitors.
History As was the case for most retail dynasties in Belgium, Delhaize started as a grocer, with a network of small shops in urban districts. That was in the 1860’s. What built the success of a food retailer then was coffee and wine, and these were personally selected by the head of the company. Today, Delhaize inevitably has a buying department, but the personal image has survived.
Wine is not the most popular drink in Belgium – beer takes that prize - but average consumption is growing, from 10 litres per head in the 1970s to 25 litres today. Not a wine producing country itself, Belgium has always been open to imports. Not surprisingly, it traditionally relied on wines from neighbouring France, which still accounts for two thirds of all imports, but Belgium is now looking at other sources. Delhaize has contributed to this opening. First, it has promoted smaller, lesser known regions of France such Pécharmant in Bergerac. Then came a new generation of buyers, still active today, who sensed the potential of New World wines and launched Chilean wines in Belgium at a time when even specialised wine retailers had yet to discover this South American country. Success was not immediate, but Delhaize persisted. The wines were simple and easily approachable - and the prices attractive. As was usual, Delhaize bought the wines in bulk and bottled them in its own facilities to save on transportation costs.
Logistics
This is an important aspect of their business. Although wine sales represent only 5% of Delhaize’s total sales in Belgium, the group maintains a large bottling facility in the heart of Brussels. Even if its efficiency has been challenged, Delhaize still bottles two thirds of the wines it sells. That figure was over 80% in the 1980’s. Some analysts believe that the chain’s sudden interest in the New World was partly dictated by logistics. By the end of the 1990’s, many French producers were trying to reduce bulk sales and claimed that the wine supplied to and bottled by Delhaize differed from the one they bottled themselves. The only difference on the Delhaize labels were the words „Elevé et embouteillé par Delhaize Group“. Whatever the truth of the claims, one still finds a lot of French wine bottled by Delhaize.
Teamwork
The Delhaize buying team consists of three buyers. 30% of their |
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working time is devoted to prospecting trips. Senior wine buyer Stefaan Wauters explains: „We have to keep in touch with the markets. This is essential if you want to import from lesser known regions or emerging winemakers.“ Delhaize’s buyers remain at their post for long terms, longer than in other departments and longer than in most other chains. They are viewed as masters of their trade and are given more responsibility by their superiors. What are the buyer’s criteria? It varies. Value for money is always in the back of their mind, but plays a larger role for less known origins. Whereas certain French or Italian appellations are musts, wines from emerging regions must pass other tests. Usually, they play on exotic origins, colourful labels and a well-known varietal; but the Belgian customer is seldom prepared to pay as much money for a „foreign“ wine as a French one of comparable quality.
Good selling atmosphere
What makes Delhaize different from its competitors, and even retailers abroad, is not so much the wines they sell. After all, their prices are similar to those seen at Carrefour or Colruyt, at least for most high rotating SKU’s. In terms of origins, their offer, although larger than most, is also standard for a Belgian supermarket. At Delhaize, France still dominates with roughly 70%, followed Italy with 10%. Then come Spain, Chile, Germany, Luxemburg, Australia, South Africa and California, with New World wines accounting for 12% of the sales.
Delhaize’s trump card is elsewhere: in the quality of their relationship with their customers. Delhaize buyers select good wines, but this is only the beginning. Its people are effective in creating a positive atmosphere in their stores, in communicating simply but efficiently to their customer base, whatever their feeling towards wine. Stefaan Wauters believes that good merchandising is a key factor: „We try to keep it as simple and visual as possible so that the customer does not feel lost. This is not easy when you offer between 500 and 600 wines, depending on the size of the store. Wines are grouped by colour, country and region. Our wine section is an island in the store“.
That island is made attractive by presenting the finest wines in wooden cases and setting up small boothes where tastings are offered. In a standard Delhaize, the shelves are low, and what is lost in terms of facing is won in visibility. This is exactly the opposite to the corridors of high gondolas at Carrefour or Colruyt, who focus on efficiency, but lack in personality. Further, at Delhaize, wine is often promoted outside the wine section. Certain wines might be highlighted at the fish counter, others at the butchers or with the cheese. Cross merchandising works well, for customers appreciate the retailer providing them tips at the spot where they choose what to eat. Wauters also trains his personnel: „Delhaize wants the customers to participate actively and organizes tastings. |
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Each store has a certain amount of wine reserved for promotions with the clients, each weekend. Someone has to be there who is able to speak knowledgeably about the wines. This is where our wine advisers come in handy.“ These advisers, who on weekdays stock the shelves and answer customers’ queries, are regular employees who follow a special 11-day course with a final examination. They receive lectures on wine making and the geography of the wine regions in 21 countries, tasting, merchandising and selling techniques. Those who pass the exam wear Bordeaux jackets with silver grapes and assist less qualified staff. When an adviser quits or a new store opens, the successful examinees can be promoted to full-adviser. There are today some 150 Delhaize wine advisers in Belgium.
Another important marketing tool is the „Carte des Vins“. Wauters: „We issue four of them each year. Although they contain a price list, they also include a booklet presenting a wine region or country or a selection of wines that can be combined with seasonal meals“. The brochures are practical and easy to read. Information is seen as an indirect selling tool. Almost everyone in Belgium remembers the advertising campaign „Delhaize, Le Sommelier“ and in simple terms, the chain has done a good job of its self-appointed task as wine educator to the masses.
Delhaize not only offers 600 wines in its stores, but also has a well kept and very dedicated commercial website www.delhaizewineworld.com that lists more than 1,300 wines.
With this site Delhaize targets wine buffs and is able to offer more expensive products. 320 are priced at more than 25 Euros, 73 at more than 50. On average 60 orders are placed each day, with the average price through that site at 15 Euros per bottle, far higher than the 4.50 in stores.
What competitors?
Four major retailers account for two thirds of all wines sold in supermarkets in Belgium: Delhaize, Carrefour, Colruyt and Aldi. While Delhaize alone moves 22% of all wines sold in Belgium, Carrefour moves 21%, Colruyt 17% and Aldi 14%. Cora, Makro and Champion each account for no more than 3%.
Delhaize does not organize wine festivals, like its main competitors. Wauters: „A good permanent offer proves your skills better than any promotional festival“. On the other hand, Carrefour wine buyer André Gigantelli insists that „Carrefour sells more than one million bottles in less than three weeks at such festivals. Who can resist?“ Further, Delhaize almost never carries the same brands as its competitors. The success of this strategy of differentiation has inspired the company to decrease the number of big brands on the shelves so that comparisons are more and more difficult. These big brands are replaced not only by private labels, but also by smaller, often prestigious |
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brands with whom Delhaize has exclusivity contracts. Traditional promotions on branded products have been replaced by image-building loyalty programs with only a small loss in the number of customers and a considerable reduction in costs. Their competitors envy Delhaize’s freedom and the customer base they have.
On anonymous competitor sums it up: „in terms of wine image, there are two successful chains in Belgium: Delhaize, which does well with a large, organized offer, and communicates effectively with its customers, and Aldi, whose very small selection is enormously successful and attracts people through word of mouth.“
From Belgium with love
Although Delhaize is still very proud of its Belgian background, the Brussels-based group makes two thirds of its sales in America, mostly under the Food Lion brand. In the 1970’s Delhaize felt that the domestic market could no longer sustain its growth, began investing overseas and is now reaping the fruits. Since then the group has expanded to the Czech Republic, Greece, Rumania, Luxembourg and to neighbouring Germany, where it has two trial stores. It has also made unsuccessful forays into France, Portugal, Slovakia and Southeast Asia, but has withdrawn from all of these. Delhaize managers are practical. Contrary to the French Carrefour or the Dutch Ahold, who have not always shown the same self-restraint, they rarely boast or announce great plans. Although a certain degree of coordination has been introduced, the management in each country is left to local people, never forgetting that retailing is always a local business. This pragmatic approach may explain why Delhaize has not expanded into the Netherlands, where Albert Heijn is so strong. Delhaize must have thought that the price conscious Dutch would not be as receptive to its quality-focused approach.
Historically, Delhaize has never been a discount retailer – or rather it has never been cheaper than it needed to be. Even at home, Delhaize has long suffered from a price differential with its rival GB – now Carrefour Belgium - and the soft discounter Colruyt; but it manages by proposing exclusive items that make price comparisons difficult to make and by emphasizing customer loyalty. Traditionally, Delhaize customers were, in any case, rather well off. Because the largest Belgian retailers have bought out almost every other competitor and face each other in every city, this is perhaps less true today – and competition is fierce. As a result, Delhaize has become more mindful of its price image. By integrating buying processes within the group it has been able to lower its prices without losing much in terms of margins.
Belgium is three markets in one
Brussels, the capital, is very cosmopolitan. Consumers there are ready to pay more for more prestigious wines. They like variety and they are looking for names. Wallonia, in the South, is a poorer region, where consumers are more faithful to French origins and looking for bargains; but they also drink much more volume per head than the two other regions. Their consumption is 85% red. Flanders is the most populous region. The average consumption is low, but increasinging at great speed. Once Bordeaux and Mosel aficionados, the Flemish are discovering the pleasures of New World wines, principally whites.
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