The on-trade dilemma

Consumers today can pick up a bottle of wine, scan the bar code and instantly discover its retail price. This is a problem for the on-trade. Robert Joseph weighs in.

Photo by Lawrence Suzara on Unsplash
Photo by Lawrence Suzara on Unsplash

Anyone who has tried selling their wine to restaurants will be familiar with these words: “Where else are you selling your wine?” 

And after you’ve explained it will appear on the shelves at Costco, or a similar retailer, you’ll then hear, “Sorry, but as much I like your wine, I can’t list it.” Unless, of course, you are offering Grande Marque Champagne, the latest cult rosé or the top Napa or Medoc wines that sometimes find their way into retail chains.Producers and distributors of almost everything else have to make a choice about where to appear.

The premise of the on-premises argument is that customers don’t like seeing a wine they put through the supermarket checkout for $15 appear on a restaurant list for $40 or more. Somehow, this resentment never applies to the branded spirits or bottled water on which restaurants and bars make high or even higher margins. But this argument has little effect on adamant sommeliers.

Twenty-five or so years ago, there were fewer opportunities to compare the on- and off-premises worlds. Restaurants were more likely to buy and mature wine themselves, in order to be able to offer vintages when they were at their peak, and there were fewer of the high-volume premium brands that are associated with the New World.
Today, as brands are increasingly being built in restaurants, producers have to make a sometimes painful choice between the reputation these establishments can deliver, and the greater revenue to be made from selling in larger quantities to retailers. 

Just to make matters worse, modern consumers may well be armed with smartphones and apps like Vivino that allow them to check prices within seconds. Is Chez Bernard charging more for its Chablis Les Clos than Chez Bruce?

The country where this behaviour is most common is China, where barcode scanning of every kind of product is almost a national pastime that is associated with and fostered by the world’s most booming e-commerce market. The solution for Chinese restaurateurs is private labels – often for quantities as small as a pallet of wine. This helps to explain the astonishing million registered brands that I was given by a customs official in Shanghai. The variation between the labels may be significant, or as subtle as the introduction of a made-up cuvée name. All that matters is that Vivino or 9KaCha, its Chinese counterpart, recognises them as different.

In that other leading import market, the US, the concept of separate labels is infinitely less developed. The cumbersome three-tier system inevitably fosters a dislike among distributors of having to fill warehouses with different versions of the same wines, and monitor their stock levels. And, of course, there can be local, state-level bureaucracy to deal with.

In India the situation is even worse, thanks to the cost of registering each individual label in the state in which it is to be sold. 

Despite these local and regional constraints and the undeniable inconvenience of this strategy, the growing ease of high-quality printing and labelling means it’s likely the Chinese model will be the one the rest of the world will follow.

And even if the accountants, logistics and warehouse staff groan at the thought, I can imagine the smile that’s going to spread over the faces of a lot of sales staff.

Robert Joseph

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