Why independent liquor stores can survive the big-box retail threat

Simon Evans
April 4, 2016
The $16 billion liquor retailing industry won’t end up like the hardware sector, where single-store operators have virtually no chance of survival against big-box chains such as Bunnings.
The chief executive of the Australian Liquor Stores Association, Terry Mott, said well-run independent stores still have a strong role to play. He cited the convenience factor – where customers look to buy from smaller stores as well as the industry giants such as Woolworths’ Dan Murphy’s and Coles’ First Choice – and the sheer diversity of the products that can be stocked.
Mr Mott, whose organisation oversees both ends of the spectrum – from big-box stores to single-store independent operators – said the packaged liquor retailing market isn’t headed toward a situation like hardware, where the Wesfarmers-owned Bunnings chain dominates the market and is set to increase its grip now that Woolworths is exiting from its disastrous $3 billion attempt to set up a rival, Masters.
Mr Mott says hardware is dominated by big players with warehouse-style operations because the number of suppliers is much lower, and the product offerings in stores is generally similar.
“The difference in hardware is that everyone’s selling a Stanley or a Makita,” he said.
“Their ability to differentiate the offer is fairly limited.”
But Mr Mott said the most successful independent operators are constantly fine-tuning their offers and getting in different products that appeal to their local customers, who are also looking for the convenience of being able to pick up a bottle or two on the way to a function or a dinner party.
Roy Morgan Research in November, 2015 estimated that Woolworths had about 46 per cent of the packaged liquor market with an estimated 26.3 per cent market share held by Dan Murphy’s, while Coles had about 18 per cent across Liquorland and First Choice.
Price, service, education are factors
The co-owner of independent store Boccaccio Cellars in Melbourne’s Balwyn, Anthony D’Anna, said turnover in March for the store is up 35 per cent compared with the same month in 2015.
Offering imported wines from Italy, the United States and France that complement its local offerings has helped to spur that growth, along with ensuring there were always interesting new specials in the range for a loyal local catchment area, he said.
“Price is obviously a factor, but so is service and education,” Mr D’Anna said. He said the big chains do have strong pricing power, and single operators who aren’t tapping into their customer base and giving them a reason to return will struggle. “There’s always going to be those falling by the wayside in this industry.”
Smart wine producers, and makers of craft beer and craft spirits, knew that being a supplier to the independents reduced the risks of being beholden to a big players.
Giuseppe Minissale, the general manager of Porter’s Liquor, a group of 22 liquor stores in Sydney, said scale is important for independent stores, and being part of a banner group is a plus because of the better buying power and larger size of the operations.
“At the end of the day you need scale,” Mr Minissale said. He said large beer, wine and spirits suppliers also hold substantial power, and to run promotions and specials without their support is difficult to do. Mr Minissale, who is president of the Australian Liquor Stores Association, said the clout of the big suppliers shouldn’t be underestimated.