Tesco – Flying Wine Buyer

Retail News – Tesco’s Phil Reedman is the only UK supermarket wine buyer to be based full-time in Australia. What on earth is he doing down there? asks Penny Boothman

I’ve shopped in Tesco supermarkets in lots of countries; France, Hungary, Poland – and of course the UK – but never in Australia, because there aren’t any there. In fact Tesco has only one employee in Australia, and he’s a buyer.

“It’s a sad club of one, the Christmas party is a bit of a short affair,” jokes Phil Reedman MW, senior product development manager, Tesco. Around eight years ago, category manager for wine Anne-Marie Bostock had a premonition of just how huge the Australian sector was going to become. The problem was back then it was not an easy market to work in, so a bit of lateral thinking was required.

Reedman explains, “What traditionally happened was that the buyer would go out for a two-week tour, blitz the country from one end to the other, go home – you know what it’s like, you’ve got jet-lag for the first week, you’re so exhausted after that that you’re not sure what you’ve seen or who you’ve talked to. You’ve done a job, but you’ve not really optimised it. So Anne-Marie’s vision was to put someone down here on the ground in the market that would give us a huge competitive advantage.”

So Reedman made the move Down Under in September 1998 and neither he, nor the retail giant, have looked back since.

“It was a great move by Anne-Marie and by Tesco to be bold enough to put someone down here and also by subsequent category directors to keep the position because it has delivered enormously for us. If you look at our market share and how we over-trade in Australia, it’s paid off many, many times over,” says Reedman.

Given the leg-up that this move gave Tesco in the Australian category, the continued absence of other UK retail buyers resident in Australia is perhaps surprising. But not all buying structures are the same, and Tesco has a slightly different way of doing things. “We split wine buying into three roles. We’ve got buying managers, who are principally the finance experts and supply chain managers, they’re based in Cheshunt. The second leg of the tripod is the product development managers, who are also in the UK – apart from me! – and they are the wine experts. And then the third leg of the set-up are the customer managers. They’re the ones that spend time reading the Nielsen data, understanding trends in the market, and feeding back exactly what the trends are, saying ‘We’re under-trading in Sauvignon Blanc from North America,’ or whatever.

“Other retailers have a buying structure which is one person who is supposed to be a financial expert, a wine expert, and he’s supposed to be a customer expert – I’m staggered!” he continues. “While I do have to be acutely commercially aware it’s not left to me to both blend the very, very best wine that I can and at the same time negotiate with the supplier to shave that extra cent a litre off the margin to hit my target. Doing both of those things is one hell of a job. I respect my competitors’ buyers enormously, I don’t know how they do it, but I think the Tesco results do speak for themselves.”

And what a result it is. As many as 135 of the 750-strong Tesco wine range are Australian, making Reedman responsible for nearly 20% of their shelf space. The much publicised range rationalisation last August actually added 10 wines to the Australian range, and Tesco launches new wines twice a year. Most multiple retailers will tell you that own-label wines make up around 50% of their sales, but with the Australian range in Tesco, own-label participation is currently more like 20%.

Strong brands

“That’s because you’ve got such strong brands in Australia,” explains Reedman. “I’d like it to be higher than 20% but we can’t get it there, yet.” Price points range from around £2.99 for Tesco Australian Dry Red and Dry White, (which can drop to £2.77 when price-matching with other retailers) to £100 for Penfolds Grange.

I have to confess at this point that I don’t recall stumbling upon a bottle of Grange in my local supermarket, but surveying the wall of wines on display it’s clear that they’re not all big brands. “If someone gives me a great wine that we really want to do, and they say they’ve only got 2,000 cases, then it’s my responsibility to manage the distribution; so we can work with very small producers,” says Reedman. “But I do get offered lots of wines, and I’ve lost sleep about how many times I’ve turned down the Beatles! I’m a bit like a kid in a sweet shop, I may want it all, but that’s not reality, is it? I would love to sell more premium wines; as a retailer the cash margin is great for us.”

Wine surplus
However, there’s no denying that volume is the main driver in the multiple grocers, and for a large retailer trying to get large quantities of wine onto the shelves as economically as possible, Australia’s well-publicised wine surplus must be something of a blessing.

“Prices are softening on the whole, I would say,” says Reedman. “Every year at this time of year people start thinking, ‘Vintage is only two months away and I’ve still got wine in tank,’ and they try and empty those tanks before vintage. It’s difficult to take advantage of those offers. There might be a great price, but physically we can’t take them and also morally I can’t say to someone I’ve already committed to ‘Sorry I’ve been offered Chardonnay at 50c/litre less.’

“I think the biggest barrier to Australia in terms of getting itself up the price scale is the global availability of wine. There are some great wines from Australia but the thing that is depressing prices overall is that lots of countries are awash with wine, and they’re all vying for a share of the UK consumer’s expenditure.”

So what’s next for Australia? If anyone has their finger on the pulse of the Australian industry, then it’s Reedman, and sure enough he’s been following a few significant trends. Rosé, Sauvignon Blanc and premium wine are naturally top of everyone’s to-do list to get out of the surplus situation.

“Over time with strong brand management and increasing quality each year there is the potential there to get retail pricing up. It’s delivering a markedly better wine, and producers here are looking to do that.”

And he should know. As Reedman’s strategic exile continues to pay off for Tesco, he could be facing a few more solo Christmas parties to come. db February 2006