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20 October 2024
Grape and Wine Sector Regulatory Impact Analysis
Wine Policy Team
Department of Agriculture, Fisheries and Forestry
Email: Winepolicy@aff.gov.au
Dear Dr Emerson
Thank you for the opportunity to discuss with Coles Liquor the Grape and Wine Sector
Regulatory Impact Analysis.
Please find attached Coles Liquor’s submission in response to your Consultation Paper.
Please contact Ms Vittoria Bon, Industry Relations and Policy Development Manager
should you require further information.
Yours sincerely
Michael Courtney
Chief Executive, Liquor
Submission from Coles Liquor to the Grape and Wine Sector Regulatory Impact Analysis
Background
• Coles Liquor is currently comprised of Liquorland, First Choice Liquor Market and
Vintage Cellars. With a nationwide presence, Coles operates 800 Liquorland stores, 101
First Choice Liquor Markets and 94 Vintage Cellars.
• Coles Liquor operate around 17% of the retail liquor market in Australia.
• As a customer led business, we range the products our customers want to buy at price
points to suit a range of budgets.
• Coles Liquor offers more than 14,500 products across First Choice Liquor Market,
Liquorland and Vintage Cellars for customers to choose from.
• These products include beer, Ready to Drink, spirits and wines.
Key Issues
Competition
1. As a customer led business we offer local ranging to meet the specific needs of our
customers, which means every store format is unique. We retail products our customers
want to buy at price points to suit a range of budgets.
2. Coles Liquor retails approximately 7% of the wine produced in Australia by volume.
3. The balance is sold by competitors who comprise large format liquor retailers,
wholesalers, speciality wine retailers, the hospitality sector made up of licensed cafes
and restaurants, clubs and pubs and wineries.
4. Of the nearly 7% of wine produced in Australia that is retailed in our stores, red wine
makes up around 35%.
5. Nearly half of all the wine sold in our stores is produced by six large multi-national
companies.
6. Our suppliers set the cost price of their product and recommend a retail price.
7. Coles Liquor does not own any vineyards, wine production, storage or bottling facilities.
It is worth noting the impact of compliance on competition within the liquor market.
Complying with the various liquor laws and the licensing regimes in Australia poses significant challenges. These requirements vary across each state and territory and create a complex regulatory landscape. This complexity extends from formal matters such as the licence application process to operational requirements such as every Team Member obtaining acceptable responsible service of alcohol qualifications. This complexity and inconsistency not only creates a significant compliance cost but also increases the barriers of entry into the market. As a result, the opportunity for growth, innovation or competition in the industry may be hindered.
Exclusive Liquor Brands
Coles launched its own liquor label, Farmland Cellars in the 1970’s and today Exclusive
Liquor Brands comprise private label brands and brands exclusive to Coles. Exclusive Liquor
Brands complement an extensive range of products for customers to choose from.
Private label are the beverage brands that Coles Liquor develops and owns, in partnership with many suppliers across the industry. Private label products represent just over 4% of all the wine products ranged in Coles Liquor stores.
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In the last five years Coles Liquor‘s private label wine range decreased by almost 14%. This is in part due to an increase in Exclusive Brands developed in partnership with our proprietary suppliers.
Our business model is to build long term partnerships with suppliers of our private label brands.
The way we build our brands is no different to suppliers in other industries.
Coles Liquor is not vertically integrated; instead, we partner with select suppliers who produce our wine under contractual arrangements. This collaborative approach allows us to leverage the expertise and resources of experienced wine makers while maintaining the quality and standards that define our brand. By working with trusted suppliers, we can focus on our core business in distribution, marketing and retailing.
We are proud of our brands, and we invest in them to ensure success across the partnerships with our private label suppliers and to provide a point of difference for our customers.
Labels exclusive to Coles are owned by other suppliers and available exclusively to Coles Liquor customers and make up approximately 25% of all the wine products ranged in our liquor stores.
For all our Exclusive Wine Brands, Coles Liquor partners with winemakers to provide customers with a wide range of drinks to suit every occasion, drinking preference and budget.
All our Exclusive Liquor Brand products are subject to the same range review benchmarking and targets as our other products to ensure they have the right quality credentials to be on our shelves. Our Exclusive Liquor Brands have been consistently recognised for their high quality with more than 400 products receiving awards in FY24.
In relation to private label wine, we recognise there are concerns regarding labelling transparency and as we transition to our new business model, we will use this as an opportunity to enhance our labelling practices where appropriate.
Suppliers
Coles Liquor represents approximately 7% of the wine retail market in Australia. Therefore, suppliers have many options outside Coles Liquor in which to retail their product. However,
Coles Liquor is a partner of choice for our wine suppliers not only due to our national presence and scale, but because Coles invests in the long term viability of its supplier partners.
We continue to invest in stores and during the last financial year opened 45 new stores and renewed 97. Coles Liquor’s investment provides a platform for suppliers to launch and retail their products and to grow their businesses. Our significant investment in our supply chain and retail stores provides an opportunity for wine retailers to range their products, should they choose, in preference to selling their wine to the many other options available to them in the domestic and export market.
At Coles Liquor we work with hundreds of suppliers to offer an expansive range of wine to our customers. We value the partnerships we have with our suppliers, some of which have existed for decades.
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We introduced the Coles Liquor Supplier Charter in 2014 to provide our suppliers with assurance about the way we will work with them. The Charter is a formal commitment to deal in good faith with our liquor merchandise suppliers.
The Charter sets out what our suppliers can expect when they work with Coles Liquor and includes that supplier agreements are recorded in writing, if variations are made it is with the supplier’s consent, that we will be transparent about ranging and provide an accessible and efficient dispute resolution process.
Supplier agreements are negotiated in advance and provide certainty for our suppliers and include agreed cost pricing, payment terms, ranging and shelf allocation and volume requirements.
We prioritise prompt payments, recognising the important role our suppliers play in our business. More than 90% of payments to our small suppliers are made in less than 30 days.
By maintaining shorter payment cycles for our small suppliers, we help ensure our partners can manage their cash flow effectively, enabling them to invest and supporting the sustainability of their businesses.
Sustainable Wine Sector
Coles Liquor partners with more than 450 wine suppliers and we want all of them to operate in a thriving industry. As a customer led business we are reliant on our suppliers providing the wine products our customers want to buy.
We recognise the importance of a productive and sustainable wine sector and that is why we work hard to compete to range the brands our customers want to buy including by fostering loyal and trusted relationships with our valued suppliers.
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