Cost increases take their toll

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Independent traders say it’s inevitable that consumers will face higher prices following an unprecedented rise in the cost of wine and other drinks.

Merchants are also being hit by soaring utility bills and fuel prices, as well as additional costs associated with shipping. Rises in business rates, rent and staff costs are also taking their toll.

Indies are reporting an across-the-board increase in wine and spirits, which is adding around £1.50 a bottle to some core wines in their ranges.

Merchants who ship direct say groupage costs from France have shot up from under £4 a case to over £13. The cost of transporting a 40ft container from South America has risen from around £2,700 to nearer £4,300.

“It’s an extremely challenging time to be in business,” says Jen Ferguson of Hop Burns & Black, which has two branches in London.

“Every business owner will be going through the same dilemma right now. Costs are rising exponentially across pretty much every aspect of what we do, but there’s only so much we can absorb before we need to start passing some of these costs on to our customers, who are also facing an unprecedented increase in the cost of living.

“How much can we realistically absorb? How much is too much to pass on to customers already under financial pressure? How can a small business compete in this straitened environment against the bankrolled big guys? It’s a treacherous tightrope right now.”

Hal Wilson of Cambridge Wine Merchants

Hal Wilson of Cambridge Wine Merchants adds: “It is important in our very competitive businesses that we maintain gross profit margins while controlling costs.

“Those objectives are challenged in times of high inflation, with erosion of margins and rising costs squeezing the profitability our of businesses. We are left with the pretty unpalatable requirement of increasing prices to customers.

“Everyone is facing rising costs in the UK, but independent wine retailers are heavily exposed. We can’t be expected to moderate price increases when we are unable to control cost increases inflicted on our businesses.”

Dafydd Morris of Cheers in Swansea echoes the point. “We are seeing increased costs from all angles,” he says. “It really is piling the pressure on. Sadly, it will only mean that selling prices will have to increase, which I hate to do.”

Many merchants are looking for ways to cut their outgoings. “I’ve even been in touch with my fridge suppliers and asked them if it would be more economical to turn them off at night,” says Jeff Folkins of Dalling & Co in Kings Langley. “All of us are going to have to look for ways to make small savings and to work smarter.

“For me, the situation now is more worrying than anything we’ve seen with Brexit or Covid.”

Peter Wood of St Andrews Wine in Fife is pragmatic, arguing that the best approach for indies is to “stop chasing every sale and focus on providing a service”.

“Then you are a bit more price increase-proof because the retail price stops being the determining factor of the transaction,” he says.

He adds: “Although I am loyal to producers and suppliers, my main loyalty is to my customers, and if a particular product or supplier is no longer offering the value for money it once did, I’ll change it.

“It might seem a little simplistic view, but that is how I set my business up: very fluid, and very easy to change if necessary.”

• Five pages of analysis appear in our April edition.

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