Wholesale concern at Diageo decision
Wholesalers have expressed dismay at the ‘highly inefficient’ decision made by alcohol supplier Diageo to cut off direct supply to those businesses that fail to meet its minimum order threshold
In a story broken by Better Retailing on 19 January, it was revealed that Diageo informed wholesalers that it plans to put a halt to direct supply from 1 April 2024 if as they fail to place orders worth £2m of stock each year.
The letter, sent this month, stated that Diageo had reviewed its wholesale and independent free trade business and was transforming its route-to-market strategy to improve efficiencies and provide better service.
Somewhat unsurprisingly, wholesalers have expressed concern. A senior wholesaler said: “Guinness is now the nation’s most popular beer, and one in nine pints served in Britain last year were Guinness. It’s popular on TikTok and Kim Kardashian was spotted drinking it when she was over in London. This move by Diageo is very short sighted because as it grows in popularity, a key route to market servicing thousands of outlets has effectively been shut off which is highly inefficient.
“Independent wholesalers serving the on-trade have effectively been excluded as the secondary wholesale market won’t be able to supply the volume of kegs needed. For retail wholesalers, it’s only worth doing in bulk which reduces options for many. Central distribution by buying groups would help but none of them have ever been able to make this work.”
Tom Gittins, Confex CEO, which does offer a central distribution service to its members, suggested that Diageo wasn’t doing anything new: “While Confex does not welcome the increase in minimum drop requirements from our suppliers, this has been happening for the last 20 years with a ramping up post-Covid.
“Confex has been offering a central distribution service to our members since 2006, working with suppliers as a route to market for their brands. The key to any secondary wholesale model is to allow access to brands with a shared margin that reflects the costs involved for servicing our wholesalers’ independent retail and foodservice customers.
“If this is achieved and our suppliers support our members with a full national promotional programme in line with those who are able to maintain direct supply, then we have found that sales growth can be achieved while also increasing distribution.”
Others, who also do not want to be named, have expressed concern as the move benefits the bigger wholesale players and penalises smaller, independent operators, while limiting retailer choice and will potentially result in higher prices for the consumer.Confex Diageo supply chain Tom Gittins Wholesalers