by Tim Atkin

An exchange of letters with Dan Jago of Tesco

On February 15th, I published a column in OLN entitled Flogging a dead horse about what I saw as the potential similarities between the horsemeat scandal, then at its height, and what is happening to the price of wine in the UK (and the corresponding drop in quality). I received a lot of emails about the piece, most of them supporting me. As you’d expect, Dan Jago of Tesco took a different view. As Dan’s letter has not appeared on line, I have taken the liberty of publishing it here, along with my response.

This is Dan Jago’s letter to OLN

I was very saddened by Tim Atkin’s article in OLN last week. Whilst I appreciate that his role as a journalist is to challenge and provoke, is it fair to cast such dramatic aspersions at the industry that also provides him with much of his livelihood?

At Tesco, we work incredibly hard to ensure that our wines consistently offer both value for money and quality for our customers, without ever cutting any corners with our suppliers. This means that we never underestimate the importance of building collaborative relationships throughout the wine supply chain, helping our suppliers to create joint business plans and meeting with them regularly, to maintain an open and honest dialogue. This builds trust with our suppliers, and we generally enjoy long and happy relationships with them ­ in fact, we have been working with some of our suppliers for over 30 years.

We receive lots of positive feedback from the people we work with; they often tell us that working with Tesco really helps to grow their business. For example, Tesco has worked with Dedicated Wines for 10 years, starting with the Celliers des Dauphins brand in limited distribution. They now supply us with over a dozen wines, including branded, own label, Simply and Finest, sold all over the UK and in our global markets.

We also appreciate the clear feedback on our ways of working we get from the many industry awards we have won including the IWC Supermarket of the year, OLN Drinks Buying team and IWSC Wine Buying team. We also get very positive responses from our annual anonymous supplier viewpoint with all suppliers as well as participating in the industry-wide Advantage Survey.

We pride ourselves on the level of transparency in our wine supply chain. As a wine team, beyond the regular buying visits, our technical managers visit our suppliers to carry out the necessary checks and offer advice and guidance, so that we can be sure they are complying with the law. In addition, independent auditors also visit our suppliers, wineries and vineyards throughout the year to make sure that they are working within the legal structure and complying with our stringent specifications. The illegal actions in the past by the manufacturers Tim refers to were exactly that.

New wine producers usually approach us in the first instance, as they appreciate the route to market we offer; this would not indicate a confrontational reputation. We pride ourselves on being able to provide a wine range which offers something for everyone, but we never forget that it is only by working as a team with our suppliers that we are able to do this.

Yours sincerely,

Dan Jago UK and Group Wine Director, Tesco

And this was my reply…

I am very saddened that Dan Jago is “very saddened” by my article on the pressures that major UK wine retailers exert on suppliers, but that doesn’t change my determination to air what I see as the truth. The fact that I earn my livelihood from wine is a large part of the reason I care about what is happening here. Would Dan prefer me to shut up or just say how wonderful things are?

Tesco does indeed stock some good wines, and I’m sure that some of its suppliers think it is honourable, fair and generally wonderful to work with. But there is another side to the story, as we (and Dan in his pre-Tesco days at Bibendum used to concede) all know. Dealing with major wine retailers in the UK – it isn’t just the supermarkets, but they wield the greatest power – is far from an equal relationship. I’m sure Dan can remember what used to happen at the Orwellian “Discounter House”, when Tesco was determined to be seen as “Britain’s biggest discounter”. If not, there are a number of suppliers who could remind him just how “long, happy relationships” with Tesco work in reality.

Dan doesn’t address the main thrust of my piece. Namely that, as with the horsemeat scandal, there is a direct link between low prices (and the pressures put on suppliers to meet them) and declining quality. The “illegal actions of the past” were sometimes related to criminal activity, pure and simple, but they were also related to a desire to make cheap wine even more cheaply and, on occasion, render it more palatable. That’s the risk at the moment.

The price wars between Tesco, Asda and the genuine discounters have created a culture of false cheapness in the UK wine trade. These retailers see wine deals as a way to entice shoppers into their stores, with ludicrous “half-price offers” that are nothing of the sort. Tesco and the like often argue that they are listening to their consumers, but they are leading them too. And in reality, the people who have their ears are their shareholders, not their suppliers or shoppers.

The UK’s low prices have already driven many wine producers to other markets and helped to send a number of importers to the wall. Look at the mass defections from the London Wine Trade Fair to Prowein this year, but also look at the dwindling ranges on most supermarket shelves and their lack of quality and innovation. With the exception of Marks & Spencer, no one is taking risks.

For those producers and importers who choose to continue to supply the mass market, there will be profits, but they will be hard earned once all those marketing and promotional support budgets, ticketing fees, gondola end charges and retrospective discounts have been deducted from the bottom line, not to mention the duty increases, invariably passed back up the supply chain.

If we do have another wine scandal in the UK, I believe that unreasonably low prices – that culture of “value” fostered by the likes of Tesco – will be partly culpable.

Tim Atkin MW

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