Wine sales have been on a steady increase in Jamaica over the past few years. A number of factors contribute to this, including, but not limited to, a more informed wine consumer, importers carrying a wider range of 'better' wines, retailers improving how they merchandise the products. 2012 had some interesting moves and shifts in the space that will ultimately result in a different experience for the consumer.
Importation and Distribution
I have been on the bandwagon shouting loudly that local wine distributors should focus on importation and distribution of their products and leave the retailing to end customers to the supermarkets, retailers, bars, and restaurants. During 2012 we noticed that three organisations decided to explore vertical integration, causing some concern to their existing retail channels. From my research, this has been one of the key reasons why a stand-alone wine retail outlet has had difficulties keeping its doors open. A consumer who wants more than a few bottles, say a case or two, will bypass the wine retail establishment and go directly to the importer.
Forward Vertical integration
In business, vertical integration refers to the degree to which a firm owns its upstream suppliers and its downstream buyers. There are three varieties: backward (upstream) vertical integration, forward (downstream) vertical integration, and balanced (both upstream and downstream) vertical integration. In relation to the wine scene in Jamaica, this year saw three examples of forward vertical integration of sorts come to fruition: this is when an organisation controls distribution and retailers where its products are sold.
Select Brands acquired 1876 Wines.
In June, Select Brands acquired 1876 Wines — a wine importer and wine club organisation that has been in business since 2004. This now allows Select Brands to channel some of its premium brands directly into the hands of wine club members — end consumers. This also gave Select Brands some new brands from smaller producers that they did not have before.
The Wine Ranch opens The Wine Store
Wine Importer The Wine Ranch opened a retail store in Southdale Plaza called The Wine Store. This currently operates more like a retail wine shop and less like a wine bar. Patrons can, however, sample a range of wines for a small fee. For now they import 100 per cent of the wines they sell. The Wine Ranch organisation began business importing wines solely for one of Jamaica’s boutique hotel chains.
CPJ Market opens its doors.
Montego Bay-based Caribbean Producers Jamaica(CPJ) Limited has opened a magnificent retail establishment in Kingston. The three-in-one concept consists of a deli, a full service bar — CRU and a retail store. Its main objective is to use the location to showcase all the products that they import under one roof. This forward vertical integration example has caused the most concern for its customers who are still wondering if there will be any impact when one of their main suppliers opens a retail store nearby.
Vertical Integration is not new. As a business student I have read the case studies of Carnegie steel in the 1800s all the way to present-day Microsoft and Apple. In our Jamaican vernacular, retailers will need to “wheel and come again”, as some of the mom and pop stores had to do when the big box stores like Walmart, Barnes and Noble, Best Buy and Home Depot made their way across the USA.
Have a very happy and prosperous 2013, being mindful that “it is the very pursuit of happiness that thwarts happiness”. — Dr Viktor Frankl — Man's Search for Meaning - a book everyone should read.
Christopher Reckord — Businessman, Entrepreneur & Wine Enthusiast. Send your questions and comments to firstname.lastname@example.org . Follow us on twitter: @DeVineWines @Reckord