The multiples have found their drinks operations in Calais lucrative, but times are getting tougher says Anne Bruce
Ask Sainsbury which branch is its most profitable per square foot, or Tesco which store sells the highest volume of beers, wines and spirits, and you might be surprised by the answers. They are in fact within minutes of each other in Calais.
Both supermarkets are successfully milking the huge disparity between UK and EU duty rates on booze. But the nice little earner is under pressure. Calais port authority figures show the market has been in decline since the end of duty-free in July 2000.
Fare hikes, negative publicity over Customs and Excise seizures, foot and mouth and fears of terrorism have conspired to put off Channel hoppers. And the market is becoming increasingly competitive with already low margins squeezed as never before.
Of the 70 high-volume alcohol retailers in Calais, the big operators are a 9,643 sq ft Sainsbury turning over £15m, the 21,428 sq ft Tesco Vin Plus with a total turnover of around £60m, and Carrefour with two hypermarkets.
Others have tried to elbow in. Wal-Mart had tried to get hold of the site now owned by Auchan in Calais, and is still said to be seeking opportunities.
Majestic Wine Warehouses was more successful in getting a foot through the door, buying Calais Wine and Beer Company in 2001 and launching its new Majestic Wine and Beer World hypermarket last year, targeting an upmarket customer with lots of niche lines. But generally the new entrants are not finding it that easy, warns Sainsbury's cross-Channel trade manager, Nico Thiriot, also the British Chamber of Commerce representative in Calais. "The margins are not as big as people would expect. You need to sell some things on almost nothing. With spirits the differential on duty is not so bright, and we sell in low volumes."
But at the recently refurbished Tesco Vin Plus, buying and marketing manager James Jackson admits times have been tough. He blames the war in Iraq and SARS fears.
Tesco's bestseller is a bottle of £1.21 Cuvée Red hardly a moneyspinner in terms of margin, and heavily reliant on its UK customer base. It is now trying to attract French shoppers, reducing its reliance on the highly seasonal booze cruise trade.
It is also carrying out joint promotions with travel operators, in this case Eurotunnel because it is located adjacent to the terminal to tempt booze cruisers.
Sainsbury works with ferry companies to offer collaborative deals and reader promotions with titles such as The Sun to try to tempt the Brits over. It has up to 50 deals on offer, and last winter promoted a free case of Hardys VR Chardonnay worth £42 as part of a £38-day trip offer with P&O Stena Line.
An online pre-ordering service for customers to use before arrival in Calais is big business for Sainsbury. Customers spend £300 on average per basket when they pre-order compared to a £100 average transaction at the store. Pre-orders are about 2% of overall turnover at Sainsbury Calais.
Tesco is working on computer systems for a similar service, says Jackson. Pre-orders are currently taken with five days' notice over the phone and fax. Tesco's systems are also being enhanced to allow it to run promotions on individual bottles of wine.
Sainsbury has negotiated with Customs to pay duty on stock only when it is sold because the store's cutting-edge computer stock monitoring systems mean it can be designated as a bonded warehouse.
Sainsbury's Calais store sits on a plot along with Auchan in a 50-50 joint venture, and turns over 5% of Sainsbury's total wine sales. Sainsbury provides all the stock and looks after range and marketing.
Auchan frees Sainsbury of the burden of French red tape by handling accountancy, legal issues, and staffing. Recently it dug its way through French bureaucracy to arrange for a store extension, work it is paying for.
Thiriot says: "We are looking for a big expansion in November, to 17,143 sq ft, to give us what we need for the Calais trade, one large store in the best possible site."
It is also diversifying, including accessories such as glasses, corkscrews, recipe books, gifts, and books about the products. And a new fine wine section will come into its own along with the extension. Thiriot plans more small appellations from around France.
The beauty of having just one store is that you can experiment, he says. "With one store we get immediate feedback so we can be responsive.When the store is extended we will be able to try out a greater depth of offer with more fine wines and beer."
Calais store manager Rob Nichols says that in the long-term Sainsbury plans to open more stores in France, using the Calais store as a template.
Rivalry aside, Tesco and Sainsbury co-operate to protect their commercial interests, says Thiriot.
Recently there was the introduction of the euro to contend with. Thiriot says: "I convinced Tesco and Auchan to put up big signs saying prices were unchanged. My philosophy is that if we work together, we can get more people to come to Calais."
Not much chance of Tesco and Carrefour working together, though.
Tesco Vin Plus' Jackson names Carrefour as his number one rival. Like Tesco, it has a Cité D'Europe based hypermarket and is aiming upmarket.
The Budget was good news for the price conscious. Quentin Rappoport, director of the Wine and Spirit Association, says: "Calais has been held back artificially because Customs clamped down on shoppers, but I think things are building up again. The Budget increase of 4p on a bottle of wine gives more incentive. Spirits sales in Calais are going up too, and there are plenty of day trip deals available from the ferry companies."
Personal allowances of 90 litres of wine, 110 litres of beer, 10 litres of spirits, and the champagne and fortified wine allowances are also good for generating turnover.
The market might be more cut-throat than ever, but Customs and Excise has received a signal to hold back from excessive searches among booze cruisers in a recent court case.
Finally, it seems, there is some good news for Calais' booze cruise retailers to toast.
Go into any hypermarket in Calais and you'll be informed that it is the cheapest. So, how do the big players stack up on bottles of the ubiquitous Hardys Stamp Shiraz Cabernet Sauvignon (UK: £3.63) and 24 cans of Stella Artois (Tesco's bestselling beer: UK: £26.16).
Sainsbury: Hardys 13.76
Stella 118.80
Tesco: Hardys 14.38
Stella 117.50
Eastenders: Hardys £2.95
Stella £11.25
Majestic Wine & No Hardys
Beer World: Stella £11.99
Le Marché aux Péradel: Hardys 16.25
Stella 118.60
Auchan: Hardys 14.57
No Stella
Carrefour: No Hardys
No Stella
SOURCE: THE GROCER RESEARCH
{{ANALYSIS }}
Ask Sainsbury which branch is its most profitable per square foot, or Tesco which store sells the highest volume of beers, wines and spirits, and you might be surprised by the answers. They are in fact within minutes of each other in Calais.
Both supermarkets are successfully milking the huge disparity between UK and EU duty rates on booze. But the nice little earner is under pressure. Calais port authority figures show the market has been in decline since the end of duty-free in July 2000.
Fare hikes, negative publicity over Customs and Excise seizures, foot and mouth and fears of terrorism have conspired to put off Channel hoppers. And the market is becoming increasingly competitive with already low margins squeezed as never before.
Of the 70 high-volume alcohol retailers in Calais, the big operators are a 9,643 sq ft Sainsbury turning over £15m, the 21,428 sq ft Tesco Vin Plus with a total turnover of around £60m, and Carrefour with two hypermarkets.
Others have tried to elbow in. Wal-Mart had tried to get hold of the site now owned by Auchan in Calais, and is still said to be seeking opportunities.
Majestic Wine Warehouses was more successful in getting a foot through the door, buying Calais Wine and Beer Company in 2001 and launching its new Majestic Wine and Beer World hypermarket last year, targeting an upmarket customer with lots of niche lines. But generally the new entrants are not finding it that easy, warns Sainsbury's cross-Channel trade manager, Nico Thiriot, also the British Chamber of Commerce representative in Calais. "The margins are not as big as people would expect. You need to sell some things on almost nothing. With spirits the differential on duty is not so bright, and we sell in low volumes."
But at the recently refurbished Tesco Vin Plus, buying and marketing manager James Jackson admits times have been tough. He blames the war in Iraq and SARS fears.
Tesco's bestseller is a bottle of £1.21 Cuvée Red hardly a moneyspinner in terms of margin, and heavily reliant on its UK customer base. It is now trying to attract French shoppers, reducing its reliance on the highly seasonal booze cruise trade.
It is also carrying out joint promotions with travel operators, in this case Eurotunnel because it is located adjacent to the terminal to tempt booze cruisers.
Sainsbury works with ferry companies to offer collaborative deals and reader promotions with titles such as The Sun to try to tempt the Brits over. It has up to 50 deals on offer, and last winter promoted a free case of Hardys VR Chardonnay worth £42 as part of a £38-day trip offer with P&O Stena Line.
An online pre-ordering service for customers to use before arrival in Calais is big business for Sainsbury. Customers spend £300 on average per basket when they pre-order compared to a £100 average transaction at the store. Pre-orders are about 2% of overall turnover at Sainsbury Calais.
Tesco is working on computer systems for a similar service, says Jackson. Pre-orders are currently taken with five days' notice over the phone and fax. Tesco's systems are also being enhanced to allow it to run promotions on individual bottles of wine.
Sainsbury has negotiated with Customs to pay duty on stock only when it is sold because the store's cutting-edge computer stock monitoring systems mean it can be designated as a bonded warehouse.
Sainsbury's Calais store sits on a plot along with Auchan in a 50-50 joint venture, and turns over 5% of Sainsbury's total wine sales. Sainsbury provides all the stock and looks after range and marketing.
Auchan frees Sainsbury of the burden of French red tape by handling accountancy, legal issues, and staffing. Recently it dug its way through French bureaucracy to arrange for a store extension, work it is paying for.
Thiriot says: "We are looking for a big expansion in November, to 17,143 sq ft, to give us what we need for the Calais trade, one large store in the best possible site."
It is also diversifying, including accessories such as glasses, corkscrews, recipe books, gifts, and books about the products. And a new fine wine section will come into its own along with the extension. Thiriot plans more small appellations from around France.
The beauty of having just one store is that you can experiment, he says. "With one store we get immediate feedback so we can be responsive.When the store is extended we will be able to try out a greater depth of offer with more fine wines and beer."
Calais store manager Rob Nichols says that in the long-term Sainsbury plans to open more stores in France, using the Calais store as a template.
Rivalry aside, Tesco and Sainsbury co-operate to protect their commercial interests, says Thiriot.
Recently there was the introduction of the euro to contend with. Thiriot says: "I convinced Tesco and Auchan to put up big signs saying prices were unchanged. My philosophy is that if we work together, we can get more people to come to Calais."
Not much chance of Tesco and Carrefour working together, though.
Tesco Vin Plus' Jackson names Carrefour as his number one rival. Like Tesco, it has a Cité D'Europe based hypermarket and is aiming upmarket.
The Budget was good news for the price conscious. Quentin Rappoport, director of the Wine and Spirit Association, says: "Calais has been held back artificially because Customs clamped down on shoppers, but I think things are building up again. The Budget increase of 4p on a bottle of wine gives more incentive. Spirits sales in Calais are going up too, and there are plenty of day trip deals available from the ferry companies."
Personal allowances of 90 litres of wine, 110 litres of beer, 10 litres of spirits, and the champagne and fortified wine allowances are also good for generating turnover.
The market might be more cut-throat than ever, but Customs and Excise has received a signal to hold back from excessive searches among booze cruisers in a recent court case.
Finally, it seems, there is some good news for Calais' booze cruise retailers to toast.
Go into any hypermarket in Calais and you'll be informed that it is the cheapest. So, how do the big players stack up on bottles of the ubiquitous Hardys Stamp Shiraz Cabernet Sauvignon (UK: £3.63) and 24 cans of Stella Artois (Tesco's bestselling beer: UK: £26.16).
Sainsbury: Hardys 13.76
Stella 118.80
Tesco: Hardys 14.38
Stella 117.50
Eastenders: Hardys £2.95
Stella £11.25
Majestic Wine & No Hardys
Beer World: Stella £11.99
Le Marché aux Péradel: Hardys 16.25
Stella 118.60
Auchan: Hardys 14.57
No Stella
Carrefour: No Hardys
No Stella
SOURCE: THE GROCER RESEARCH
{{ANALYSIS }}
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