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A case of Bargain Booze

Gloucester Business School, Cheltenham, UK University of Glamorgan, Pontypridd, Wales, UK, and University of Plymouth, Plymouth, UK
Keywords Alcoholic drinks industry, Consumer behaviour, Grocery Abstract This market for alcoholic drinks sold for home consumption has become increasingly dominated by the multiple grocery chains at the expense of small specialist off-licences. However, one specialist company, Bargain Booze, which specialises in the sale of a limited range of leading brands at competitive discount prices via a franchised network of corner shop outlets, seems to be ``bucking the trend''. Provides a short case study of Bargain Booze. The case includes a review of the changing structure of the off sales trade, an outline of Bargain Booze's origins and development, an examination of the principal elements in the company's retail marketing mix and concludes with a discussion of the past, and potential future, market development strategies.

Peter Jones and Colin Clarke-Hill David Hillier Peter Shears

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Introduction A recent Mintel report on drinking trends within the UK revealed that consumer expenditure on alcoholic drinks had risen from 22.78 billion in 1991 to 31.84 billion in 2000 and that there had been a steady increase in the frequency of alcohol consumption amongst the population (Mintel, 2000). Much of this increase is seen to originate from consumption within the home and during the period 1993-1999 off sales trade grew by almost 50 per cent to capture some 35 per cent of the UK alcoholic drinks market. The multiple grocery chains have become the increasingly dominant players in this market, capturing over 60 per cent of market share with the specialist off-licence chains and independent retailers having less than 40 per cent (Mintel 1999). Looking to the future, Mintel (1999) predicts the specialists will continue to lose market share to the grocery multiples. However, one of the specialist chains, Bargain Booze, seems to be ``bucking this trend''. This paper provides a short case study of ``Bargain Booze'' and an outline of the overall market structure provides an introduction to the growth and trading characteristics of this distinctive and aggressive company. The study is based upon information supplied by the company and available on its and related Web sites and upon site visits to a small sample of Bargain Booze outlets in the North West of England. Changing market structure The market structure of the off sales trade includes a number of elements. Looking back to the first half of the twentieth century the market was dominated by small independent grocery and off-licence shop owners who served their local communities and carried a limited range of bottled beer and

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cider, one or two draught beers served and sold usually in pint bottles, and a limited selection of spirits, wine and sherry. Many public houses and bars also had a sizeable off sales trade and had a separate entrance and counter for this part of their business. Some chemists' shops also had a licence to sell wines and spirits sold ``for medicinal purposes''! During the second half of the twentieth century the process of concentration common to most of the retail sector of the economy took its toll on the vast majority of these independent grocery and offlicence owners. The numbers of these small independent retailers steadily declined as specialist national and regional off-licence chains and the grocery supermarket and superstore groups began to increasingly dominate the off sales market. The major grocery multiples, which are the dominant players, began to move into off sales in the early 1980s. Initially they began selling wines as an ideal accompaniment to food, giving alcohol a ``new identity'' as a growing product for routine domestic consumption. The success of this initial move led the grocery multiples to expand their range of alcoholic drinks. Such ranges are now an integral part of the ``retail offer'' in the grocery multiples stores and considerable shelf space is devoted to wines, beers and spirits. A large Tesco superstore, for example, will typically stock multipacks of the more popular beers such as Boddingtons, John Smith's Smooth, Tetley's Bitter, and Worthington's Creamflow plus over 30 more ``specialist ''or ``traditional'' beers including Fullers ESB, Shepherd Neame's Bishops Finger and Smiles' Heritage. The lager range will again include multipacks of the brand leaders including Carling Black Label, Skol, Carlsberg, Fosters and Castlemaine XXXX and a wide range of imported lagers, while there will also be over 40 brands of bottled and canned cider. The wine section will extend over some 150 metres of shelf space and include some 500 different wines and there will be a range of spirits including some 30 different brands of malt whisky. Tesco also now offers wine sales with home delivery via the Internet. Initially it was the development and expansion of a new breed of specialist off-licence chains that began to take a growing market share at the expense of the small independent off licensees. These chains established an increasingly prominent market position in the 1960s and they sought increasingly high profile high street locations in an attempt to maximise sales. By the mid 1970s there were almost 80 chains with a total of well over 6,000 outlets. Further concentration occurred as many of the national and regional brewers acquired and developed their own chains of off-licences and common high street fascias included Augustus Barnett, Peter Dominic, Haddows, Cellar Five and Victoria Wine. However, the 1989 Monopolies and Mergers Commission report on the brewery industry led to major restructuring and during the 1990s many breweries disposed of their off-licence outlets. By 2000 First Quench Retailing, initially formed by a merger of the various off license chains owned by Whitbread and Allied Domecq, but then acquired by the Japanese company Namura dominated the specialist sector with well over 2,500 outlets. Parisia, created from a management buyout of the off-licence division of retail pub and

leisure based Greenall's Group, Unwins, Oddbins, Majestic Wine Warehouses and Bargain Booze are the other major players, and these five companies account for over 90 per cent of all specialist off-licence outlets. The multiple grocery groups and the specialist off-licence chains account for over 80 per cent of off sales with the remainder being sold via a large number of outlets including small independent specialist off-licences, grocers, convenience stores and petrol station forecourt shops. Such outlets usually carry a very small range of beers, spirits and wines and they are used for ``impulse'' and ``emergency'' purchases rather than mainstream drinks shopping. The illegal importing of alcoholic drinks from mainland Europe is also making an informal but increasingly high profile contribution to alcohol consumption in the UK and as such must also be seen as an element in the overall market supply structure. While there are no definitive or official figures on the scale of this activity the Brewers and Licensed Retailers Association estimate that by early 2001 illegal beer imports alone were running at about the annual equivalent of 1.5 million pints of beer and they have suggested that beer smuggling is one of the UK's fastest growing retail sectors. Bargain Booze Two local entrepreneurs established the Bargain Booze company in Sandbach, Cheshire in 1980 and during the following decade they developed a small chain of some 30 shops in south Cheshire. Towards the end of the 1980s the company began to convert to a franchise operation with the initial company marketing and distributing alcoholic drinks to the outlets owned and managed by independent franchise operators. During the late 1990s rapid growth occurred and during 1999 alone retail turnover rose by some 35 per cent to over 140 million. By the end of 2000 there were some 212 Bargain Booze outlets spread throughout the North West and Midlands of England and in North Wales and they claimed to be serving an annual total of over 30 million customers. The franchising format has been central to the company's rapid growth and it has allowed the company to spread the risk, to keep its overheads down and to increase buying power. Early in 2000 Bargain Booze was purchased by the BWG group, which is itself a subsidiary of the French drinks conglomerate Pernod Ricard. At the time of writing, Pernod Ricard had intimated a desire to sell the BWG group during 2001 in order to finance its acquisition of Seagram's drinks brands. Bargain Booze is a volume driven ``value for money'' operation and its franchised outlets specialise in the sale of beers, wines and spirits, often along with a limited convenience range which includes cigarettes, newspapers, soft drinks, sweets and some grocery items. The product range of alcoholic drinks includes the leading brands of bottled and canned beers, lagers and spirits and a range of popular wines. All outlets have a common red and gold fascia and livery they are planned to an agreed specification designed to project the company's personality and trading philosophy. Bargain Booze outlets are located within residential communities and as such look to have a ``corner shop''

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feel. While outlets do vary in size, most offer around 500 square metres of selling space with the vast majority of it being devoted to alcoholic drinks. In 2000 the average turnover of a Bargain Booze outlet was approximately 20,000 per week. The company recognises that its trading style is often perceived as ``stack it high, sell it cheap and sell plenty of it''; their goal is to ``change customers thought patterns separating out the concept of one stop supermarket shopping'' from what they see as ``the more focused one stop Bargain Booze shopping''. The company looks to achieve this goal through its focus upon price, marketing, control and customer service, and like the vast majority of discount retailers, it operates on tight margins. Price is perhaps the most important element in the retail marketing mix and while the company does not claim that it always has the lowest price for every product in the market, it does look to offer its customers a ``superb range of hard to beat promotional prices everyday of the year''. While some discount retailers rely heavily, if not exclusively, on little known and/or imitation brands, Bargain Booze's trading philosophy is underpinned by the company's ability to negotiate price structures for leading brands with major suppliers. The aim is for all outlets to stock all the leading brands in quantity at very competitive prices. Bargain Booze has placed considerable emphasis on its ability to compete on price with what it describes as the ``incredible growing domination'' of the grocery superstore groups. During the spring of 2001, for example, promotional leaflets in the Bargain Booze outlets in South Cheshire emphasised the price comparisons with local Asda and Tesco stores. Thus a bottle of Gordon's, the leading brand of gin, was 9.99 in Bargain Booze compared to 11.29 in both superstores, while the corresponding figures for Lanson Black Label champagne, Jack Daniels whisky and a 24 pack of Carling Black Label lager were 14.99, 15.49 and 13.99 compared to 20.99, 17.29 and 15.98. Such promotional leaflets and full-page advertisements in local newspapers continually stress the price message. Thus leaflets carry a ``warning'' of ``shockingly low prices'' as customers are ``invited'' to an ``orgy of total price satisfaction'' and encouraged to ``check in store for hundreds of other amazing discount offers''. In a similar vein the banner headline in the four page Christmas 2000 edition Bargain Booze News was ``Festive Price Massacre''. A series of ``BOG OFF'' (buy one get one for free) offers on packs of 12 and four bottles/cans of beer and lager, and sometimes on single bottles, are also part of the company's periodic price promotions. The Bargain Booze marketing message is certainly price aggressive but it is also characterised by a humorous approach that the company describes as ``wacky'' and ``light hearted in your face''! Thus promotional materials refer to offers for 24 packs of beer and lager as ``More mental case prices'' and ``2001: a case odyssey'' with ``prices out of this world''. The ``Booze Brothers'' advertise a ``Poets Corner'' on the company's Web site. Customers are invited to submit a poem, rhyme or limerick and all contributors whose entries are posted on the site receive a Bargain Booze voucher. Another fictitious company-created character ``Joe Punter'' the ``bargain hunter'' also features regularly in the

company's promotional material. A typical ``verse'' from Bargain Booze News captures much of the spirit of the company's distinctive marketing message:
No ordinary Joe Its Friday again and the usual chore, The superstore visit a nightmare, a bore, They've chopped a few prices on fish, beans and mash, But don't touch the booze they'll rob all your cash, But Joe's not so ordinary, he's a punter of fame, Joe Punter Bargain Hunter remember his name, When it comes to bargains Joe's hot on the pace, He's straight down Bargain Booze to save on a case, Big brand spirits, wines and much more, And the thing he likes most it sure ain't no chore.

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The company also sees strong business discipline and tight control as central to its trading philosophy and here the franchise format has played a vital role. All retail prices are set centrally via the EPOS system and all prices are the same regardless of location. At the same time, continuous communication and reporting via the EPOS system provides an effective approach to restocking and inventory control, which is linked to the company's centralised buying and reliable delivery system. The company's 10,000 square metre storage and distribution warehouse facility in Crewe is well placed to link into the motorway system and the trunk road routes which offer rapid access to the network of Bargain Booze outlets. A series of in-store standards, merchandising programmes and negotiated promotions throughout the estate portfolio are also an integral part of the Bargain Booze format. Training in administration, accounts, customer care and health and safety issues are provided in-house for all key employees. In addition, the company holds monthly meetings of franchisees designed to focus upon current corporate and promotional strategies, legislative changes and changes to operational practices. Bargain Booze claims to draw its customers from across the adult age range and from a wide cross section of society and suggests that the appeal of a limited and competitively priced range of brand leaders within a friendly environment and in convenient locations is universal. The company's customer service focus in upon ``putting its customers' needs first'' and the aim is to ``offer the customer the best deal possible in the best manner possible''. The accent is also clearly on projecting a positive image of the company to the customer and the aim is for Bargain Booze outlets to be seen as an integral part of local communities and to be meeting specific local needs. However, this relationship with local communities is seen to go beyond the provision of a retail service. Thus Bargain Booze sponsors a number of local soccer, rugby and netball teams and they support a wide range of charitable causes, local authority and school initiatives and local cultural activities. All Bargain Booze staff are encouraged to play an active part in their community, for example, by working with local clubs or on local authority voluntary service projects, and this is seen

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to be important in helping the company to develop and visibly demonstrate its relationships with the communities it serves. Discussion During the past decade Bargain Booze has sought to enter and increasingly penetrate a relatively mature and highly concentrated alcoholic drinks market. Business theory suggests that in adopting such a strategy the company will face a number of difficulties. Not least that the advantageous cost structure of the existing market leaders should prevent penetration by new competitors with a much smaller market share. That said, there are a number of ways in which new entrants looking to move into a market dominated by a small number of large and well established players can begin to strengthen their position. The route that Bargain Booze has followed is to identify, create and develop a niche market based around the sale of a small number of leading brands and to sell them at discount prices. This classic approach of attacking strong and well-established competitors by offering leading brands at lower prices has certainly been a central element in Bargain Booze's growth strategy. However, while pricing policies per se have been important, they must also be seen as part of a wider strategy that includes an aggressive but distinctive retail market mix and which has relied heavily on the franchise format. The aggressive elements in the marketing mix are the advertising attacks on the superstores that are characterised as ``calling the shots'' on prices and the price comparison advertisements. The company's distinctive approach to marketing is seen in its humorous engagement with its publics via its advertising and public relations campaigns and activities and its in store environment, and through its focus on offering a personal service at the ``local corner shop''. The company's commitment to expansion via franchising has certainly been successful in allowing Bargain Booze to build up quickly a network of outlets that has in turn provided a critical mass to facilitate market penetration. The focus on bringing existing independent retailers into the Bargain Booze franchise network has allowed the company to achieve rapid growth with limited capital investment whilst harnessing the creative energy and commitment of individual franchisees, who themselves can benefit from the buying and marketing power and the organisational expertise of the company and the increasingly well known corporate identity. Looking to the future, Bargain Booze has plans to continue to expand its geographical coverage throughout a much wider area of the UK. Business growth strategies based around the development of new market territories are common within retailing and many retailers have developed a national profile and coverage after having first established successful business operations at a regional level. The move to expand beyond the North West and Midlands of England and the attendant growth in sales will certainly be important in enabling the company to negotiate more favourable price discounts from suppliers. However, moving from being a regional to national player may also present a number of challenges. In the past, the company has been successful in

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enlisting franchisees into its network of outlets and here the attractions of a known and growing corporate image have been important. However, it remains to be seen if this retail brand will have the same attraction in areas where the company is unknown. While the establishment and successful working of warehousing and distribution functions designed to supply a national, rather than a regional, network of outlets might normally be seen as an important challenge, the acquisition of Bargain Booze by the BWG group in 2000 has given the company access to an existing distribution, warehousing and logistics network. The company will also want to maintain the tight business control disciplines that have been a hallmark of its operations to date. While the integration of a wider geographical spread of outlets into the company's EPOS system will certainly facilitate continuing tight controls, the need for senior company personnel to maintain a ``hands on'' familiarity with outlets may prove more difficult as geographical coverage increases. Perhaps a more intangible issue revolves around the transferability of the Bargain Booze formula. In short, whether Bargain Booze's retail mix of competitively priced leading brands offered in ``corner shop'' locations and marketed in the company's ``wacky'' and ``light hearted in your face'' traditional style will find favour in all parts of the UK remains to be seen. Such an approach may be seen to be ``cheap'' and ``tacky'' by potential customers who see themselves as more sophisticated and quality conscious, rather than largely price sensitive, consumers. Conclusion During the past two decades the retail market for alcoholic drinks has become increasingly concentrated, with the major grocery chains taking a seemingly ever larger market share, but Bargain Booze has established a prominent and growing regional market presence within the Midlands and North West of England. The franchised Bargain Booze chain of corner shops is a volume driven discount operation which concentrates on the sale of a limited number of leading brands of spirits, beers and wines and which offers a distinctly local and humorous trading style. The company is now looking to extend its geographical coverage beyond its original regional base and to grow its market share. This will bring it into greater competition with the grocery chains and the company's ability to transfer its distinct retail marketing mix from a regional to the national arena may well provide a variety of interesting challenges.
References Mintel (1999), Off-licences, Mintel, May. Mintel (2000), Drinking Trends, Mintel, November.

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