Victoria Wine and Thresher to merge

THE POWER of the major supermarkets was again in evidence yesterday when Victoria Wine and Thresher said they are planning to merge their high street off licence chains in an attempt to fight back against superstore giants and the cross channel booze run.

The move, undertaken by Allied Domecq, which owns Victoria Wine and Whitbread, which controls Threshers, is likely to provide an early regulatory test for Peter Mandelson, who took over as the Secretary of State for Trade and Industry last week.

News of the proposed Thresher-Victoria Wine tie-up comes just days after the supermarkets were themselves put under the monopolies microscope when the Office of Fair Trading launched a wide- ranging investigation into the major grocers to establish if they have been using their dominance of the food and drinks market to the detriment of consumers.

The merger, a 50-50 joint venture, would create a high street giant with 3,000 branches controlling more than 30 per cent of the high street off licence business. However, its combined share of the take-home drinks market would be much lower as the traditional off licences have been gradually losing trade to the supermarkets, which are able to buy at lower costs and sell at lower prices.

Whitbread and Allied Domecq said their combined share of the whole market would only be around 14 per cent. However, there may be a problem with local monopolies given the scale of the two operations. The pair are already the top two in the specialist sector. Threshers owns a host of names such as Wine Rack, Bottoms Up and Drinks Cabin while Victoria Wine trades under formats such as Cellars and Martha's Vineyard.

The companies admitted that there would be job losses and store closures as they seek to reduce duplication and cut costs. However they declined to comment on suggestions that there could be up to 100 closures, which would result in several hundred redundancies. They said both the main trading names would be retained.

Industry experts said the merger was not a surprise but would not necessarily lead to a stronger entity. "They would argue that this is the only way that they can compete against the supermarkets that are squeezing them ferociously but I'm not sure what it will achieve," said Clive Vaughan of Verdict, the retail consultants. "These are essentially convenience stores but with only one product. They need a new trading idea but the commitment just doesn't seem to be there."

He pointed to Parisa, the former Greenalls off licence, as an example of what could be achieved. It is being remodelled under a convenience store format with a broader range of products and services.

Mr Vaughan said specialist chains such as Oddbins, which aims at wine buffs, and Majestic Wine Warehouse, which operates a large store format, should not be seriously affected. However, independent operators such as Unwins could be squeezed.

Specialist off licences have been experiencing a rapid decline in the UK. They accounted for 40 per cent of take-home drink sales in 1990, but that share has slipped to less than 30 per cent now. The major supermarkets, which overtook the market share of the specialists eight years ago, now control two thirds of the market. Tesco, Sainsbury and Safeway are now Britain's major drinks retailers followed by Threshers in fourth and Victoria Wine in fifth.

Threshers was founded by Samuel Thresher in 1897. It was acquired by Flowers Breweries in the 1950s and has been part of Whitbread since 1962. It recorded profits of pounds 22.8m on sales of pounds 632m last year.

Victoria Wine was formed in 1865. It added 550 branches in 1993 when it bought the Augustus Barnett chain

How the off-licence giants compare

VICTORIA WINE THRESHER

Trading formats: Victoria Wine Thresher

Victoria Wine Cellars Wine Rack

Haddows Bottoms Up

Martha's Vineyard Drinks Cabin

Firkin off licences

Store numbers: 1,500 1,500

Owner: Allied Domecq Whitbread

Profits: pounds 15m pounds 22.8m

Market share: 7.1% 7.9%