Ep. 2291 Systembolaget, how the tender process and tasting works - one of the tools for reducing the climate impact with Gad Pettersson | wine2wine Business Forum 2024

Of the different sustainability aspects that are important, we have singled out that our main focus is on the climate impact. And as you all are very well aware, that is a very pressing matter for everyone to address. And we have taught long and hard on how to address it as in our role as a big retailer in the alcoholic veridge trade. Official media partner, Italian wine podcast, is delighted to present a series of interviews and highlights from the twenty twenty four wine to wine business forum. Bringing together some of the most influential voices in the sector, we discussed the hottest topics facing the industry today. Don't forget to tune in every Thursday at three pm or visit the Italian one podcast dot com for more information. For those of you who are here for the tasting session now, we will be moving on to the rationale behind the tender offerings of system belonging. We did this other two times. Right, Sarah? Yeah. And, today, we're going to do a tender simulation because often the producers will come to me and say, my wine is so good, but why doesn't the Swedish monopoly want my wine? It's so great. And it's not about your wine being good. It's about meeting the technical rationale behind the request that they advance in the tender offerings. And this is the dude. Is that correct? It's very correct. Thank you. Okay. So, good morning, everybody. I'm a Gad Petashon. I've been with System Volgut for, quite exactly twenty six years, this autumn and have worked many years as a buyer for French wine, but, after that, also as category manager. So, I've been part of planning the assortment and had red wines and sparkling wines. Now for a couple of years, I'm head of product quality and sustainable supply chain. But I happen to have a both practical and in-depth knowledge about the tender process because I've been working with it for many, many years. That's why I also feel comfortable to talk about it and adding a few other aspects onto it. I guess that many who are here are interested to know how is a tender process happening and the tender tasting happening at Sistemologates, maybe to understand how can I increase my chances to win a tender and access a relatively big wine market We turn around two a little bit more than two hundred million liters of wine every year? So understandably so how do I have success in a tender tasting? My point to start with is that it's quite important to understand who sustained Boggett is and what things comes before the tender tasting to be successful in our market even if you are already present, it's good to have an understanding of those principles and basis for our work. My first line is that system will not get it is based on foundation of sustainability in terms of health, public health. The existence of a retail monopoly is there to limit the damage of alcohol in society. That means that the step to other sustainability aspects is very short. We are not there to maximize gain. We are there to protect public health and to provide good service when we sell our products. So in short, just to get an overview, ninety four percent of what we sell to Swedish customers is part of what we call the fixed assortment, literally what you meet in the shelves of our stores. And that's around, three thousand five hundred SKUs, wines, beers, and spirits. You can see in the other Staples, there are higher numbers when it comes to number of products, but those are either online only or only temporary listings that are there for a short time in a few stores. So the bulk of people meet in Sweden when they buy alcoholic products are among those three thousand five hundred items around. And the tender process, it's strongly linked to products that enter to our fixed assortments. We have close to six thousand employees We have more than twelve hundred active suppliers and return around close to forty billion Swedish grants or close to four billion euros, I guess. We can only survive if the Swedish people think keeping a retail monopoly is a good idea. So our key index or indicator we look for is the customer satisfaction index. How do we keep our customers happy with our service, accepting the limitations of our activity, three out of force which support the monopoly. That's kind of where we come from. Now in our strategy, our vision is a society in which alcoholic beverages can be enjoyed without harming people or the environment. This means we're not only focusing on public health for those who consume alcoholic beverages. We also focus on people who are involved in producing these alcoholic beverages, and the environment that might be impacted by producing these alcoholic beverages. On our focus areas, three main focus areas, increased digital relevance and AI, the second one significantly reduced our climate impact through an assortment for everyone of the different sustainability aspects that are important. We have singled out that our main focus is on the climate impact. And as you all are very well aware, that is a very pressing matter for everyone to address. And we have taught long and hard on how to address it as in our role as a big retailer in the alcoholic beverage trade. So that's our core. Now picking up on the climate, twenty five percent of the carbon footprint that we are guilty of as a company is coming from packaging. This aspect is something we have worked on for many years, focusing on lighter weight bottles on alternative packaging and so forth because of this insight. But if you look at the next one, growing raw materials, that's twenty four percent of the climate impact. The cultivation working in vineyards, fields for barley, and so on. And then twenty four percent from the production itself only six and a half percent comes from transports. And here, the limits is transport from the producer to the backdoor of our shops. But if you look at the whole chart, that means that close to eighty percent of sustainable against climate impact come from the products we sell, the assortments. And to address this, how can we reduce the climate impact. Then you need to understand what causes the different impacts in the value chain and the production of a one single product. So the concept of product carbon footprint is something that you will all hear much more about from us going forward. So production, it's growing, and it's the packaging and the transports, finding out how this looks for every single product. That's our way of first measuring to be able to manage the climate impact. This is another way to illustrate what the equation of product carbon footprint. You have the method again, growing production, packaging transport gives a unique product carbon footprint for every product we sell. This will be used in customer communication and guidance. It will be used in managing our assortment and evaluating our assortment. Simply put everything else alike. If you have a lower carbon footprint you will have a benefit. Reporting is increasingly coming something both stressful and important for all companies of a certain size to report to the European Union on different aspects of sustainability, not least the climate impact. And our goal is to reduce our carbon footprint by fifty percent from the assortment by two thousand and thirty and the clock is ticking. So we have no time to lose. How does all of this relate to the tender process now. Didn't we go off topic a little bit? Well, the whole purchasing process and the tender process is part of a bigger thought. We start with intelligence looking at the surroundings. What is the availability of certain products from certain regions and countries, of course, but also what are the pressing issues that we need to look at? For example, climate change. That is divided down to assortment strategy, a launch plan. And just a word on the launch plan, since a couple of years, we do that as an open process together with the suppliers with input from producers like some of you who are here in the room. We have an outline. We need a certain type of wine. And then in an iterative process, we build a structure of what is available meeting our gap in the assortment. After that, we come to a tender request that's gather all those pieces of intelligence and background into an actual tender requests where we ask for a certain type of product. And it is one tool to drive sustainability. I highlighted three of them. Today, you will often find a requirement on a maximum weight for glass bottles or that we ask for an alternative type of packaging, like, a tetra pack or a PET bottle or a can or bagging box for that matter. But if we ask for a glass bottle, you will most certainly find a max one bottle weights. We have done that for quite many years already, and that has been driving a change towards packaging that has a lower climate impact. But as I mentioned before, going forward, we can't satisfy with only twenty five percent of the carbon footprint from packaging. Also, for customers to understand why bothering wig packaging, it's a little bit difficult sometimes to convey the idea. We see that if we can communicate of the product itself, the carbon footprint of this product is this or that will be much more powerful because, that's how it works with many other fields. You don't have a fraction of the government footprint demonstrated or talked about. You have the whole carbon footprint explained. So this is something that will come more and more. And it could be expressed like this that this particular wine must not exceed zero point nine five kilograms of c o two equivalents per liter. For example, of course, there are details about what type of wine from which region, which price bracket, what kind of volumes need to be available and so on because we have many stores to fill So it can't be too small volumes to to meet our requirements. Now, we come into this tender tasting where we actually look for a pinot narrow from the Trentino alto adige region, which is twenty two or twenty three. And now we'll come into the, maybe, what you all expected. How does it go about with the tender tasting? What is the process? And how do do you evaluate products. Key in our tender tastings is the taste profile. It's the foundation of it. That's where it stated what style we're looking for. So in this case, we're looking for light, fresh wine with varietal tipicity that carries notes of wild raspberries, strawberries, and hints of fresh herbs the wine may have oak slash barrel flavors, but it is not a requirement. In our tender tastings, we have an expert panel. What does that mean? Well, it is trained professionals who taste the wines. These people taste literally hundreds of wines every week, week out, week in year after year to build up a very good capacity to evaluate many different wines and other drinks. So when they come into the room, they get this information, the region, the vintage price brackets, and can of course connect to what is expected from a wine with those specifications. On top of that is the particular taste profile, which is not exhaustive. It's just giving an indication. You might argue that pinotaro from Tarantino have a certain dial, and that is also built into the tender process. But here is highlighted. We look for a fresh light, fresh white wine, which type of aromas can you expect. Sorry, a question. If, the retail price is ten to fifteen euro, what would that translate into for the seller price? Well, roughly, I have not the excel sheet in my head, but rough flee, I would say that equals around five six zero. What is the tax in Sweden? Personally, and is there a a set margin markup for system to log it? There is a tax, and, it's not based on the price, of course, it's in the alcohol contents. And basically, it's around two euro for a normal bottle. And our margins are fixed and transparent. They are not changing depending on the country of origin or anything else. It's a set margin, which one part is so to speak per bottle and another one is related to the price. So it's dynamic to a higher price. The takeaway is that we have a set margin which is transparent. So you can always count on there will be no surprises on our markups. Great. Now, when we enter into the actual tasting, the actual tasting moment is a little particular. You can taste wine out of many perspectives. Usually, you you are looking for a certain quality. But here, the whole point system is based on one key question. Does this wine correspond to what we asked for in the tender? That's the first and foremost question. If the answer is yes, and hopefully you have quite a few wines that the answer is yes, then you come into the quality aspect of evaluating the wines. So you see, The task ahead of of you all now is to evaluate three wines in front of you. And I hope it's a quite easy performance for professionals like yourselves to single out, but it's more to drive home the points. When you taste and the tender tasting as a stable logger, the question you ask first, does it correspond to what we asked for? And after that, you put a certain number. So the whole score can go from a defect product up until corresponding with exceptionally high quality. Usually, we do not have only three samples in a system where I get tender tasting. Sometimes it's, twenty, thirty, forty, fifty, sixty eight, seventy, eighty, more than one hundred samples. When we have the really huge number of samples, we divide the tasting into several sessions because it becomes exhaustive for a human being to taste too many products in a row and also your accuracy go down. So one question. We're looking at pinot noir from this region, for example. How often in the year? If I was a producer of Pino Nero here, how many times a year would I have the chance to present my wine for a tender? Are you saying that there is a tender for this kind of wine now and the next tender would be in a year's time, or might there be one in six months? Or It's a very good question. A very, very good question because there is no such, schedule like that. The whole tender process is based on intelligence and the gap in the assortment, but like I tried to drive home, the concept of sustainability. So to put it simple, every time we want to add a new product or a fix assortment. We would like to have a wine that in the aspect of sustainability performed the same or better than what we have already. How do we do it? I mentioned the, for example, packaging we have been focusing on we will start focusing on the climate impact of the whole product, but I didn't mention the certifications. So if you don't have any kind of certifications that prove your performance in an environmental sense, or when it comes to working conditions, that's one step probably missing for us to be interested in asking for that type of it. So if a region, for example, Trentina, have been very good at focusing on that, it's more likely that we will focus more tenders to that region. Simply put because there are plenty of good wines from many places. But we want to add the aspect of sustainability. So let's do the tasting. Usually, most wines are starting from four or five if if they are not corresponding very well, and then you have up to the highest scores. And I guess that we afterwards can, just see if, you are in general agreeance on which wine should have been winning this particular tender, and I'll flip back to the specifications. So please taste the wines at your pace, and I'll see when you look ready and start talking again. I get the feeling that majority has, finished tasting. Don't stress. We can just start talking slightly about these wines. We are in a room full of wine professionals. So, I'm curious to hear what are your thoughts on this, task now. Is anybody brave enough to declare a winner in this tender tasting? Well, if you start with the first glass, glass number one. What about meeting in the criteria? Is it, something that is, typical for pinotaro? Get a few head shakes. It's a good quality wine. And, it's, definitely very good quality, I would say. It's not the effect, at least. But it's not very much a, a pinonero style, lights, fresh. It's more body and, quite rich in taste. Are all these three one hundred percent pinotaro? No. Legally. Well, the the thing is that when we have our tender tastings, we of course have first received the the tenders with specifications, but in the actual blind tasting session. This is what we have. We have the specification and we have a class in front of us, and we have to evaluate according to that. And then we can have a higher degree of confidence that all of them in this case would be one hundred percent pinot narrow. This is more to demonstrate the actual tasting environment, how it can be. So the second wine, what about that? I guess if you had nods Yes. It's fresh, more typical. I have watch like that, grates, warming up. Give me more. It's fresh, raspberry. Yeah. There is a normal quality. Yeah. Check check check. And even color wise, you see a significant difference, which is not unusual for Pinon r also. And the last wine, it's to me, at least, very clear vanilla okay flavors. To me, I relate that to using chips and not, flavors more than barrels, which were actually not prohibited in this tender, but, it was also not required. A question from here? For such tender, this is for the market. Right? Is it for the airlines also is it the same process? Or Our company is only retailing in in stores to private customers on ground. Okay. Not in the air. No. No. That's why I was gonna ask if this was gonna taste it in a pressurized cabin. No. If we would have such, outlets, we would probably think of it, but we are just selling on ground level. And, just so you know, in the Swedish market, we don't have a monopoly for what is sold to restaurants, hotels, and so forth only in our own shops. There is another question. You said that in this situation that oak chips aren't prohibited, but are there other scenarios where you're calling for wines that would prohibit like oak alternatives Definitely. The tender can be designed to really meet what we're actually looking for. For example, if, a particular wine region, the the wines, all of them we already have are maybe heavily oak scented, We might see a need to also display another style or type and then it might very well be so that in the description of the ten day, we'd say that we do not want any oak flavors. Another question. Can you talk about your data and your data verification process? So how do you know for sure that the bottle weight is what it is, what it's being represented to be? How do you know that it's truly EU organic? And it's ticking all of the boxes that are legally required in order for it to be noted as such. So effectively your data integrity. Before the tender tasting, the data we are checking into is what is actually provided by the suppliers and that produces in a tender, what they claim the wine to be or not to be. Then when we have done the tasting, we have selected a winner, which by the way is glass number two in this scenario. So we have that out of the way. Then we come into in this picture here. After the tender tasting, it's quality control that is done very thoroughly in several steps. First, to ensure that the actual quality we tasted in the blind tasting is the same that is five to six months later distributed to our stores. So we pick samples from our stores, together, we'd saved samples from the tender tasting and compare them both sensorially and chemically. To ensure that nothing has happened on the way. When it comes to all the surrounding information, if it was required, your organic, we will check for that product, the certification when it comes to what other things did you mention? Bottle weights. We will weigh the bottle when it's actually distributed to check that it meets the requirement. So it's not left to chance. We do check all of the requirements that is specific for this standard. So there's another question, please. Sorry. We're not letting you move forward, but that's a really interesting process as you're describing. I don't know if he will speak about it later, but regarding the joy of drinking. I mean, do you ever consider, like, average consumer? Do you take in mind personal opinion of a person who would drink this wine? I mean, this kind of thing, not technical criteria regarding style, regarding quality and other things, but garden the joy of of wine because wine can meet all the criterias, but then you compare two that meet and then one is joyful and that the one that we're Yeah. I would say that in this particular moment when the select which is actually a crucial part in who will get the business for certain tender. We don't put into those aspects in the actual tender tasting, but then it's more if you have several wines that meet the criteria. We try to dissect which one have the highest quality. But your question, I think suits better into this picture also when it comes to the intelligence and assortment strategy, how do we know what pleases people? Well, it is what they buy. So that affects what we are looking for in the tenders as well. We look at the sales of this and having the structure as we have, we happen to have very good sales statistics to analyze and see what's happening trend wise. To be clear, that particular aspect is not incorporated to the process about the pleasure of certain wines. And I can show you the tender taste test after a session with forty or fifty, wines. It's not the joy of wine that's top of their mind. It's quite exhaustive. I'd like to come back with the details. I got a perfect supply of data here for your question about it is quite spot on two euro per seven fifty ml bottle of alcohol tax. It's counted on top Our margin is around fifty euros as a fixed margin, and then it's a percentage of fourteen point seven percent on top of that, which will vary with the price. And that's based on the, actually, the price from the Swedish supplier. So those percentages are not on top of tax. They are stripped from tax and the price from the Swedish. Importer. And their margins, I can't speak for. It's they are free to put them themselves. And it's a point of negotiation between the producer and the Swedish importer. So, first of all, let's give it up for Gat Patterson, our system will log it. They have been incredibly generous with us. Sharing their process of the tender offering. This is their third time doing this. I hope especially the wine producers and also the PR agencies who are always badgering them, like, why aren't RN wines getting picked? I hope there is some insight into this after today. Thank you very much. Sorry. Can I just say I didn't reveal The the first class is La Graine from Trantino? Second is pinonero, and the third one is, Terre Oliano. So Anybody guessed all three? Okay. I was gonna give away a free ticket, but okay. Milligrams. Yeah. Okay. Thank you very much. Listen to the Italian wine podcast wherever you get your podcasts. We're on SoundCloud, Apple Podcasts, Spotify, email, IFM, and more. Don't forget to subscribe and rate the show. If you enjoy listening, please consider donating through Italian wine podcast dot com. Any amount helps cover equipment, and publication costs. Until next time.