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Research Alcoholic-beverage-suppliers

Alcoholic beverage suppliers: Why service matters in a crowded market place

By Ernst Gouws and Tasneem Motala

  • DEC 2020
13 minutes to read

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The importance of service quality when choosing alcoholic beverage suppliers
The alcoholic beverage industry (incorporating manufacturing, wholesaling and retailing) is a significant economic player in South Africa, contributing as much as R96.5 billion to GDP in 2015. Several international alcoholic beverage businesses have a presence in South Africa, including Heineken, Pernod Ricard and Anheuser-Busch InBev (the largest beer brewer in the world), who view the country as an important launching pad into the rest of the continent.

In a highly competitive environment, where there are several alternative suppliers to choose from, service quality really matters. Put another way, the more alternatives that alcoholic beverage resellers have, the less they will be prepared to tolerate poor service. As far as South Africa’s hospitality industry is concerned, anecdotal evidence suggests that there is often a gap between the quality of service that resellers, such as restaurants and bars, expect from their suppliers and the actual level of service that they receive. This gap  could, in turn, affect the service which the resellers deliver to their patrons (that is, end consumers).

In a highly competitive environment, where there are several alternative suppliers to choose from, service quality really matters.

In the face of fierce competition, suppliers cannot afford to concentrate only on the inherent characteristics of their product offerings; the quality of the accompanying service is often the deciding factor for buyers. Service quality can be described as the relative distance between a customer’s expectation of how the service should be performed and their perception of how it was in fact performed. Service quality is crucial for a company’s standing in the market, competitiveness and financial performance, but it is difficult to measure. A service is, after all, largely intangible and the quality thereof is often in the eye of the beholder.

A number of researchers have proposed models aimed at assessing service quality according to standardised criteria, with the Gap Model being among the most highly regarded. The Gap Model recognises that service quality lies on a perceived quality continuum, where the perceived quality is a function of the discrepancy between the expected service and the perceived service. The size of the gap, or gaps, can be quantified using the SERVQUAL instrument, which measures whether a discrepancy exists on the customer’s “expectation‒perception continuum of service quality” (ranging from unacceptable quality to ideal quality), assessed according to five different dimensions: reliability, assurance, tangibles, empathy and responsiveness (RATER dimensions). The combination of the Gap Model and the SERVQUAL instrument has won much support from researchers who are interested in measuring service quality.

Service quality is crucial for a company’s standing in the market, competitiveness and financial performance, but it is difficult to measure.

While service quality has been put under the microscope in several industry-based studies, little research has been conducted on service quality in the South African alcoholic beverage industry. This article discusses a study whose main aim was to investigate whether there is a discrepancy between reselling customers’ expectations and perceptions of the service quality delivered by alcoholic beverage suppliers in South Africa.  A secondary aim of the study was to explore the different dimensions of service quality and what customers’ actual expectations and perceptions were.

Service quality in the alcoholic beverage supply chain
Because of the multiple links in the alcoholic beverage supply chain, perceptions of quality can differ up and down the chain as needs and expectations vary. This in turn can give rise to discrepancies or gaps in perceived service quality at different points in the chain. For resellers of alcoholic beverages, service quality is a bi-directional concept – that is, the service-related expectations that they have of their suppliers are somewhat influenced by the expectations of their own end consumers who frequent their establishments. For example, if a restaurant is unable to obtain a consignment from its supplier at short notice due to an unanticipated stock-out situation, its patrons will be left disappointed.

The South African hospitality industry, perhaps more than any other industry, is designed to create happiness among consumers. Therefore, those who visit restaurants, bars, nightclubs and other hospitality-type venues often expect more from these service providers than from others.

While service quality has been put under the microscope in several industry-based studies, little research has been conducted on service quality in the South African alcoholic beverage industry.

How the study was conducted
For the empirical study, the survey method was chosen. Surveys are known for their ability to capture large amounts of data, particularly if administered online, as they can be distributed to large numbers of respondents. As the target population for the study (businesses that purchased alcoholic beverages from suppliers and resold them to patrons for on-premises consumption) was dispersed throughout South Africa, the researchers felt that an online survey would be a more efficient and practical option than interviews or focus group sessions.

A two-part SERVQUAL questionnaire was used for the survey, which compared customers’ service expectations and service perceptions. Respondents were required to rate a series of statements presented in the questionnaire relating to the five RATER dimensions (reliability, assurance, tangibles, empathy and responsiveness) on a Likert scale of opinion, ranging from Strongly Disagree (1) to Strongly Agree (5). The researchers also solicited qualitative comments from respondents. This was to acquire insights into the unique service quality issues impacting the supply of alcoholic beverages in South Africa.

Results of the study

Empirical results: Interestingly, the 60 survey respondents had varying expectations regarding service quality. Across all five dimensions, though, respondents’ expectations of service quality were higher than the perceived service quality that they received from their suppliers – clearly an undesirable state of affairs. The greatest gap between expected and perceived service quality was in the reliability dimension.

Because of the multiple links in the alcoholic beverage supply chain, perceptions of quality can differ up and down the chain as needs and expectations vary.

Qualitative results: Many respondents mentioned that their suppliers did not take the time and trouble to develop and nurture relationships with them, and that they were not sufficiently caring. Some spoke about a lack of follow-through after deals were concluded via the sales reps, infrequent or no meetings to discuss how things were going and/or areas for improvement, and even uncertainty as to who the key contact people were at the supplier. Some respondents implied that suppliers’ lack of interest in their customers’ needs and expectations stemmed from arrogance and the knowledge that they (their customers) relied on them so heavily. Respondents called for better product information and training from their suppliers, which they believed would enhance their marketing efforts and boost sales to end consumers.

When asked what would influence their choice of alcoholic beverage supplier, respondents mentioned several factors: great customer service, an interest in their brand, open communication channels, skilled and professional staff, product availability, timeous deliveries, the ability to supply urgent orders and fair pricing. The general emphasis in the responses on service, delivery and flexibility highlighted the importance of reliability when it comes to supplier choice.

No place for weak links
This study has helped to lend both structure and texture to the service quality expectation‒perception dynamic in the supply of alcoholic beverages in South Africa. With these insights, suppliers will become aware of the concerns of their customers and will be in a better position to address these concerns in practical ways. Resellers, in turn, will be able to approach their suppliers from a more informed base, with a view to negotiating a more productive and cooperative business relationship.

The study also described a useful mechanism whereby suppliers can evaluate the service quality of their own suppliers further upstream. This should make suppliers more responsive to the needs of their immediate customers, while also positively impacting the efficiency and effectiveness of the supply chain as a whole.

In a business environment that is becoming increasingly crowded with similar product offerings and competing brands, superior and innovative service is fast becoming firms’ main competitive advantage.

In a business environment that is becoming increasingly crowded with similar product offerings and competing brands, superior and innovative service is fast becoming firms’ main competitive advantage. This is very evident in the case of fast-moving consumer goods ‒ and alcoholic beverages in particular. However, in their haste to keep pace with the competition and cater to the highly coveted consumer market, firms should not overlook the critical role played by other members of the supply chain. In the competitive race, there can be no weak links.

  • Find the original article here: Gouws, E. & Motala, T. (2019). Quality of service delivered by alcoholic beverage suppliers to customers in the South African hospitality industry. African Journal of Hospitality, Tourism and Leisure, 8(3). https://www.ajhtl.com/uploads/7/1/6/3/7163688/article_8_vol_8_3__2019.pdf
  • Tasneem Motala is a senior lecturer in Operations Management at USB.

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