BUBBLY WAR ESCALATES

Published: 23 July, 2008

By Giles Fallowfield

Massive cuts in the retail price of Champagne are not being funded solely by cheaper grey market' stock sourced outside the UK. Supermarkets appear increasingly ready to pare back profit margins, far below the customary 30%, in their efforts to gain an edge over competitors. Neither Sainsbury's nor Tesco made any money on the half-price' Champagne deals they ran over Easter, although Sainsbury's is thought to have cut its single bottle price on tertiary brand Charles de Muret to 6.99 (below the break even' level) two days after Tesco started selling P Boutet at 7.49 on Monday 25 March. While Sainsbury's secured the required million bottles from supplier Duval-Leroy in the second half of 2001, when the ex-cellars price was weaker than it is today, it will have paid no less than FFr46 or FFr47 a bottle (the price has now drifted up to FFr52 or more). Even if the supermarket giant paid as little as FFr45 a bottle, once duty, freight and VAT are added it would need a shelf price of over 7 to be in profit. If many consumers took advantage of the additional 5% discount available in both stores on purchases of six bottles or more (bringing Sainsbury's price down to 6.64), losses will have neared 1 a bottle. The latest round of deep discounting began in January, when ASDA slashed the price of Lanson Black Label by 7 to 11.96, in an offer that still has two weeks to run (to 21 April). Although grey market' Lanson has been widely available over the past six months, ASDA is understood to have bought its stock from the UK arm of brand owner Marne & Champagne at the normal price, suggesting a profit margin closer to 5%, the margin on which French supermarkets operate. The lowest recent price on Champagne in France, where it is illegal to sell below cost, was e8.75 (FFr57.4) at the Carrefour hypermarket in Calais,in March.

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