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News
Tesco sells Champagne for less than £7.50
British retailer Tesco is selling Champagne at the below-cost price of just £7.46 per bottle over the Easter period.
The UK’s biggest supermarket chain is selling Pol Aimé Brut Champagne with a 25% discount applied to its already low price of £9.95.
The deal, which runs from 23 March to 3 April to tie in with Easter celebrations, applies when shoppers buy six bottles.
It means that customers will be able to buy a six-bottle case of Pol Aimé for only slightly more than the price of a single bottle of Bollinger NV Champagne at Tesco.
It is thought Tesco will make a loss on every bottle of Pol Aimé sold at the reduced price due to the production costs involved in putting a bottle of Champagne on its shelves.
Approximately 1.2kg of grapes are needed to make Champagne. The average price of wine grapes in the Champagne region between 2011 and 2015 was €5.78, according to figures from the Comité Champagne.
This means the price of the grapes needed to make a bottle of Champagne is roughly €6.94, or £5.50 at the current exchange rate.
Factoring in high duty and VAT costs, as well as production, storage and transport, it is inconceivable that a bottle of Champagne can sell for less than at least £10-£15 in the UK without making a loss.
Tesco has been invited to confirm whether Pol Aimé is a loss-leading brand.
The retailer has exclusive ownership of the Pol Aimé label, giving it the advantage of selling at a rock-bottom price without damaging the reputation of Tesco’s own-brand fizz.
However, it has the potential to damage the luxury image of Champagne as a whole.
According to Tesco’s website, Pol Aimé Champagne is produced by “small, traditional producers with a record for quality and for good value.”
It is supplied by Champenoise des Grands Vins, a subsidiary of Lanson BCC, which owns Champagne Lanson and Champagne Philipponnat among other major brands and companies.
Champenoise de Grands Vins is a major broker of Champagne that sources liquid from numerous producers to sell on to distributors under brand labels.
I was going to comment but I’m at a loss for words
Ludicrously, the UK government views ‘cost’ as duty + VAT, currently £3.21 on sparkling wine. So Tesco could lose more if they wished. Market distortion by the big boys at the expense of everyone else.
I am very unhappy about the wine being sold at that price, but very happy that at least someone has the courage to voice the costs of making champagne (and the 10-15 GBP is a loss for all small growers as they do not have the economies of scale kicking in) and also has the courage to voice who is making it and explain that the only damage it is doing is to all champagne houses in one go. The champagne bureau (CIVC) should follow guidelines from the European Union about selling at loss and take off the licence of Mr Tesco to own champagne brands whether being Paul Aimé Champagne, Tesco Champagne or Tartanpion (very french that one :)) Champagne
The supplier is the same group I believe that is owned by Bruno Paillard – a leading figure in the champagne industry, on the management committee of the Comité Champagne and an advocate in other places of the prestige image of champagne, particularly his own brand that bears his name. How does he square all that with selling to Tesco for sale as a loss leader, or even at the ‘normal’ price of £9.95?????
I’m sorry, but can we actually have a dose of realism here.
1) Champagne doesn’t cost that much to produce and we consumers have been in the thrall of big name champagne brands for far too long, convincing ourselves that this is a rare and luxury product – it’s not, it is re-fermented unripe chardonnay and pinot noir with a load of sugar in it.
2) Tesco will have some commercial arrangement with Pol Aime so that this deal is profitable to Tesco. (Also a bit of spell checking would be good by Mr Baker before publishing, Aime/Amie)
3) The author for some reason objects to someone selling something below cost. If the wine would otherwise be binned (usually the reason for such things) what is wrong with someone trying to recoup their losses. This smacks of a producer or co-operative who’ve overproduced and are happy not to have made a total loss.
4) Tesco are selling it because they know people will buy it. Retailers discounting wine is not news.
Hi Mr ‘Ranty Steve’,
1) Nowhere do I suggest that Tesco isn’t making a profit.
2) Nowhere do I make an outright objection to below-cost retailing.
Ps. Thanks for the speling tipp.
@Ranty Steve:
“Champagne doesn’t cost that much to produce” – Oh, really? And you know this how? Are you aware of how champagne is made? The production process is a great deal more complex than for still white wines, and all of the products that go into making it (bottles, corks, etc) cost far more than for still wines. Labour costs are also very high, as employees are covered by a regional trade union and then subject to very high social charges. A common per-bottle cost for a big champagne house is over 8€ per bottle, and small producers often have costs running above 10€ per bottle.
“re-fermented unripe chardonnay and pinot noir with a load of sugar in it” – Actually there are 7 different grape varieties that may be used to make it, and there are more often than not three of them in a champagne blend. Most champagne sold is “Brut” champagne, which has less than 13 grams per litre of sugar in it. This is equivalent to a MAXIMUM less than 3 teaspoons of sugar per litre. More commonly, you’ll have between 5 and 10 grams per litre. Mix one or two teaspoons of sugar into a litre of water with a few squeezes of lemon (to replicate the acidity levels in champagne, which the addition of sugar is supposed to balance, and which are NOT a flaw, but rather a characteristic that bring champagne its freshness) and let me know sweet you find it.
“The author for some reason objects to someone selling something below cost.” – Selling something below cost is considered predatory pricing. If the producer is exporting at below cost price, it’s called “dumping” and is illegal in the context of international trade, in particular under WTO agreements. So the fact that someone should object to selling something below cost is not as outrageous as you make it out to be.
“If the wine would otherwise be binned (usually the reason for such things) what is wrong with someone trying to recoup their losses.” – Champagne is only binned if it’s declassified, in which case it cannot have the word Champagne on the bottle, and on the rare occasions that this happens it is usually sent off for distillation or transformation into vinegar. The more likely situation is not that it was destined for destruction nor, for that matter, sold below cost by the producer, but rather that Tesco re-sells at below cost. This is what the author refers to as a “loss-leader”, and since your comments imply that you don’t know what that means, I’ll explain it: the supermarket prices a product (in this case champagne) at below cost price in order to draw people into the supermarket. So a consumer sees a promotion for champagne being sold at 8£ and says to himself, “Well, I think I’ll do my shopping at Tesco this week, since I can buy cheap champagne!”. If Tesco buys the bottle of champagne from the producer at 11€ per bottle (I know a producer who sells to another major UK supermarket at that price and the retail price is also at 9.95£, so let’s assume it’s the going rate), ex-VAT and duties, and not including shipping, it’s costing them 8.82£ at today’s rate + 2.67£ duty + 0.20£ shipping (approximately) + 20% VAT, their cost per bottle is 14.03£ per bottle. That means they’re losing 6.57£ per bottle, and in order to get the discount the customer must purchase 6 bottles, so they’re losing 39.42£ for each customer. Even at the regular price of 9.95£, they’re losing over 4£ per bottle. Do the margins on the other shopping that the customers do make up for that loss? One would hope for Tesco’s sake that they do, but given Tesco’s market performance in the past couple of years it wouldn’t be surprising if they don’t.
If you disagree with the author’s opinion in this article, it is certainly your right to do so, but before you make provocative statements on the subject you would do well to educate yourself.