Wine industry ruined by price promotions?

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by Stevie Kearney, Head of News

Everyone loves a bargain.  However, have we ever considered who loses out when we get a ‘fantastic’ deal on our wine?

For a bottle of wine to be sold on a ‘buy one get one free’ or ‘3 for 2’ deal, someone is not going to get their usual cut.  Is it the retailer who is taking the loss?  Is the producer being forced to cut corners in production to satisfy the demands of the buyer?  Curse the thought, but are the buying public being conned?

Someone has to lose.  That is a basic fact of economics.  We’d like to believe that the retailer is the one being amazingly gracious in offering to cut the price.  Sometimes, this may be true.  But often there are other factors at play.

With seven years’ experience in the wine trade, I have seen it first hand. The price of a bottle of wine is set at a standard rate so that everyone can get a fair cut and the production chain from grower to buying public, via producer, importer and retailer (and taxman), can continue to function.  If suddenly the price of a bottle of wine is half the price it was yesterday, someone is sure to be losing out.

[caption id=”attachment_29” align=”alignleft” width=”174” caption=”Even 007 can be tempted by multi-buy deals on Champagne”][/caption]

I’ve spoken to many retail managers in the trade.  Small and medium sized retailers offering 3 for 2 and ‘buy one get one free’ deals are, unfortunately, highly likely to be bumping up the single bottle price to offset the large discount.  This trend was started by the supermarkets, who offered big discounts on brands which were never worth any more than the discounted price.  One manager of a well known Off-Licence chain told me that many retailers feel they have to resort to such practices as they represent the only way to compete with the buyer power of the so called ‘Big Four’ supermarkets.

Even more sinister then, is the impact of supermarket buyer power.  Very often, in order to offer ever greater discounts, those with the greatest buyer power are able to exert significant pressure on the wine producers.  This has serious implications for the wine industry.

In order to satisfy the big clients who make or break a winery, winemakers are being forced to cut corners in production.  Instead of buying expensive oak in which to age Chardonnay, price pressures are forcing some wineries to add woodchip to large vats of wine to try and get the same oak influence from a much cheaper source.  Experienced tasters will tell you, it isn’t the same thing.

Whilst the addition of woodchip is not illegal in most wine regions (Old World countries like France and Italy tend to be more stictly regulated than New World countries like Australia and Chile), there are many illegal acts which do happen in wineries in order to satisfy demand.  An Australian winemaker I spoke to made reference to the infamous ‘snake in the tank’, which is the very Australian way of describing water being added by a hose in the top of the tank to bring down alcohol levels and increase the amount of wine to be bottled.

It goes on for sure”, he said, “I’m not saying everyone is doing it, but I know some wineries are”.

[caption id=”attachment_28” align=”alignright” width=”235” caption=”The ‘snake in the tank’ is just one way wine consumers are being bitten”][/caption]

The wine industry in South Africa has already been caught out.  Several wineries were found to be breaking the rules by adding flavourings to their wines.

Producers in Beaujolias in France have had the opposite problem to their Australian counterparts; 60 producers are due in court having been caught adding large amounts of sugar in order to increase alcohol levels.

This is a prime example of corners being cut in order to compete.  Nobody is sure how widespread such practices have become, but there is only one loser and that is the wine drinking public.

Countries such as France and Italy have strict guidelines on what can and cannot happen in the winery in order to maintain quality, but anyone watching Jane Moore’s recent Dispatches documentary will agree that we have reason to cast doubt on the quality of the product we purchase.

The trend is worrying.  In order to meet the all important price point requirements of the big retailers, wine makers have little freedom to experiment or improve.  Often they actually have to cut back on the quality of what they produce.  Sometimes they just simply cheat.

Or, perhaps that 3 for 2 deal is actually just you being conned by inflated single bottle prices.

Either way, next time you see a bargain that can’t be missed, consider who is the real loser in the deal.  Chances are, it just might be you.

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