Squeezed until the price points squeak: The cost of wine is being forced above the all-important pounds 3 barrier as the pound's fall hits the shelves. Anthony Rose reports

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Black Wednesday hit wine retailers in that most vulnerable spot - the price point. The mass market is fine- tuned to produce bottles on shelves for pounds 2.49, pounds 2.99, pounds 3.49 and pounds 3.99. Yet the depressing fact is that much of the wine on our shelves is - or soon will be - 10 to 15 per cent more expensive than it was.

About nine out of every 10 wines are from EC countries. France and Germany, where the purchasing power of the pound has fallen most drastically, account for more than six out of the nine. 'We'll still see French vins de pays at less than pounds 3,' says Mike Connolly, head of Sainsbury's wine department, 60 per cent of whose sales are in French and German wines. 'But I think it will be the end of appellation controlee at pounds 2.99 in the longer term.'

As if to emphasise this, Sainsbury's claret rose from pounds 2.95 to pounds 3.19 this month. Tesco and Waitrose followed suit, and Safeway will do likewise from Monday. Victoria Wine and Asda, however, are holding theirs at pounds 2.99 for the time being.

Safeway has shelved plans for a Christmas promotion of French and German wines. 'We were 80 to 90 per cent sorted out and now we have had to unpick everything,' says Nick Wakefield of Safeway, which is clinging to pounds 2.99 on beaujolais and muscadet. Ironically these two regions were the worst offenders at putting up prices until recently, but swollen stocks have allowed prices to ease. And if the first reports of a large but mediocre French harvest this year are accurate, softer prices should help to cushion the blow.

Waitrose has already raised prices on a number of French and German wines. Typically its excellent Cabernet Sauvignon Vin de Pays d'Oc has moved from pounds 3.99 to pounds 4.25, its traditional St Emilion from pounds 4.99 to pounds 5.35, while its St Joseph has soared 80p from pounds 6.95 to pounds 7.75.

About 20p on a bottle may not seem a huge price hike, but crossing the pounds 3 Rubicon on as important a product as your house claret is a giant step for a supermarket. Overstep the psychological barrier, be it pounds 2.50, pounds 3, pounds 3.50, pounds 4 or pounds 5, and you put your wine on the chopping block of customer loyalty. 'If they are loyal to the brand, 90 per cent of customers will continue to follow it,' says Neil Sommerfelt, one of the Waitrose buying team.

The pressure to keep prices stable is that much stronger as the coming Christmas season adds competitive spice to the recession. 'We can probably absorb some of the increases for the time being,' says Stephen Clarke, who pledges to keep most of Tesco's key prices steady until Christmas. 'But after that, we're going to be hit by the double whammy of recession and devaluation.'

Thresher, the biggest wine merchant in the high street, says prices will have to rise this month, although together with its sister companies, Wine Rack, Bottoms Up and Peter Dominic, it is committed to maintaining prices on its special promotion until 4 November. This includes the more than 300 medal winners and commended wines from this year's International Wine Challenge.

Peter Wallis, of Augustus Barnett, says: 'We haven't had to put any prices up yet and will endeavour to hold prices on key products for as long as we can.'

At Majestic Wine Warehouses, Debbie Worton says, 'We have held fire till now, but prices have had to move. At the cheaper end, things moved over their price points this week. France at less than pounds 3 will be increasingly difficult now.'

'All fast-moving lines are up by 5 per cent,' says Oddbins' John Ratcliffe. 'Our approach is to protect price points in the key pounds 3.50 to pounds 5 category where we can.'

There are alternative approaches. While no one likes to admit that in order to preserve sacrosanct prices they might be willing to downgrade the quality of a wine by paying for a cheaper blend from the same source, it is an option.

Even if they do not make the choice for themselves, companies without the necessary quality control to spot-check every lorry and container may find that unscrupulous suppliers have already made the choice for them.

The bigger the muscle, the more effective the power of persuasion; the big supermarkets are keen to convince suppliers that it is in their long-term interest to make concessions on price.

'We have asked suppliers to help,' says Mr Connolly at Sainsbury. 'Some have responded positively, others are unable to. We would not say we would have to go elsewhere if they cannot help, but in the long run it may influence our product development programme.'

Mr Wakefield, at Safeway, says: 'We would rather put pressure on our suppliers to maintain price points than downgrade.'

'The pressure's on,' admits Jeremy Roberts of Val d'Orbieu, a major supplier of southern French wines to retailers. 'We needed to persuade the French to make concessions or customers would go elsewhere, so they are prepared to offer a discount until Christmas.'

Another option for retailers is to look elsewhere for better value. But it takes time. 'We will continue to increase the volume of wines from areas that offer good value,' says Ms Worton from Majestic, which has doubled its under- pounds 4 range from Spain, brought in wines at pounds 2.99 from northern Italy and increased its Australian range dramatically.

Whatever concessions the trade manages to wring from French and German producers, the ill wind of devaluation is clearly an opportunity for the wine producers of Italy, Portugal, Spain and Eastern Europe, as well as the New World, to help themselves to a bigger share of the prestigious and still lucrative British market.

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