Savour the benefits of a strong pound
Thanks to a strong pound and typical British summer weather, holiday companies have been reporting a lemming-like rush to leave the white cliffs of Dover. Compared to this time last year, pounds 250 will buy you an extra pounds 42.79 in French francs, pounds 37.95 in Italian lira, pounds 43.44 in Spanish pesetas and pounds 115.69 in Turkish lira.

If it's good news for Channel hoppers, it's cork-popping time for wine drinkers. The first swallow of summer arrived after a raid by the Co-op on a stock of Moet et Chandon Champagne in Belgium. Offered a price it couldn't refuse, the Co-op flogged off a rumoured 60,000 cases in six weeks, at pounds 14.99 a bottle. This started a mini price war, in which Moet cut its official pounds 19.99 price by pounds 1.

A number of retailers followed suit. Marks & Spencer has knocked pounds 3 off its Oudinot champagne, now pounds 9.99; Sainsbury's Blanc de Noirs is down by pounds 2 to pounds 9.99 (pounds 9.49 with the six-bottle discount).

Now that wine from western Europe is getting on for 25 per cent cheaper than it was this time 18 months ago, the longer-term effects of the strong pound are filtering through. "Western Europe is cheaper for us this year because of the exchange rate," says Liz Robertson at Safeway. "So, although the real price of basic wine at a proper margin is pounds 3.19 to pounds 3.29, the pounds 2.99 wine is still there."

Tesco has dropped its Gamay de Touraine from pounds 3.29 to pounds 2.99, Fuller's its Bordeaux rose from pounds 5.49 to pounds 4.99, while at Thresher, Soleil D'Or is down from pounds 4.49 to pounds 3.99. At Sainsbury's, some Languedoc wines have been cut - Minervois from pounds 3.35 and Corbieres from pounds 3.45, both to pounds 2.99. Red and white Burgundy are down to pounds 4.99 from pounds 5.45, Macon-Villages to pounds 4.99 from pounds 5.95, and Sancerre to pounds 6.95 from pounds 7.45. Bordeaux Rouge is a steal at pounds 2.95.

For now, the currency advantage is mainly being used to sell wines beneath critical price ceilings such as pounds 3.50 or pounds 4, or on promotion. "Where we're making a healthy margin, we're putting it back into promotions," says Julian Brind, at Waitrose. The result is that opportunities for multi-buys and discounts on a half- dozen or more wines from western Europe are likely to increase, with the potential for a Christmas bun fight. Sainsbury's Robin Tapper also sees it as a chance to sell better-quality wine at the existing price.

The announcement by Spain's Torres that it is cutting prices about five per cent could have a knock-on effect. But the chances of the trickle of price-cuts turning into a flood are small. Bigger companies, which tend to buy currency in advance, are still wary. According to David Gleave, of Liberty Wines, "It's swings and roundabouts. When the pound was weak, a lot of people swallowed profit margins. If you bring prices down now and have to pull them up again, any increase will be more than eroded by implementing the changes."

The strong pound should help calm anxieties over New World price hikes. Because the New World delivers on flavour and value, the popularity of its wines - from Chile and South Africa in particular - continues to grow. But difficulties with the 1997 harvest will mean a shortage of premium wines, especially reds, across the southern hemisphere this year. A strong pound should help offset increases in suppliers' prices, although the respite may be temporary. As the global thirst for premium wines creates a sellers' market, we could still lose out to the big spenders of America and the Far East