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Heavy discounts blamed for sluggish wine sales say Constellation and Majestic

Pressure to offer wine drinkers deals during Christmas in the UK and Thanksgiving in the US has damaged sales figures, according to updates released in the past week.

Majestic Wine said it cut prices by more than it wanted to, so as to keep pace with rivals

The annual pre-Christmas wine price wars were fiercer than expected on both sides of the Atlantic, according to Robert Mondavi wines owner Constellation Brands and UK retailer Majestic Wine.

Constellation saw net wine sales fall by 4% to $685m in the three months to the end of November, versus the same period of 2013. It said it did not anticipate such weakness in the US, and blamed discounting at the lower end of the market.

‘I think that that’s driving the overall market down,’ said Rob Sands, CEO of Constellation, which owns Kim Crawford, Ravenswood and Inniskillin wines, alongside the Mondavi label.

In the UK, Majestic saw its share price slide by around 20% over 7 and 8 January after it said that it sacrificed some profit margin to compete with its rivals on price.

Majestic still saw total store sales rise by almost 4% in the 10 weeks to 5 January, but like-for-like sales – excluding those from new stores – only increased by 1% on the previous year.

‘The Christmas trading period was particularly challenging, characterised by increased levels of competitive promotional activity to attract customers into store and online,’ said Majestic’s chief executive, Steve Lewis. He said he expected this trend to continue in 2015.

Supermarket chains Tesco and Sainsbury’s also reported tough Christmas trading in the UK, although they did not release specific figures for wine.

The expansion of wine ranges in discount chains Lidl and Aldi may have fuelled deeper price cuts on wine in the UK ahead of Christmas. Both Lidland Aldi have been taking market share from the more established supermarkets for the past 12 months.

Early signs suggest Lidl saw strong sales of sparkling wine over Christmas. Prosecco sales tripled in December, although Champagne was its best-selling product and Cava also did well, a Lidl spokesperson said, without providing specific volume or value figures.

Written by Chris Mercer

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