How do the supermarkets still sell wine so cheap?

The chances are, that if you’re reading this article, then you’re quite possibly considering buying a bottle of wine from the independent merchant Wineman, and not, as 9 out of 10 other bottles are, from the supermarket.

Most of us will drop a few bottles into our trolleys at the end of the long, wending path through the other, lesser aisles of the supermarket. Sometimes I think the booze section is placed at the far end of the store simply for this reason – the gold at the end of the rainbow. And often, it appears as though there really is gold to be had here.

Offers are bursting from neat little stacks and point-of-sale displays, or glaring at us with big red letters from shelf-edge tickets. 25% off, a third off, occasionally even half-price; sometimes you wonder how on earth they can make any money…or do they?

Well yes, although they didn’t always used to. In 2014, a law was passed banning supermarkets for selling alcohol at less than the cost they paid for it, something that all the major UK retailers were guilty of doing in an attempt to attract more and more customers into their stores.

Although this practice has now been made illegal (largely in an attempt to curb binge drinking), supermarkets still use highly aggressive pricing measures to undercut many smaller UK wine merchants. One of these, and perhaps the most successful, is the liberal use of so-called ‘offers.’

We all like offers, but only if they’re genuine. Several studies conducted in recent years by the likes of mySupermarket and the BBC TV series, Rip Off Britain, have shown that supermarkets often artificially inflate prices in order to implement convincingly ‘bargain’ discounts. By charting the cost of a particular bottle over the period of a year, it can be seen that the price of the wine can fluctuate across a suspiciously large spectrum.

Over the course of 2012, a bottle of Ogio Pinot Grigio from Tesco shifted in value from £4.99, all the way up to £9.99 – remaining at this top price point for a mere 63 days, before being slashed to ‘half-price’ for the remainder of the year. It doesn’t take much to realise that the wine was never really worth a tenner at all. Most supermarket wine manages to appear cheap because that is exactly what it is.

Buying power is the key. Supermarkets buy vast quantities of the majority of their wine range in order to sufficiently supply their numerous branches throughout the country. Ordering wine in quantities of supermarket magnitude naturally means that they can demand a certain degree of price discrimination on the part of the supplier, as well as reaping the benefits of economies of scale through reduced per-unit distribution costs.

Sometimes supermarkets buy such volumes of wine that it is cheaper for it to be bottled in the UK than incur the transport costs of those bottles; instead, the wine is shipped in huge bladders before being decanted and labelled domestically. Occasionally, and particularly for the cheapest product lines, supermarkets will have vertical control of the whole production process, from berry to bottle to shelf. They will own the vineyards and the winery, and bottle and store the wine themselves, cutting out any middle men who’d normally take even the smallest slice of pie along the way.

For an independent producer, the security of sale that a supermarket can offer means that they are often willing to accept even lower prices for their wine in exchange for the nationwide marketing platform that the supermarket can readily provide. Indeed, buying wine at the supermarket is so commonplace, and the product representation it provides so vast, that some producers will even sell their wines to the megastores at a loss to gain a foothold.

There is, after all, something of a guarantee of providence (and often, a subsequent association with quality) in the eyes of the consumer if a producer can say that their wine is stocked by ‘x’ big name supermarket. This was the case until recently with one famous English sparkling wine estate – selling at a loss to a supermarket that claimed to be no less than a ‘champion of local produce’.

Unfortunately, bullying and heavy-handedness both contribute to low supermarket wine pricing.

There are other, subtler influences on price too, one of which is the more metaphysical idea of customer expectation. For years, shoppers have been buying supermarket wine at cheaper and cheaper prices, to the point where it is not unreasonable to expect most stores to stock at least one bottle barely over four pounds. This has led to something of a bargain culture. Customers simply wouldn’t stand for wholesale increases in wine pricing, and this mental barrier – the idea that wine should cost sub six quid – is a difficult one for the supermarkets to break.

Customers attracted to one store by the ‘honeypot’ wine prices will merely switch their weekly shop to another of the big six. Although there is variability in wine pricing between supermarket chains – some aligning their wine prices with their more premium, ‘middle class’ food range at large – this sense of necessity, driven by the highly competitive supermarket industry, is a large factor keeping prices low.

Price is a difficult thing in the wine industry. Some bottles sell for thousands of pounds. Is the quality within worth a thousand pounds? In my opinion, no. The majority of wine however, is far removed from these luxurious few. Nearly all the wine sold in the UK each year retails somewhere between the £4 to £15 mark, and within this bracket the quality to price ratio is a far more sure-fire affair. Yes, supermarkets do sell some remarkably cheap, good wine, but most of it is cheap because it’s plonk. Spend a little more, and you’ll get a little more; whether you buy from a supermarket or an independent merchant is up to you.