The mechanics of the £20 Taittinger offer

This is the time of year when the supermarkets try t0 outdo each other with special offers on well-known fizz.

I was surprised when I popped into my local Asda and found Champagne Taittinger NV for sale at £20 per bottle, with a maximum of three bottles per customer. I’ve heard from others that Sainsbury’s and Tesco offered it even more cheaply, at £17.50 and £17.99, respectively.

So at the Taittinger Comtes de Champagne vertical last Friday I asked a member of the Hatch Mansfield (Taittinger’s UK agents) team how these promotions work. It would seem odd for a brand owner to risk damaging their brand in this fashion, by offering the Champagne so cheaply (normal retail is c. £33).

The response was that in Asda’s case (and presumably the case of Tesco and Sainsbury’s) the promotion is funded by the supermarket. And Hatch are furious, but can do nothing about it.

Asda have been building up stocks for a while in advance of the promotion, and Hatch speculated that they might have even been buying from a third party. This would make a promotion like this quite expensive for them, but marquee offers such as this are done to drive footfall at a crucial trading period.

It puts the UK agent in a difficult position, because with a Champagne such as Taittinger, they will be supplying a range of outlets, including independent wine merchants and restaurants. And this offer price is probably the same price that Hatch will be selling the Champagne to their customers at, making it impossible for them to come even close to the supermarket offer price, which makes them look very expensive indeed.

It is normal for brand owners to fund promotions, but these are usually discussed well in advance. When a wine is listed, there may be a discussion about promotional movement (say, £2 off) and the discount that will be given by the agent or brand owner to fund this. Now that many supermarkets do 25% offers across their entire range, this becomes a bit more complicated. Generally, the supermarket will ask for money for this from the larger players, but not charge the smaller ones.

But brand owners would normally never agree to the sort of discounting we are currently seeing with Champagne, because once a customer has bought Taittinger for £20, their impression of the value of this wine will be diminished.

At the moment Hatch are not supplying Taittinger to Asda, but will no doubt end up supplying them again in the future. Taittinger can’t cut off the supply to the supermarkets because they have 5 million bottles a year to shift. That’s not huge, but it is a sizeable production.

It’s interesting to see which brands are immune from this discounting strategy. Note that you never see Krug promoted at all. Of course, Krug aren’t allowed to discuss pricing with their stockists: no one is – this is highly illegal, because of price fixing laws. But I imagine that if you funded a Krug special offer, then you’d find it hard to get any stock in the future.

22 comments to The mechanics of the £20 Taittinger offer

  • james cornish

    Two years ago, Sainsbury dropped Krug to £50!

  • Interesting thoughts….

    While I don’t mind Tattinger, this only highlights the need for independent merchants to be proactive in their quest for unique smaller scale houses and winemakers.

    In the muddy waters of the supply chain, I am quite certain there are grey imports (like other products) are going to these supermarket giants. For instance, if Champagne sales are down in the rest of Europe, what is to stop a multinational supermarket retailer buying this stock and selling it within the UK market as long as they pay duty etc….. and if there is regulation is it really being applied ?

    Mr Champagne House doesn’t really care as he has to shift volumes to keep his shareholders happy and he keeping the consumer happy to boot ! The only people who suffer are the importer and smaller merchant, who in many cases will weather this situation. If not there are plenty of others to take their place.

    As this annual champagne clear out usually happens (albeit post Christmas), I sincerely hope the merchants take the opportunity to do something different.

    now…. where is that bottle of English Sparkle ?

  • “Note that you never see Krug promoted at all.”

    Nor, indeed, in Asda…

  • Dids

    Interesting – this goes on in my industry aswell. The manufacturers response to it is to stop supplying the customer. Would Mansfields stop supplying the supermarkets? No I think not.

  • Nick Robinson

    This happens in pretty much every retail facing industry. Supermarkets will always be able to heavily discount some items, sometimes taking a hefty loss in the process, to drive footfall. Take a look at the price they sell a Harry Potter novel (and compare to an indie book shop), or a copy of FIFA 2012 on PlayStation (compared to the price at HMV or Game). The supermarket will make the money back, and some, on other goods purchased during the visit – a specialist retailer has a much harder time doing that when people come in just to buy a single bottle, book or game. And whether the supermarkets are discounting below the wholesale price they paid, or negotiating a much lower price than the indies in the first place, they are never interested in the impact on the producer’s other retail relationships.

    Gregory, above, makes an interesting point about merchants needing to look for unique winemakers to compensate. But that doesn’t solve the problem in all cases. Wine is like any business: only a tiny proportion of available brands shift in large volumes, and pricing is essential because the volume audience is simply not informed enough to choose between “unique and quality” and “prestige but discounted”.

  • Tesco are selling Taittinger for €25 in Ireland and then they have the 25% off on top on any 6 bottles. (BTW excise duty here is higher at €4.10 on fizz) Hatch can’t be that ‘furious’ as their staff were in Dublin pouring it on a Tesco stand at Food & Wine Magazine’s Christmas event in Dublin the weekend before last. Very nice it was too. I met the Tesco buyer too who said, in general about their deals at the moment rather than about Taittinger, that they were not selling below cost and that the offers were to stop customers shopping cross border in Northern Ireland. I found that hard to believe.

    It’s likely that below cost sales on alcohol will be banned in Ireland in a few months time but he said he welcomed that move as it meant retailers would all charge more. Which kind of implies they are selling below cost now.

  • The important question is whether Taittinger is worth £33 to the consumer. I think the universal answer will be: no. It’s an industrial wine produced from heroic yields and yet costs the equivalent of an artisanal premier cru Meursault. £20 is a little closer to its ‘real’ contextual value. Nick Robinson’s comparison to FIFA12 or Harry Potter above is spot on. A bottle of Taittinger is worth about the same as a video game – close to nothing. The rest is marketing.

  • Killian Clifford

    Supermarket loss leading is illegal in many countries and it would be good to see it extended to the UK, perhaps via EU competition law.

  • Bernhard

    Interesting. In Austria you sometimes find Krug offers for 129,- Euro. Whats the price in UK?

  • Well said, Martin, especially with respect to Hatch Mansfield being “furious”. I would say that the Irish importer (Febvre & Co) is also furious.
    This Taittinger story started (in the Republic of Ireland, at least) this time last year when Tesco had it on offer at a “half price” €25. Right now, to the best of my knowledge, it is €30 but if you buy six bottles (can be mixed) you get 25% off, bringing it down to €22.50. I have spoken informally to colleagues and people in the trade about this ongoing promotion and most are agreed that Taittinger are aware of these offers. All of the Tesco stock (I have checked the boxes and the bottles) comes from Hatch Mansfield.
    And Hatch are happy to bypass other Irish importers also, with some other well known names.
    See: http://www.blakeonwine.com/files/what-price-taittinger-october-2011.php
    (Note the spelling of “Taittanger” (sic)

  • It is a strange idea, and very anti-free market, that a distributor should dictate sales conditions for a retailer. You sell your stuff and the retailer does what he wants with it.

    If Asda wants to finance a marketing promotion, let them. They put money in marketing as they wish. Would anyone complain if they simply paid for huge billboard ads for Taittinger? don’t thinks so but it would in the same way be a retailer paid-for marketing campaign.

    But then again, Champagne has never been much in favour of the free market, have they?

  • Very interesting topic, also from a small producer’s point of view. I think selling to large suppermarkets is a game for large volume producers – if you’re a small or medium sized producer and you get involved with a supermarket, you’re dicing with death! If you sell to a supermarket, you lose control of your price point and if the supermarket decides to discount your product for whatever reason, your brand/value/etc is trashed forever among your end-customers and/or other retailers. It’s a free market of course, but in this case its “Seller beware”!

  • Ben Fawcett

    Every single christmas this happens and quite often at other times of the year. Solution Independents must NOT buy champagne from suppliers who are willing to countenance such discounts, and as Jamie says Hatch will no doubt be back at asdas door seeking business. Supermarkets are free to sell at which ever price they see fit – above or below cost. Independents and critics also should grow some skin and wear it this is nothing new.

  • K1nley 5m1th

    I am drinking Taittinger bought 2 years ago from Tesco at £17. Lovely with a bit of bottle age. If it hadn’t been £17, I’d be drinking something else.

  • glenn

    I’ll be enjoying a bottle of 1997 Krone Borealis Cuvee Vintage (around 11 pounds) for christmas of new years. Haven’t yet been able to try the krug

  • Alex lake

    It wasn’t just Sainsburys that were flogging Krug for £50ish. Tesco also. I bought quite a few (mostly for a friend, sadly!)

  • Simon T

    It is quite possible that Hatch may be ‘upset’, however it is ‘illegal’ for them to withold supply to a retailer on the basis of them not liking their wine being sold for £x less than the ‘desired’ price. All of the laws referred to are to protect the ‘consumer’ and aside from the witholding of supply, it is also ‘illegal’ to state that a retailer may not sell a bottle of wine for less than £x – it is however, quite fair to express quite strongly that a retailer should not sell something for more than £x as this is acting in the interests of the consumer (keeping cost down).
    Jamie your point about Krug is no doubt fair, although the perspective given to a customer (that you did not want to supply) would need to be that you only have ‘x’ and you can get more money elsewhere for that stock. This is legal, witholding supply because you are ‘furious’ with pricing is ‘illegal’.
    I would suggest that Hatch have actually sold all their ‘Tatt’ to the Supermarkets and therefore are using messages of convenience to garner pity/understanding from trade customers. In reality, all suppliers have access to retailer EPOS data and so long as the Account handler has a GCSE in Maths it is fairly easy to track normal r.o.s and to anticipate that the November order of (say) 20,000 cases probably indicates that the retailer is planning to do something naughty with the price of your brand.
    As soon as you sell your soul and start dealing with the big 5-6 UK retailers you start dancing to a different tune. They bring you in, grow your volume, you build infrastructure to support the ‘new business’ and then they’ve got you. And even the big guys have ‘needs’ – ie; LVMH for example may ‘live with’ Moet being trashed for 3 weeks (and be complicit in the supply of stock) in Tesco so long as they are then supported with NPD such as Rose, Vintage, etc etc.
    Re Martin’s point on Tesco and Ireland, the South to North booze trips have been a part of the scene for a good few years now since the punitive tax laws in Eire were introduced – and then repealed somewhat – (Asda Enniskillen and Sainsburys Newry are two of the highest grossing supermarkets for Alcohol in the UK) so the point made to him is believable. Re the Hatch guys at the Tesco tasting – what do you honestly expect them to do, storm out of the tasting and refuse to pour Taittinger ? Not good for the relationship me thinks !
    Finally, it is interesting how all right minded wine people fall for the whole mystique of Champagne and how this small snippet of North-East France somehow has the right to charge an amount of money that no other region of the world could do. I am not referring to the wine itself – which when great is amazing – merely that pound for pound it is massively over-priced as a product and we are all suckers for believing that it is worth £30. But hey, that’s Marketing I guess and without us (and the unquenchable thirst for ‘wine bling’ in the Far East) all of the major Champagne houses wouldn’t be reporting record figures on justdrinks – even in a ‘depression’ !

  • Just had this response from a contact at Mentzendorff, UK agent for (and owned by) Champagne Bollinger – about Morrisons offering Bolly NV for £20:

    “This is a nightmare, we are devastated because this is totally against our strategy and everything we are working towards. We didn’t even supply the stock ourselves, so it’s a total mess. Of course we didn’t fund anything.

    “I believe they sold out by Sunday morning and only had 1 day of stock.

    “Such a shame after so much hard work this year.”

  • With UK duty on Champagne and sparkling wine heading towards £36 on a case of 12 in the next Budget, this does seem like a time to stock up. If you’re a consumer. A nightmare for the trade though – immensely damaging for the brands in the on-trade and independents. What price this stuff in restaurants?

  • Jamie,

    It’s a game that both the retailer and the supplier (and his agent) play. Here’s another variation of the game, called Seeding, this time when the supplier is the true “bad guy”:
    1. Say you’re a supplier sitting on a whole lot of stock and you need to move it fast. But you don’t want to drop your price to everyone in the market, or be seen to be dropping your price. (Can you think of anyone in the wine trade in this position?)
    2. Rather than doing a direct deal with Tesco, Sainsbury or ASDA (the biggest)you have a quiet word with, say, the buyer at Morrisons. You offer him a rebate (off invoice so no other retailer finds out) of £x/bottle if they sell say x cases.
    3. Morrisons feature your product at “Wow £19.95″…
    4. Tesco, Sainsbury and ASDA (never to be outdone) match Morrisons price (but note, you are not discounting to them)
    5. The product gets featured in all supermarkets at Christmas. You sell out, but you’ve only discounted a small proportion of it. Voila!

    BTW I’m certainly not accusing Mentzendorff or Hatch of this… just pointing out a play that I’ve seen where you achieve a spectacular result and (for once) the supermarkets lose.

    Gratuitous advertising: if you like Louis Roederer NV we sell it for £27.95, with £1 off if you buy 6 or more in a mixed case – it isn’t a special promotional price it is what I have charged for the past year. As an Indie our model works on the fact that we are a cafe and a wine bar, so we can have a very small margin on our retail shop. It is a sustainable business model that is fair to my suppliers and my customers, yet I can compete with supermarkets as people know they are always getting a fair price, rather than the bullshit yoyo prices and discounts that dominates the rest of the UK retail. If you’re near Earl’s Court or Summertown, Oxford, come and check us out.

    Merry Christmas!

    Rob

  • We have Taittinger, Roederer and Bollinger (and Krug/Dom Perignon/Cristal). We do have offers, but it doesn’t surprise me that Asda do this; we can’t afford to sell at a loss (I assume Asda are), we can only work with Hatch Mansfield and our other suppliers to give a good all year-round price. People come to us for advice though – what it is actually like, what is the Folies de Marqueterie nv in comparison etc etc, but as time goes on – even I buy vino elsewhere on occasion – smaller retailers will be squeezed even further by such mercenary tactics of the big boys.

  • Kieron

    I’ve had many conversations with reps from the big Champagne houses about “half price” deals which are almost invariably below cost. Whilst still a little cynical, I’m inclined to believe that they generally do not fund these insane deals which devalue their brand. I have heard that TV advertising during the X-factor final was £8k a second – so a 2 minute ad would cost more than taking £19 a bottle off 50,000 bottles of Champagne. The fact we’re all commenting on this story proves the below cost strategy is effective and cheaper than other means of advertising.

    I asked about the ridiculous price of Krug in Tesco when it happened – apparently they delisted it and therefore wanted to dump the stock. There must have been over 120 bottles in the Banbury branch at under £50 each, and they were there for a few weeks. Says a lot about the Tesco mentality that no-one had the good sense to sell these bottles at a sensible price and make money. They could have sold at cost and made an extra £30 a bottle! It was just treated as a commodity as every other item they sell is. However, I’m increasingly inclined myself to think of some things in the LVMH portfolio as commodities – the arrogance of luxury isn’t a substitute for quality.

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