Sainsbury’s invests in customer savings as wine producers face ‘perfect storm’ of cost increases

UK supermarket Sainsbury’s has pumped £500 million into keeping prices low for shoppers until 2023, it has announced, as its wine team talks of a ‘perfect storm’ of supply chain pressures and cost increases.

The retailer yesterday said the investment boosted its commitment to helping customers with the squeeze on household finances.

Simon Roberts, chief executive officer at Sainsbury’s said the rising cost of living was having a huge impact on customers’ and colleagues’ live. “We understand that, right now, every penny counts. We are determined to stand side by side with our customers and we are relentlessly focused on driving savings that can be reinvested into keeping food prices low,” he said.

Speaking to the drinks business at a recent tasting, Sainsbury’s technical manager and winemaker Lisa Rogerson described it as the “perfect storm”,  with challenges sourcing due to poor yields last year, in addition to rising cost prices for producers.

She said that although it was still too early to see the squeeze on wallets filtering through to the aisles, customer insight research showed that people were intending to cut back – although in a discretionary category like wine, people are more likely to choose a slightly more premium wines, but treat themselves to it less often.

However, costs for producers have also increased due to the impact of fuel costs on dry goods, with glass, labels and shipping all becoming more expensive, making it more expensive for retailers to buy, she pointed out.

“It’s mostly dry duty good at the moment, as the wine has already been made at last year’s production costs,” she explains. “But the fuel prices that the dry goods suppliers are seeing has increased so they are having to pay so much more for the energy to produce the bottles, and labels etc, so that is being passed on to our suppliers. They are seeing increases of anything up to +40%.”

She added that the invasion of Ukraine was also having a knock-on effect on production costs, due to the fact that Russia and Ukraine manufacture pesticides and fertilizers.

“One French supplier told me he was spending 200 euros/ha for pesticides last year but that has gone up to 1000 euros/ha. Depending on the yield of the vineyards, even that alone justifies an additional 10p on a bottle,” she said.

The likely changes to duty next year are also likely to compound the problem.

Sourcing

Rogerson said another big challenges had been in sourcing sufficient volumes from key regions due to the poor harvest last year.

“Obviously the France harvest was badly impacted in 2021, and we’re seeing it sooner in the white wines rather than the reds, so we’re launching whites in the styles that could replace those big hitters like Chablis where there isn’t that much volume,” she explained.

“These are richer white styles, without the big names on the label”

This included Paul Jaboulet Aine Viognier (RRP: £8) which is partially sourced within the Rhone as well as other areas in France, so it is labelled as Vin de France, as well as a Bouchard Aine & Fils Chardonnay, where a proportion is sourced from Burgundy and supplemented from limestone and clay vineyards across France.

“It’s a great way to keep the quality and maintain volume,” Rogerson said.

Similarly, with Marlborough Sauvignon Blanc in shorter supply (although the current harvest is looking more promising), the team have looked towards South Africa, adding a Sauvignon Blanc from Journey’s End Spekeboom (RRP: £10) and a Cape Mentelle Sauvignon Blanc Semillon blend (RRP: £17).

“It’s not mimicking Marlborough, which is hard to do, but providing Sauvignon Blanc alternatives for customers to look for,” she said.

It has also added six new wines in the small parcel Taste The Difference Discovery range, including a Godello and Mencia 2019 from winemaker Jorge Nevascuesa, at a winery owned by Cune, a German Sauvignon Blanc from Rhein Hessen in Germany, a Grenache Blanc 2020 from Jean Claude Mas in the South France, and a classic full strength, Lambrusco, with Rogerson said would hit the spot at a barbecue or summer party.