(Bloomberg) -- The sniff of wine at less than 6 pounds ($7.48) a bottle was enough to intoxicate investors of Majestic Wine Plc on Wednesday after the U.K. merchant introduced its first own-label range “aimed squarely at the entry-level market.”
Shares in the Watford, U.K.-based wine retailer rose 6.3 percent, the most in almost three months, on the strategy to ply consumers in the increasingly competitive low-price market dominated by discount retailers such as Aldi and Lidl.
“With currency movements in the past year, and an alcohol duty rise in last month's Budget, it is increasingly difficult to find good-quality wines that won't break your wallet,” Majestic Wine said in a statement on Tuesday.
The plunge in the pound since Britons voted to leave the European Union in June has already taken the fizz out of Champagne's exports to the U.K. As Brexit-fueled inflation squeezes disposable incomes, the most recent budget from Chancellor of the Exchequer Philip Hammond also isn't helping: alcohol duty on beer, cider, wine and spirits now increases at the rate of RPI, currently 3.2 percent.
“The launch of this valued price range plays to their strengths in trying to drive volume and traffic with more value, and they've been a lot more commercial and opportunistic,” Liberum Capital Ltd analyst Wayne Brown wrote in an email. “It's more strategic than just a response to Aldi, Lidl, etc.”
The stock has had a rocky ride in the past year, falling almost 20 percent compared with a 60 percent gain in the FTSE AIM Retail Index. Majestic Wine slid 24 percent on Sept. 21 after saying profit would be hurt amid increased efforts to build its customer base at home and in the U.S.
To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net.
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Angela Cullen, Emma Ross-Thomas
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