Supermarkets And Sour Grapes

In larger Golden State supermarkets, folks pick from 30 or 40 chardonnays to complement their mesquite-grilled squab. Grocery-store sales, allowed in California and 32 other states, are a key outlet for the state's $7 billion wine industry.

Now, a leaked confidential memo from Safeway, the nation's No.3 supermarket chain, has spooked vintners. "The majority of our stores have the appearance of a liquor store," complains John Cartales, Safeway's new senior vice-president for 260 Northern California stores, in the Mar. 18 memo. Result: About 100 brands are being yanked from the warehouse lists in his territory--or about 10% of the wines Safeway carries. He also urged that wine promotional displays be curtailed. And Cartales suggested still more paring back of slow-selling wines may come. Why? While wine has high margins (20% to 30%, vs. 3% overall supermarket margins), some wines don't move well.

Vintners, who had long considered Safeway wine-friendly, were stunned. And wine buffs lit up Safeway's switchboard. A company spokesperson quickly backpedaled, saying Cartales regretted any antiwine impression the memo left and insisted stores would maintain a good wine selection.

But the move could batter small wineries dependent on Safeway sales. And vintners worry that other chains will follow suit if Safeway's move leads to short-term profit gains.

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