Faced with prices rising on all fronts, from petrol pumps to the supermarket checkout, those tempted to drown their sorrows were handed a further case of bad news yesterday. Inflation, Majestic Wine announced, is creeping into the wine cellar and prices are about to jump by up to 10 per cent over the coming weeks.

The retail chain, which sells wine by the case, said that it had no choice but to increase its prices in an attempt to recoup higher costs caused by the strong euro and by short harvests in France, northern Italy and Australia.

Moreover, according to Steve Lewis, Majestic's chief operating officer, the Chancellor has exacerbated the problem by introducing a 14p rise in wine duty in the Budget three months ago. Including VAT, the Government now takes £1.72 in tax on every bottle of wine.

“If you do the maths and take the change in duty into account, you would expect to see a 10 per cent increase in the cost of a bottle of wine,” Mr Lewis said. “Some prices have gone up in the marketplace already, but we have yet to see the full effect of it. The increase in duty was unjustifiable. The duty was already considerably higher than elsewhere in Europe.”

Mr Lewis added: “It is hard to see how the official rate of inflation in the UK can be 3 per cent.”

The average price of a bottle of wine sold by Majestic has increased in the past year, from £5.75 to £5.98. A bottle of Mâcon Lugny white wine has risen from £5.99 last summer to £6.99, while La Serrana, an entry-level red, is up from £2.99 to £3.39.

Mr Lewis, who takes over as chief executive from Tim How in August, said that the biggest price pressure in the coming year was likely to be on wines such as Sancerre, Pouilly Fumé or Chablis, given last year's poor harvests and high demand.

Annual results yesterday showed that pre-tax profits across Majestic had risen 3.4 per cent to £16.7 million in the year to March 31 on sales of £197 million, up 3.1 per cent. Like-for-like sales - sales at stores that have been open for more than a year - rose 2.4 per cent, helped by a rush ahead of the duty increase proposed by Alistair Darling in March.

Majestic's Wine and Beer World warehouse in Calais suffered an 8.8 per cent sales slump as the strong euro meant that consumers shunned the indulgence of a cross-Channel booze cruise.

Mr Lewis said: “We are operating in difficult trading conditions, but we have been doing so for the past couple of years and we have made sure we have a compelling offer of wines across the board.”

Majestic has been bringing in cheaper wines to offset some of the inflationary pressure, as well as increasing marketing spending around seasonal peaks in demand, such as the barbecue season, to attract customers.

Mr Lewis said that, despite the tougher trading conditions, some of the strongest sales growth over the past year in Britain - of about 25 per cent - was in wines priced at £20 or more. Majestic also has no plans to reduce from 12 the minimum number of bottles that a customer must buy.

Mr Lewis said: “We started to see a slowdown a year ago, but what we are seeing now is that customers who are coming in less frequently are spending more when they do.”

The shares, which have fallen 46 per cent in the past year, rose 12p to 211p yesterday. Sanjay Vidyarthi, retail analyst for Dresdner Kleinwort, said that the results were in line with expectations but he told investors that Majestic was likely to find trading tough as the economic climate worsens over the coming year. “It's still a resilient business model, but I think surprises on the upside are going to be quite difficult to come by,” Mr Vidyarthi said. “Most of the retailers' growth in the current climate is coming through price rises rather than any volume growth.”

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