UK wine drinkers are set to become the most heavily taxed in Europe after the government announced a 14p increase on a bottle of wine.
The shock decision, which takes effect from midnight on Sunday, comes as consumers already face price increases on the back of rising costs for grapes, packaging, glass, transportation and energy.
'Pretty much everything that it takes to make and bring a bottle of wine to these shores has gone up in price recently, and often by a considerable amount,' Jeremy Beadles, chief executive of the Wine & Spirit Trade Association (WSTA), told decanter.com.
Consumers will suffer as a result, Beadles added. 'It is bizarre at a time when the economy is slowing, prices are rising and many families are feeling the pinch that the Government should choose to add to their burden by making the simple pleasure of a glass of wine or spirits considerably more expensive.'
Matt Dickinson, commercial director of wine importer Thierry's, told decanter.com certain 'hot-spots', including Chablis, Rioja and Chianti, were likely to face the biggest price increases thanks to a 'triple whammy' of rising production costs, the weak pound and the duty hike.
He called for a fundamental rethink of wine marketing and pricing in the UK. 'Maybe it's about time that we got our house in order, and changed this culture based on discounts and ultra-cheap pricing,' he said. 'A lot of investment is going into big discounting at gondola ends. I don't believe that's healthy for any industry.'
Beadles warned that many wine producers would desert the UK in favour of potentially more lucrative markets like the US or China – and that a number of UK wine businesses could go out of business in the next year or so as a result.
The increases, announced today by Chancellor of the Exchequer Alistair Darling in his first Budget, are set at 6% above the rate of inflation.
They will create a £1.46 duty burden on a 75cl bottle of wine – 7p higher than the rate in Ireland, previously the most highly-taxed wine market in the European Union.
The rises also mean 18p more on a bottle of sparkling wine, 20p more on a bottle of fortified wine and 55p extra on a typical bottle of spirits. A pint of beer will be 4p more expensive, while cider goes up by 3p per litre.
The Chancellor also announced that alcohol duty would go up by 2% above the rate of inflation for the next four years. Describing this as 'very worrying', Beadles said: 'We could be at £2 per bottle duty very quickly. It now looks like they're planning bigger year-by-year increases. There is a point at which the consumer rejects that.'
Peter Spencer, senior vice president sales for Constellation Europe, said that Constellation would have to pass the increase onto the consumer. 'This may lead to a departure from the £0.49p and £0.99p price point. The duty increase of approximately 10% is 6% higher than the rate of inflation and means that UK consumers will now be paying more for a bottle of wine.
'I believe this duty hike will mean prices across the wine category will rise substantially and that it will herald the end of wine at the £3.99 price point, as it is simply unlikely that any wine producer can sustainably supply wine at this price.'
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The point which no-body seems to be mentioning is that a further hike in UK duties on alcohol will only increase the urge of the population to buy its drink from the continent; booze cruises will be even more popular than before, leading to a further decline in the UK retail drinks industry. Is that what they want? 'Cos that's what'll happen!
Peter Bowyer, Swindon, UK
We do import from the Veneto, but I am still wondering what a “gondola end” is here.
Julian Alubaidy, Ireland
As reported in the current issue of Decanter magazine, the increases are hardly a shock following the concerted anti-alcohol campaign by the government. Many people in the UK wine trade are quietly relieved it's only 14p a bottle plus Vat - as they scan their crackberries and iPhones from Hong Kong.
Mr. Darling repeated the word 'fair' umpteen times in his speech. But is it fair that wine lovers in the UK should pay £1.73 in duty - and rising - when there is no duty in Italy, Spain, Germany, Austria or Portugal and only 2p in France?
Worse still, the impact is more than £1.73 because to assume that duty is a charge like Vat is misleading. Most wine merchants, other than those selling fine wines in bond, have to include duty as part of the cost of the product. Speaking to a number of successful merchants yesterday, one said that he now has to sell a wine that he buys for one euro from the producer for just under £5 including Vat (and in turn that wine sells in restaurants for £14.50 a bottle). This involves quite reasonable margins of 30% on the part of the merchant and 66% at the restaurant. The other merchant said that she can no longer afford to list any wines for under £7 a bottle.
The only surprise is that we now know just how much the Government intends to punish responsible drinkers in the years ahead.
Gavin Quinney, Chateau Bauduc, Bordeaux, France
Gondola End is the short side of a supermarket aisle - often reserved for promotions.
Joseph Grech
Matt Dickinson has it completely right. Wine marketing and pricing in the UK is a shambles and the whole culture of cheap pricing and discounts is an embarrassment. Going overseas to South America and hearing all the stories of UK buyers bullying these (relatively poor) producers for better pricing makes be very sad that the UK market has come down to this level. After having lived in California for 30 years I have seen how good quality California wineries have marketed their brands by maintaining pricing and at the same time added tremendous value to their overall structure. This policy has allowed the overall price level of wines to be more diverse and for some reason the consumer seems less price conscious. Despite the current economic situation, the wine business here in California throughout all sectors is, in general, really quite healthy.
Merrick Dowson, Owner, Adventures in Wine
Thank you, Joseph for explaining gondola ends; even if, in Cheltenham week, we've mostly been taking a punt.
Julian Alubaidy, Cork, Ireland
I do find it difficult to difficult to swallow the hypocrisy of some of the comments on the Chancellor's 14p hike on wine duty when Gavin Quinney refers to margins of 30% by the merchant and 66% by the restaurant as 'quite reasonable. The 14p increase pales into insignificance beside this. It will no doubt cause some increases in the market but I doubt it will impact much on volume. Discerning drinkers are not quaffing much wine at below £5 per bottle as their low end and generally Joe Public has started to raise his game as his wine appreciation has improved. Sales of Champagne have never been higher; chateau bottled Bordeaux is now plentiful on supermarket shelves at prices up to £40 (sorry £39.99) and 'half-price' offers abound on the 'gondolas. Fourteen pence is not going to sink that particular boat as the wine buyer is not going to let it get in the way of his enjoyment. No, what the agonised shrieks reflect is the fact that the supermarkets are not going to allow the stupid 49p and 99p price points to be exceeded and are going to put the screws on the merchants margins to protect their own. Most of the agonisers are being (almost) as disingenuous as Gordon Brown's puppet chancellor was last week.
Eddie Kirk
Sorry to disappoint you Richard Woodard, but as far as I am aware Ireland still has higher duty rates on wine.
Our rate is 2.05 euro per bottle which at today's rate of 1 to 1.27814 (xe.com) is 1.60 sterling which makes us 14p more than your 1.46 not 7p less. We also have VAT of 21% not 17.5%. Our sparkling wine tax is even more punitive at 4.10 euro per bottle. Given the declining tax income and a raft of 'bad news' gifts to neo prohibitionists such as alcohol fuelled riots in Dublin on St Patrick's day and two Polish men recently murdered by a drunk teenager, the next budget will almost certainly bring duty rises. Bertie Ahern has also promised to change laws relating to promotions and licensing.
Martin Moran MW, Dublin, Ireland
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