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.’
Written by Richard Woodard