Accolade Wines, the owner of the Hardy’s, Echo Falls and Kumala brands, has called for “unity” across the drinks trade in a bid to encourage the government to re-think the alcohol duty escalator, which it says is damaging wine sales.
Speaking this week at the launch of the company’s 2012 Wine Nation report, Paul Schaafsma, general manager for Accolade Wines (UK, Ireland and AMESCA), revealed the “crippling effect” tax was having on the drinks industry.
Since 2002, 80% of the rise in wine pricing has been from alcohol duty increases, he said, adding that today, tax accounts for 60% of the price of a bottle of wine. Proposed Home Office measures – currently in consultation – to price alcohol at a minimum of 45p per unit would add at least £1 to the price of a £3.50 bottle of wine and would effectively be “a tax on the poor” and further damage the market.
Schaafsma recognised the beer industry for its high-profile campaign to end the duty escalator but said the tax regime did not only affect brewing but was having an impact across the drinks manufacturing and retailing landscape – and that the whole drinks trade needed to align.
“As an industry we must show our government that we are one voice,” he said. “Relentless tax increases are crippling an industry that provides thousands of jobs and contributes significantly to the national economy and local communities. In recent months we have seen the demise of major drinks companies including Waverley TBS, D amp;D Wines and Stratford’s, due to the difficult trading environment and crushing tax regime. The government must re-think this policy if it is serious about backing UK businesses, creating jobs and driving growth – not decline.”
The Wine Nation report, which we’ll be covering in more detail in a future issue of Wholesale News – also outlined that the wine industry is facing further challenges with rising costs, poor harvests and domestic demand in wine producing markets, which will add to pricing pressures in the UK; with Italy, California and New Zealand potentially seeing the biggest impact from rising prices. Raising grain and oil prices will also add further pressure to supply chain costs, said.
In the off-trade,said Schaafsma, the average price of a bottle of wine is now £4.95, of which the wine itself accounts for just £1.05. The assumed retailer margin is a further £0.92 while tax, including VAT, duty and Common Customs Tax, accounts for 60% of the cost: “With the UK duty escalator set to increase the duty paid on alcohol above the rate of inflation until 2015, the price of wine will continue to rise.”
Most damagingly, says the report, the most comprehensive on the UK wine trade, on-trade wine sales have plummeted by 25.2 million.
The results of the Home Office consultation into unit pricing on alcohol is expected in February 2012.