Thursday, 7 April 2016

Budget 2016 - Enough to turn you to Drink?

There are a few days in the calendar, where people who work at the sharp end of the wine retail world tend to hold their breath in trepidation. First off its Beaujolais Nouveau Day (third Thursday in November, when you are legally allowed to sell the young wine of Beaujolais from), where you are two days away from the big day and no sight of a bottle of wine and people are clamouring for it. Second is Christmas Eve, as you count down the minutes until the madness of panicking consumers dies down and you yourself can actually think about having a rather large drink. Finally, there is Budget Day, when you find out whether the £5.99 bottle of Chardonnay you sell either stays as a good value wine, or turns into a £6.49 weapon that every customer tells you is now 'too expensive' and regales you with a story of 'I remember when this was £4.99, etc, etc..."

The alcohol industry has always been the financial pinata to beat with the taxation stick, as in many quarters it's still seen as the only cause of the ills of society and still seen by many others as a 'luxury item' in the shopping basket (seems to always be first on my shopping list though...). The government sees the booze industry as a cash cow that never runs out of milk and so, after the 21st March, parts of it have been hit again to boost the Treasury's coffers.

The good news was that duty on beer, cider and whisky was frozen, so that means (in theory) we shouldn't be paying any more than we do this year on a wee dram or a pint of whatever your poison is at the local. Bad news is that wine duty is increasing with inflation (2%, by and large). When you start to calculate how much of your spare change is disappearing onto a bottle of wine, it actually only means 3p extra in terms of tax that you'll be paying. A minuscule amount, I'm sure you'd agree (my dad would disagree...). 

(courtesy of Simon Howden on

The problem is that small figure of 3p is money that has to come out of someone's profit margin, be it either the winemaker who has made the wine, the company who buys the wine off them to sell on to the shop, or the shop who sells it to you. This amplifies this small number a fair amount , as everyone can't be losing money, so they have to pass it on to the one next in the chain. The last person to suffer (us) generally gets hit the hardest, with anything from 20p-50p increases across the board. Of course, if you are buying a big branded bottle of wine, the company who makes it could be wary of adding money on to a specific price point, thus alienating loyal drinkers, so would just absorb the cost, rather than lose sales. However, a much smaller producer can't afford to take on this extra burden and increase in their running costs, so have no choice but to pass the cost on.

This increase in wine duty will also put a barrier to market of any new wines either made in this country, or from outside, to enter the shelves and give us the opportunity of tasting new and fantastic stuff. Any bottle has to pitch itself at the right price to make it appealing to the person who may want to buy it. If, after factoring in all the costs of making the wine in the first place, it doesn't actually fit into the price point they need to hit to get maximum sales, it either won't be taken up or the wine's quality will be diluted to fit into the price it needs to hit. So no-one wins.

Quoted from the Wine and Spirit Trade Association, freezing wine duty has contributed "£118 million extra in revenue to the Treasury in the last 10 months - a rise of 4%", so to put it up will have the detrimental effect of people drinking less, thus not contributing all that lovely money to the pockets of the government. Doesn't make sense to me.

All in all, I think this was a bit of a 'swing-and-a-miss' from ol' George and co, making sure that the strong (and sensible) wine drinking crowd in this country have been bruised a little bit more from that 'stick'.

This is an opinion piece and in no way represents the wider views of VinspireUK as a collective.

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