Retailers dig in heels over duty hikes

06 April, 2007

Consumers have again escaped the Chancellor's duty increase as retailers refus e to pass on the 5p levy on wine, 7p on sparkling wine and 1p on beer and cider.

Retailers remain reluctant to break 99p price points on wine and this week there was little evidence of any shops moving 3.99 wines to 4.04. Many suppliers are privately seething at the intransigence of their retail partners but others had already budgeted for a lack of price flexibility.

Majestic has taken a firm line, insisting in a letter to suppliers that they absorb duty. "This cost reduction will enable us to maintain the current selling prices and any agreed promotions for the duration of the summer price list, and ideally beyond, and will hopefully benefit you in terms of volume sales," the letter from buyer Matt Pym states.

"Unfortunately, since our margin is under severe pressure at the moment, if you are unable to offer this support then reluctantly I might be forced to increase our selling prices and understandably this could result in slower sales."

Retailers and suppliers are discussing the situation, in many cases agreeing to hold prices for key lines while introducing larger increases on less price-sensitive products.

Thresher trading director Lloyd Stephens said: "Ultimately it's a consumer tax and we won't be bearing the brunt of it ourselves, but looking to work with all our suppliers to come to a mutual agreement about where prices will sit. I hope we're being responsible by working with them if they decide to put up prices."

Co-op category buyer Barney Davis said: "We're at that in-between stage. We're holding all retails to give us time to discuss with individual suppliers what they do with their products on a line-by-line basis."

He agreed breaking 99p price points could be disastrous for some wines. "We've tried it before and it didn't work. We saw volumes drop by as much as 40 per cent so at the moment I don't think customers will accept them [04p price points]."

De Bortoli's UK general manager for national accounts, Mark Wilson, said: "We've made some advance decisions assuming duty did what it's doing. We've targeted particular brands we wanted to keep as they were and others where we will perhaps move.

"The only issue is having the retailers on side about the product being at any higher price point. If you move up you need to be able to offer some proactive support. I would imagine some bigger brands will maintain their price position but restrain their discounts."

The Chancellor has announced a review of the appeal process against decisions made by Customs. The move has been welcomed by Wine & Spirit Trade Association chief executive Jeremy Beadles, who said: "We have been calling for the government to make all decisions made by the commissioners subject to review and appeal.

"We are also pleased that Customs has announced it will strengthen duty clawback arrangements. This is something we have been calling for in the face of increased concerns about duty fraud."

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