Duty calls after Budget hikes

21 March, 2008

Retailers yet to ramp up prices despite 'sufficiently' steep hike in alcohol duty

Consumers expecting to be hammered by the biggest drinks duty hike for decades had a pleasant surprise when they visited supermarkets and off-licences this week to find prices had barely moved.

Although tobacco duty was passed on immediately, major retailers were holding off taking the plunge on alcohol as OLN went to press, as the annual round of negotiations with suppliers got under way.

This week, shoppers could find the usual keen offers and multibuys at Asda, Morrisons, Sainsbury's and Tesco - though many in the trade expect retails to shift upwards far more markedly than in previous years, when duty increases have been largely borne by suppliers. The rising costs of raw materials in the beer, wine and spirits industry has compounded the problem for producers this year.

Dan Jago, Tesco's head of BWS, described the current situation as "a very fluid environment".

He added: "The Chancellor has come out publicly and said it is a revenue -raising exercise, and it is sufficiently large that one would have to have an ambition to pass it through to customers as it is a consumer tax. But it comes at the same time as a significant number of increased costs on commodities - grain and other raw materials - so in fact it is a double whammy on the consumer."

Matthew Hughes, joint managing director of Bargain Booze, questioned whether big price increases were sustainable. "There has got to be some sort of happy compromise," he said. "Retailers will absorb some, suppliers will absorb some and the consumers will absorb some."

There has been fierce criticism from Brand Phoenix about the WSTA's tactics in its pre-Budget discussions with the Treasury, but Hughes was supportive of its approach. "The WSTA was caught in the headlights of a juggernaut with this one," he said. "The message it sent out was spot on. We've got a Budget that will not affect binge drinking whatsoever, but it may well encourage booze cruises."

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