"Drinks trade must unite to fight duty escalator"

27 November, 2012

The wine and spirits industries must grow more vocal and join the beer lobbyists in fighting the duty escalator that is crippling the entire drinks trade, according to Accolade Wines.

Paul Schaafsma, general manager at the UK’s largest wine supplier, praised the beer industry for its high-profile campaign against the tax regime.

But he said the escalator, which ensures the duty on alcohol rises above inflation until 2015, affects the entire drinks trade and urged the industry to show a united front.

Schaafsma pointed out that since 2002 80% of the increase in wine pricing has come from duty increased and that 60% of the price of a bottle of wine goes to the taxman.

In the off-trade, the average price of a bottle of wine is now £4.95, according to Nielsen, CGI and Kantar data compiled by Accolade for its WineNation 2012 report, published today.

The wine itself only accounts for £1.05 of this price, with 92p going to the retailer and the rest covering the tax bill, according to Accolade.

Schaafsma said: “The duty escalator has been crippling for the wine industry. We have seen the beer guys make some noise in reaction and that’s great, but it’s an alcohol escalator and we need to be allied.

“We must show the government that we are one voice.”

To illustrate how important that voice is, Accolade’s category insight manager Ian Anderson pointed out that the alcohol industry is worth £37.6 billion in the UK. If it were a country it would have the 65th largest economy in the world, with a GDP equivalent to that of Croatia.

The wine industry is worth £9.4 billion, similar to the GDP of Jamaica, but Schaafsma said it is in serious danger from the duty escalator.

“Relentless tax increases are crippling an industry that provides thousands of jobs and contributes significantly to the national economy and local communities,” he said.

“In recent months we have seen the demise of such blue-chip companies as WaverleyTBS, Startford’s and also D&D Wines.

“This is due to the crushing tax regime as well as difficult trading conditions.

“The government must rethink this policy if it is serious about backing UK businesses, creating jobs and driving growth – not decline.”

The report also outlined the pressures the UK wine trade is facing from increased worldwide demand, poor costs and spiralling costs of grain and oil.

Anderson said: “There is significant pressure on price. We are affected not just in the increase in costs from a poor harvest, but also by the rising costs of oil and knock-on things like glass.

“There is a significant increase in demand from the likes of China, the USA and Brazil – the demand for the overall pot of wine is increasing and this is not just a short-term blip. Brazil, the USA and China won’t stop wanting wine. You might see a slightly better harvest but this increased demand will continue to put pressure on price.”

Anderson also slammed minimum  unit pricing and a ban on multi-buys.

He said: “Legislation and market intervention in Scotland has not worked.

“Sheffield University was widely publicised as a big part of why the Scottish Parliament banned multi-buy deals. It said we would see an 8% decline in alcohol volume sales. But there has been only a 3.1% decline. In England and Wales, where there was no ban, volume declined by 2.8%, so the decline is only 0.3%.

“The rest of the decline can be attributed to a general decline in alcohol consumption. What Sheffield University said would happen and is far different to the reality. That’s clear and factually-based.”

He called minimum unit pricing a “blanket tax on the poorest of our society”.

“It’s not going to have an effect on the majority of drinkers in our society,” he said. “Minimum unit pricing will move the cost of the cheapest wine up, but the average consumer won’t even notice it’s occurred.

“We don’t see how it will achieve the government’s aims of reducing harm from alcohol.

“Accolade sees education being the real solution to the issues at bay. We need to work harder at education.”

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