As we head into a festive period, we are all ready for a tipple, and a Q4 uplift. Ready to cheers the future, make some New Year’s resolutions, wipe off the blackboard, start afresh and chalk up exciting strategies for 2024.
Now, this will all happen, and we will continue as an industry to create, innovate and curate. But – and this is a big but – the policies for duty are failing us. And with the Office for Budget Responsibility’s 2023-2024 alcohol duty estimate at £13.1 billion, we can’t afford to get it wrong.
Back in August we saw major duty rises in line with RPI – a shake of the treasury pockets to bring in some short-term cash. How was this really felt in the industry?
From the point of view of those with chunky monthly targets in large spirits businesses, it was a home run. Grocery retail, wholesale and cash & carry raced to extend credit terms, investing in stock of the top five brands in various categories. Most channels were investing in four to five months’ stock coverage. Frankly, why wouldn’t they? They are in this for commercial gain, and it is a smart commercial decision to invest in something that over the months will make a handsome margin on stock you know will sell.
From another point of view, SMEs and key innovators suffered enormously. Buying decisions were delayed by another six months, range reviews extended and most importantly, the cash that routes to market would usually support challenger brands with was not available. This caused a stall to many an SME’s efforts, and a mirror of the January trading pattern in August.
SMEs make up 61% (FSB/House of Commons) of UK private sector employment, thus having a duty policy which ultimately damages those SMEs is a little backwards and frankly short sighted.
Kindred Spirits is a strong and fast-growing movement with around 300 like-minded members. As a group, we have been vocal about the challenges but also about the solutions.
Kindred Spirits member Chris Jones from Paragon Brands says: “[Retailers were buying 4-5x normal volumes] with things only normalising in October. This had a four-month impact on smaller brands, so as well as being the biggest duty increase in nearly 50 years, the long notification was a double whammy.”
Jack Orr-Ewing from Duppy Share expressed concerns over the quality of liquid. “Now we’re seeing a lot of the industry reacting by reducing ABV,” he says. “This will mean that the consumer price will be about the same, the government will make no more money, and the consumer gets an inferior product.”
Meanwhile, James Kerslake from Tom Savano Cocktails believes SMEs play a key role in industry creativity. “Innovation and excitement are crucial to the alcohol sector, with modern consumers needing story and authenticity to maintain their interest,” he says. “Small producers need something to help us have a chance to compete, and keep the sector vibrant.”
We have to support smaller businesses in a similar way to what I see in America and Australia, where SMEs receive relief up to a certain amount, allowing them to invest and innovate.
The fact remains that at the heart of these SMEs is passion, ability to change and the unwavering tenacity to not accept defeat. However, without considered policy change and its real impact on businesses there will only be so much tenacity that can keep the lights on.
We have to demand more for the SMEs in our sector or we will see diversity, true innovation and incredible businesses fail in the next 12- 24 months.
Thanks to the WSTA, you can easily write to you MP here for support.
Let’s provide some real Christmas cheer to the brands and the people that work every day to make them a reality.