Wine trade fighting for its future
A number of the UK’s leading wine companies have banded together to campaign for wine to be treated fairly in future Budget announcements. The category was singled out for punitive tax rises in 2016 and 2018, while beer, cider and spirits were given a break. The wine trade has reacted with grim exasperation to recent Budget clobberings, but it has not altered its strategy for influencing policymakers – until now.
Several companies have joined forces to create Wine Drinkers UK, which aims to shift the conversation towards the unfair impact these duty hikes have upon wine lovers from all walks of life. Treasury Wine Estates and Concha y Toro – the largest wine producers in Australia and South America respectively – are leading the charge, and several importers, wholesalers, retailers and writers have joined the campaign.
DRN met with TWE European managing director Michelle Brampton and CyT UK managing director Simon Doyle to discuss the campaign. It is rare to interview two industry heavyweights from rival companies in tandem, but their collaboration shows just how pressing the issue is. They are urging retailers and wholesalers from across the UK to back the bid, promote it on social media channels and explain to shoppers why the current excise situation is unsustainable.
“The campaign will work if everyone comes together,” says Brampton. “Retailers are touching the end consumer more than anyone else, so having their voice involved is really powerful.”
The statistics help form a compelling argument: 61% of a £5 bottle of wine is tax. The UK pays two-thirds of all the wine duty in all Europe. Consumers often find these figures alarming when presented with them, as do some policymakers, so the key is to keep making the point as often as possible, in as prominent a fashion as possible.
“As a wine industry we have probably been a little bit too subdued on this matter,” says Doyle. “Other categories have been on the front foot. We have not taken the leadership we perhaps could or should have in the past, and the issue is fundamentally about fairness. If something isn’t fair, you can just sit back and play the victim or you can step forward and try to do something about it.
“We want the government to stop discriminating against wine. It’s not fair. I know ‘fair’ can sound like a whinge, but this is a genuine grievance rather than a whinge.
“If you go to the pub and buy a G&T, you’ll pay half as much excise as you do if you buy a glass of wine. And that’s not fair.
“What do we do about it? Other than carry on with the previous process, which would be to get up in arms at the end of an excise duty rise at the Budget and then go quiet again for another nine months until Miles [Beale, Wine & Spirit Trade Association chief executive] rallies us all to write them a letter. That has been the process. Now we’re saying we have a responsibility as wine industry leaders to identify a strategy and go on the front foot.
“It’s a very simple objective, and the strategy is very clear. We just need to scale it up over time.”
Beale has always provided a compelling economic argument to the Treasury in a bid to see wine duty frozen or cut.
He presents facts and explains clearly that a tax break results in a lot more wine being sold, thus boosting the Treasury’s coffers and ensuring it makes more money in duty, despite the rate being lower. It has worked a couple of times over the past six years, but the government continues to single out wine over other alcoholic drinks categories.
Protecting domestic product
There are various schools of thought as to why this is. One is that the vast majority of wine consumed in the UK is imported, from Australia, Chile, Argentina, France, Italy, Spain, the US, New Zealand and so on. Britain produces vast quantities of beer, cider, whisky and gin, and the government may feel inclined to protect these domestic products. There are MPs with massive breweries on their patches and they lobby hard on behalf of their constituents for a tax break.
Many MPs in Scotland know how important Scotch whisky is to their local economies and they are also banging the drum. Ditto MPs in the West Country, who know how important cider is to rural economies. English wine is growing, but it does not yet have that sort of influence.
The second potential reason for wine being penalised focuses on PR. The other categories have perhaps run slicker campaigns and devoted more time, money and effort to influencing the government in the build-up to the Budget. Wine is a much more fragmented category than beer or spirits, where major firms such as Diageo, Pernod Ricard, AB-Inbev, Molson Coors, Heineken, Carlsberg and so on are well mobilised and can speak with a unified voice.
The third reason centres on the perception of the wine drinker as an affluent, middle-class consumer who can afford to keep shelling out more for a bottle of claret or Rioja each year. Beer has done a great job of portraying itself as the drink of the common people, the glue that holds communities together at pubs. One previous Budget was called the “beer and bingo Budget”, seen as distracting Brits from other punitive raises by dangling shiny things in front of them.
The new campaign seeks to address this perception of wine. An agency called Headland has been appointed to run it after a competitive process, and it is bidding to galvanise support while securing media coverage. It conducted a Yougov poll and found that wine was drunk by 81% of adults over the past year, excluding teetotallers. That saw it beat beer and spirits, with 79% each, to the top spot.
Wine is the largest category by value in the UK off-trade, ahead of both spirits and beer, and the average bottle is sold for less than £6. It is not the preserve of the elite, and any perceptions as such are outdated and need to be addressed. Consumers from a wide range of socioeconomic backgrounds enjoy it in a responsible fashion, and they are being unfairly punished.
Campaign supporter Helen McGinn, author of The Knackered Mother’s Wine Club, points out that the alcohol duty decisions by the government over the past decade have consistently been more favourable to beer drinkers than wine drinkers, which essentially punishes female drinkers, who are more likely to choose wine over beer.
“The economic arguments have been made, but they’re not persuasive enough,” says Brampton. “The political arguments, around it being the nation’s favourite drink, versus the Great British brewing industry and the Scotch whisky trade, it’s a different political conversation that’s trying to change the perception of who drinks wine and who is being taxed unfairly. It is putting it as a consumer issue as well, rather than just an economic issue.”
The government has a lot on its plate right now, what with Brexit dividing the nation and proroguings being deemed unlawful, so the industry faces a difficult challenge in making its voice heard ahead of the next Budget. But this campaign is not a flash-in-the-pan event. It is designed to have longevity and to continually highlight the plight of wine drinkers across the UK in the years ahead.
“In a noisy political environment you are almost trying to communicate to MPs and the Treasury as consumers as well,” says Brampton. “This is affecting everybody. It’s longer-term than just the run up to a Budget.
“The entire trade is impacted – everybody is impacted, whether it is paying the consumer tax or trying to absorb it in the supply chain. The message is: drive the conversation, get involved and support it, because the more people we can get to understand the unfairness the better.
“We had an initial burst of activity and an MPs’ event at Westminster. There was lots of good conversation, and shock at the statistic that 61% of a £5 bottle of wine is tax. People genuinely had no idea. It is interesting to watch that feedback, when people start to understand. We are now moving into whether wine tax has a gender bias. The percentage of women who name wine as their drink of choice is higher than that of men by a long way. How we take it further will depend on the Budget.”
Not everyone is supportive of the campaign. Some wine writers have suggested that the industry should instead be focused on promoting more expensive bottles that drive more value into the supply chain. “How about encouraging wine drinkers to trade up – not to seek tax cuts, but to emphasise the premium experience that wine offers, and explain why it is worth paying more?” said our own columnist, Richard Hemming MW.
Yet Doyle counters this argument by highlighting how important entry-level wine is for the future health of the trade. “It’s about sustaining a positive future for the industry,” he says. “Most people who come into wine initially come in at those lower tiers. As they learn more and engage more, they experiment a bit more and pay a bit more, so if we really want to engage and educate and encourage consumers to pay more for wine, they need to be sure that their wine is being treated fairly, that there is a fair approach to it. You need to think, where are my consumers coming from?
“We are losing younger consumers. They are moving into other categories. To try to get them back later is a tough gig. If people are moving on to more affordable categories because tax isn’t allowing them to engage with wine when their budgets are tight, then why are they going to buy wine at a later stage? That’s a complacent view. We have to recognise the role that entry-level plays for the long-term stability of the wine industry.
“The average price of wine is £5.91, still 55% of that is excise duty. Whichever way you cut it, it’s still not fair, even at the premium end. There’s only so much value in the chain, and if the government takes an unfair proportion of it, that does cut out the ability to invest in innovation.”
The world would certainly be a far duller place without wine, and the industry leaders feel they are fighting for its future in the face of unfair duty hikes. “If wine is declining there is less revenue for the government, it’s an industry that supports employment across the UK and it is the global hub of the wine trade,” says Brampton. “It has an enormous reputation and it would be a shame to lose that. Moderation is a trend, and that’s fine, but there’s still lots of enjoyment to be had out of drinking wine and sharing wine and connecting socially.”
The challenge will simply be to recruit as many people within the industry as possible, spread the word among consumers and make the government pay attention.
“They have a lot of issues on their plate, so getting cut through is challenging,” says Doyle. “This is a long-term aim. This is a statement that, as an industry, we need to galvanise on a common issue such as this, and take the lead and do something about it. Are we going to fix it in one day? Very unlikely. We need to be prepared to keep at this until we make the breakthroughs that need to be made.
“If you have the leading player in Australia and the leading player in South America making this move, working together for this common objective, then people will see that and recognise there’s some leadership here and maybe it’s worth joining this campaign.
“It’s not just about us as producers. We need people to help us spread the message. The more advocates we’ve got, the better. We need people to help champion the message.
“The objective arguments are so strong. We have to speak with more voice as an industry. We’ve got to stop accepting that what went before has got to be what goes beyond, as other successful categories do. They make their arguments.
“The recruitment of Headland is a statement. We’re not just sitting around getting cross. We’re galvanising to find people we can work with to help us cut through. We have all just talked to ourselves for too long. Now we are channelling that energy and frustration into doing something.”