Duty Increase

July 6, 2023 byEden Fine wines

Duty Increase

The August Duty Increase:

An Unpalatable Prospect for Consumers and the Wine Industry The recent news on the increase in wine duty has left a bitter taste in the mouths of wine enthusiasts and hospitality professionals alike. In March, the government announced their intention to change the way in which wine duty is calculated and from 1st August duty will be implemented on an ABV-based system. This means that wines (and other alcoholic drinks) of different ABV will pay different amounts of duty and in most cases, will result in the most significant increase since 1975. The decision to raise the tax on wine is not just an issue of higher prices for consumers, but also poses significant challenges for businesses within the wine industry. Eden Fine Wines understand that the hospitality industry faces financial pressures from all angles at the moment and have been working hard to help mitigate the impact on their customers for the past few months.

What the Changes Look Like:

Duty will increase for most wines, particularly fortified wines, as their ABV is higher. However, the duty premium previously paid on sparkling wines, will end, so the good news is that we will see a reduction in price on some sparkling wines.

The changes mean that from 1st August 2023:

• A 75cl bottle of still wine of 11.5%-14.5% ABV will increase by 44p per bottle.

• A 75cl bottle of still wine of 11% ABV will increase by 12p per bottle.

• A 75cl bottle of sparkling wine of 11.5%-14.5% ABV will decrease by 19p per bottle.

• A 75cl bottle of sparkling wine of 11% ABV will decrease by 51p per bottle.

• A 75cl bottle of fortified wine of 20% ABV will increase by £1.30 per bottle.

Impact on Consumers:

The immediate and most noticeable consequence of the wine duty increase is the rise in prices for consumers. As wine is already subject to a considerable amount of tax, any additional increase further burdens wine lovers and this could potentially lead to a decline in wine consumption. Any duty increases are generally directly passed onto the on-trade by wholesalers and a £0.44 increase in cost (potentially 8% on a bottle of Pinot Grigio), translates to a £1.75 increase to the consumer in order for the restaurant or bar to maintain margins.

We could just as easily see the price hike affecting the accessibility of wine for lower-income consumers, limiting their choices and potentially pushing them towards cheaper, lower quality alternatives. This outcome not only dampens the enjoyment of wine for those with limited resources, but also negatively impacts the overall perception and appreciation of wine as a cultural and culinary experience.

Finally we could see a further shift towards consumers opting for quality over quantity – choosing to eat out less often, but treating themselves more when they do.

Eden Fine Wines have made a number of changes to our range over recent months, in order to enable our customers to address these potential consumer trends post duty increase.

What should your wine merchant be doing in order to help?...

The simplest way to mitigate the duty impact is to explore lower ABV options for key lines. This could be by working with producers to create 11% versions of wines, or driving consumer trends to lower ABV/price (but equally good quality) wines and regions, such as Picpoul to Vinho Verde. A more obvious but less exciting option is to source more affordable wines from well known regions.

At Eden we are doing all of the above this year and whilst our core range will remain the same, you will see a greater diversity of wines in the lower ABV and entry level categories. As ever, our focus is on quality across the range, so you can rest assured that we will not compromise on any of our wines.

Another angle is to create better value around the offer through targeted staff training or enabling a larger by the glass offering through wine preservation systems. Again, we are developing all of the above this year. We have recently introduced Coravin to our portfolio, which we can provide on a loan basis to customers, enabling them to sell fine wines by the glass. This comes alongside a tailored programme of in-house staff training, to give our customers the confidence to promote these wines and increase consumer spend. By absorbing the duty increase into the by the glass markup – particularly 75ml Coravin measures as part of a tasting flight – the impact is far less noticeable to the consumer.

If you have any questions about these changes, please don’t hesitate to raise them with your sales representative.