Focus - Tax gives wine leaders a headache
Wine having a taxing time in the UK
A 25% rise in duty tax on wine within the last two years in the UK has squeezed profit margins to breaking point, according to a just-drinks survey of industry leaders.
More than a third of respondents to the just-drinks State of the Nation UK survey named duty tax as their biggest concern.
Tax hikes of the last two years, coupled with the prospect of higher value added tax and a Government duty tax escalator that could deliver annual rises for at least another four years, overtook industry concerns about the power of multiple retailers for the first time.
Unfavourable currency rates, increased promotions in supermarkets and tax hikes have squeezed margins, according to the survey, which was presented at this week's London International Wine Fair (LIWF).
There is growing pressure from the trade find a way to pass on more costs to consumers.
"I do think we have been sold down the river a little bit," said Troy Christensen, president of Constellation Brands' wine business in Europe and Australia. "But, the trade has been its own worst enemy. Consumers never really feel the increases and so nobody gets mad with the politicians," he told LIWF visitors at a seminar hosted by just-drinks.
Some senior delegates at this week's LIWF spoke to just-drinks of their anger at the way multiple retailers, which control more than 80% of off-trade wine sales in the UK, have failed to pass on costs to consumers and have fallen back more heavily on promotions during the country's recession.
However, Christensen and other panellists said that the wine industry must do more to communicate with consumers, particularly to diminish low prices as a reason for buying wine.
David King, chief commercial officer for price comparison website mySupermarket.co.uk, said: "Consumer spending habits aren't just going to go away. We have to work out how we are going to make peace with them and how we are going to work with them."
Simon Thorpe MW, previously of Constellation and now MD of Australian fine wine importer Negociants UK, said that independent retailers had a key role to play.
"These are the guys that have got the dialogue with the consumers," he said. "If you can get these guys on-side then that has the biggest impact. You can't just stick on masses of volume, you have to do the leg work."
All the panellists spoke of the need to improve brand building in the UK wine sector.
To read a just-drinks comment article on this issue, click here.
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