Blog: Olly WehringWill the bubble burst?

Olly Wehring | 21 March 2007

The drinks industry, like much of the UK, has today (21 March) given a mixed reaction to the country's latest Budget.

Distillers raised a glass to the decision from Chancellor Gordon Brown to freeze duty on spirits. Their cousins in the beer and cider industries, meanwhile, saw tax on their products linked to inflation.

However, the picture for the UK wine trade, already working in tough industry conditions, was far from rosy. Duty on still wine rose by 5p (US$0.10) - in line with inflation - but the tax on sparkling wine has increased by 7p.

Jeremy Beadles, chief executive for the UK's Wine and Spirit Trade Association, was seething at the news.

Beadles told just-drinks that the discrepancy between still and sparkling wine had its origins in the time when the UK was at war with Napoleon and had no place in today's economy.

However, Beadles painted a gloomy picture for the outlook of the sparkling wine sector in the UK. He said the hike in duty on sparkling wine would hit the bottom line of suppliers.

"The UK will be a much less attractive market to supply into," Beadles said. "With declining margins and profits, suppliers are likely to stock elsewhere, which would lead to reduced choice and quality for consumers."

Whether the Champenois and others hit by the higher duty on fizz will scale back their business in the UK is debatable.

Nevertheless, will the tax hike burst the bubble of what has been one of the UK wine industry's more buoyant categories?

The UK wine industry is renowned for being driven by fierce price competition, particularly in the off-trade. How easy will it be for producers to pass on an increase in duty to fickle consumers, who are always on the look-out for the best deal?

We want to hear your thoughts.


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