Budget's duty hikes leave alcohol suppliers reeling

23 March, 2007

Chancellor raises prices by 5p on still wine, 7p on sparkling, 1p a pint of beer and 1p a litre of cider

Wine suppliers reacted with shock to the Chancellor's duty hikes on Wednesday - and drinks retailers say the tax is unlikely to be passed to consumers.

Gordon Brown raised duty by 5p a bottle on still wine, 7p on sparkling wine, 1p on a litre of cider and 1p on a pint of beer. The increases will take effect at midnight on Sunday March 25. Duty on spirits was frozen.

Waitrose's BWS boss Mark Williamson said the changes were largely as expected, with the exception of sparkling wine. He said the grocer would discuss its position with suppliers over the next few weeks. "We're not going to be dogmatic, there are certainly going to be some brands that would like to continue at key price points and we'll respect that," he said, "but by and large, we can't absorb that so we are going to have to pass it on. Those discussions will take place over the next few weeks."

Steve Parker, general trading manager of Wine Cellar, said: "We'll be looking at trying to hold prices for the next few weeks and see if producers want to adjust their product portfolios up or down."

Parker said Wine Cellar would be less hesitant than in previous years to move to 4p price points on wine if necessary. "Our customers have got used to it in the multiple retailers. Where we can keep 99p price points we can but I don't see why consumers would be upset by 04."

Sheffield-based independent retailer John Mitchell said: "I'm disappointed with the increase on sparkling wine - there's no reason it should be taxed more than still wine. It's not a luxury any more. We'll swallow the 5p increase because we won't go to 04 - as an independent I need to follow the supermarkets' lead. It really affects £3.99 wines that we sell at three for a tenner. Three for £10.15 doesn't really work."

Majestic wine buyer Justin Apthorp said it was too early to say how the duty hikes would affect price points. He added: "The process will have to move somewhat, but a £4.99 wine can't be a £5.04 wine."

Independent retailer Matt Cowan, who part-own s Vinology in Stratford-upon-Avon, said he would have no choice but to up his prices.

Thierry's managing director Peter Darbyshire described himself as "suicidal" at the news. He said the wine supplier had been expecting a 4p hike, but "that 5p is really that extra turn of the screw". He said: "T hat could tip the balance for us. I don't know what will happen, but I believe that price points will not move because consumers will not trade up". Darbyshire said suppliers were likely to have to swallow the duty hike because retailers will not back increased price points.

He went on to say the 7p price hike on sparkling wine was "disgraceful - they are going back on their word". He added: "It is straightforward reneging on a promise, and this makes Mr Brown an even less trustworthy Prime Minister than Mr Blair."

Frazer Thompson, managing director of English wine producer Chapel Down, said he is "bitterly disappointed" with the duty increase on sparkling wine "just at the moment whe n it looks like our industry is really taking off".

Patrick Spanti, export director of Jacquart, said the Champagne house was disappointed with the decision and added it could encourage people to buy abroad instead.

Wine & Spirit Trade Association chief Jeremy Beadles said he was "absolutely gobsmacked" as it goes against the Treasury's previously-stated policy. "There's no reason it should be taxed at a higher rate than still wine just because of the bubbles". Beadles said the measure would hit English wine producers hard. "Last year Gordon Brown said he wanted to raise a glass of sparkling wine to the English football team. There won't be many people in the trade who want to raise a glass to him today," he said.

The WSTA was disappointed that the Chancellor had not listened to its calls to freeze still wine duty.

Cider's 1p duty increase was the first hike in five years. Scottish & Newcastle, Merrydown and Gaymers said they would pass the increase on to retailers.

Duty on cigarette 20-packs is up 11p.




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