Diageo calls for tax per unit

03 September, 2010

Diageo has called for a new approach to alcohol taxation, with a unit of alcohol charged the same duty rate across spirits, wine, beer, cider and RTDs.

In its submission to the Treasury’s review of alcohol taxation and pricing, Diageo said the easiest way to implement the measure would be to hold spirits duty at its current level and use the 2% excise duty escalator already in place to move other drinks up towards spirits over time.

Simon Litherland, Diageo GB managing director, said: “Alcohol is alcohol and we believe that people should know they are paying the same tax per unit whether it is a pint of Guinness, a glass of Blossom Hill or a glass of Johnnie Walker.”?Diageo says the proposal would generate between £524 million and £1.9 billion a year for Treasury coffers.

Chief executive Paul Walsh said the company was “very relaxed” about the prospect of minimum pricing for alcohol in parts of the UK.

The company turned in glowing sales figures for the year to June for GB, in contrast to many developed markets, with take-home leading the way.

Walsh pledged to “work with [the new government] in its endeavours” to tackle alcohol abuse – a plan which includes restrictions on below-cost pricing by retailers whose sales have contributed most to increased market share for key Diageo brands.

“We have to remind ourselves that there is no empirical evidence that price intervention tackles alcohol abuse,” Walsh added.

Andrew Morgan, president of Diageo Europe, added: “We’ll partner with just about anyone who wants to tackle alcohol abuse, but it needs to be done in a targeted way.” Measures shouldn’t impact “the pensioner who enjoys a glass of Bell’s on a Friday night”, he added.

GB volumes of Diageo brands grew by 9% over the year and net sales were up 5%.

Guinness grew share in a declining beer market and Baileys, Pimm’s and Smirnoff were all in growth.

Walsh said: “In GB, we strengthened our relationship with off-trade retailers, with spirits brands growing share. We had better relationships and stronger collaboration with our customers.”?Diageo increased marketing spend by 14% in the second half of the financial year, after a 5% drop in the first half, and Walsh pledged to continue to support major brands.

He said: “We made our allocation decision on two levels: investing behind prime growth drivers that we can execute with scale, and high-growth opportunities, such as that in rum, that we see in Europe.”?Captain Morgan was among the brands to receive the biggest boost in marketing support over the year.

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