The pre-Budget report in December made it clear Alistair Darling was likely to make specific mention of cider and perry in his statement, so, although unwelcome, it didn’t come as too much of a surprise when he increased duty on cider by 10% after inflation.
Despite headlines railing against cider drinkers being singled out unfairly by the hefty sounding rise, Dave Smith, beer and cider buyer at Booths, says he doesn’t expect many repercussions.
“It probably wasn’t as bad as we were all thinking – cider has been left alone for so long it’s averaged itself out,” he says.
“I don’t think it will make a difference to people’s buying behaviour as far as our trade is concerned and I don’t see it having a great impact. But I think Darling has missed an opportunity and he should have had a go at white cider and RTDs rather than attacking serious cider drinkers.”?It looks increasingly likely that white cider will be considered separately in the near future. During his speech last week the Chancellor mentioned changes will be made to the definition of cider to make sure “specific strong ciders are taxed more appropriately”.
Chairman of the National Association of Cider Makers Henry Chevalier-Guild explains a request has been made by the Treasury and HMRC to review how cider is defined.
“It’s been pretty much the same since 1976,” he says. “They want to explore what that definition is and understand how best to deal with stronger ciders.
“It’s impossible to say how it’s going to go until we meet, but I think they want to have something in place by September. The Tories are going to wait and see what it is before they decide anything.”?Chevalier-Guild says the Tory policy on high-strength cider is problematic as it stands. They want to stop binge-drinking by doubling the tax on strong cider but have neglected to define what that phrase encapsulates.
He says: “It’s a catch-all for everyone. Smaller producers are fermenting up to 7.5%-8% abv ciders in a hot summer and don’t have the means to blend to have the same flavour profile at a lower abv.” Smith says the rise might have a negative effect on a forthcoming promotion at Booths.
“We’ve got a cider festival planned which has already been priced up – I think it’s best to hold the duty increase until it finishes at the end of May.
“Some of the ciders not on promotion will be put up and, on average, I think it’ll mean increases of about 4p a bottle.”?Magners producer C&C was quick to advertise it was going to absorb the hike with a press campaign in the Metro which read: “Same again Darling. We’re covering the cost of the duty increase.”?A spokesman declined to say how long this would last, explaining: “There’s no guidance on the length of time or cost to the company.” Martin Thatcher, managing director of Thatchers, says it will not be absorbing the cost. “We have to pass the duty on – it’s such a big rise we have no choice. It would cost us nearly £1 million over the year.” Thatcher says the increase will make life more difficult for producers but doesn’t foresee any closures as a result.
“The category is in good shape and I believe it’s in a strong position. The hike is bound to make people think twice about innovation but I think new ciders will carry on driving the category forward.”?Roger Jackson, commercial director at Westons, believes innovation is “vital” in ensuring long-term growth.
“Our NPD team is currently working on a number of new projects and we fully intend to continue with these as planned,” he adds.
Simon Russell, of the NACM, says the rate of growth – currently at 16% according to Nielsen – may well slow down.
He says: “When they left us alone we were able to innovate and invest. We had a small reduction in duty which was followed by solid growth.”?He points out that between 2004 and 2008 the value of the cider category doubled to just over £26 billion.
“Consumers had a broader range than ever before and the government doubled revenue. It was a virtuous circle. They have introduced something that will put that into reverse.”