The report stated that since 2002, 80% of the rise in wine pricing has been from alcohol duty increases, and that today, tax accounts for 60% of the price of a bottle of wine.
At a press conference, Paul Schaafsma, general manager for Accolade Wines (UK, Ireland and AMESCA) recognised the beer industry for its high-profile campaign to end the duty escalator but said the tax regime did not only affect brewing but was having an impact across the drinks manufacturing and retailing landscape and that the whole drinks trade needed to align.
“As an industry we must show our government that we are one voice,” he said. “Relentless tax increases are crippling an industry that provides thousands of jobs and contributes significantly to the national economy and local communities. In recent months we have seen the demise of major drinks companies including Waverley TBS, D&D Wines and Stratford’s, due to the difficult trading environment and crushing tax regime. The government must re-think this policy if it is serious about backing UK businesses, creating jobs and driving growth, not decline.”
The report outlined that the wine industry is facing further challenges with rising costs, poor harvests and domestic demand in wine producing markets, which will add to pricing pressures in the UK; with Italy, California and New Zealand potentially seeing the biggest impact from rising prices. Raising grain and oil prices will also add further pressure to supply chain costs.
In the off-trade, the average price of a bottle of wine is now £4.95, of which the wine itself accounts for £1.05. The assumed retailer margin is a further £0.92 while tax, including VAT, duty and Common Customs Tax, accounts for 60% of the cost.
With the UK duty escalator set to increase the duty paid on alcohol above the rate of inflation until 2015, the price of wine will continue to rise.
On-trade wine sales have fallen by -2.1m 9L cases, or 25.2 million bottles - over the last two years after prices have risen monthly over the same period. The average price of a bottle of wine now stands at £15.31. One area that is seeing growth is branded wine in the on-trade, due to its more affordable average price point of £12.37 versus £17.00 for unbranded wines. With an increasing number of pubs reliant on food, there is therefore a huge opportunity to boost profits through branded wine.
In the past five years, Accolade Wines has invested more than £6million in understanding the wine market and its consumers. The WineNation Report was created from a panel of 50,000 UK wine drinkers along with data and insight from industry partners such as Nielsen, CGA and Kantar.