Well, that was interesting wasn’t it! George Osborne is apparently keen to support people who sell and drink beer, but not those who sell and drink wine. The scrapping of the beer duty escalator in this week’s Budget, whilst very welcome, is only a job half done. What about scrapping the escalator for the rest of our favourite tipples George? Not yet it would seem, though I hope that the positive move on beer means that the days of the escalator are numbered. The Chancellor has two more Budgets before the 2015 general election and any tax giveaways in 2015 will just look like an attempt to bribe the electorate (which I’m sure he’ll try) but to have any credibility the escalator surely has to be axed for good next time round?
Good old George also stressed how he expected the accompanying cut in beer duty to be passed on in full to customers, and presumably he therefore intends that the increase in Excise Duty on other alcohol to also be passed on in full to customers? Actually, retailers of wine have 3 choices:
1. Pass on the increase. Simple enough but it’s not just the increase in Excise of course, there’s VAT as well, and this is also the time of year when suppliers put their prices up. Oh, and have you noticed the exchange rate recently, and the cost of transportation? All wrapped up together these will combine to add more than the 10p a bottle increase announced in the Budget.
2. Absorb the increase. The ability to do this largely depends on the variables mentioned in point 1, but we will certainly be looking to keep any increases down to a minimum, or simply look for new lines that offer better value for money.
3. Ask suppliers to absorb the increase in costs.
Actually, this is only really an option if you happen to have your suppliers over a barrel (so to speak) and care more about attractive looking price points than protecting the quality of the wine that goes in the bottle.
As discussed in a
previous blog this way is fraught with danger and there cannot be many customers who have not hoisted the message in by now that if you pay peanuts you get horsemeat….
With costs (especially taxes) on the rise, customers have a simple choice: either pay the same for your wine as you always have done (in which case be prepared to drink less good wine each year) or pay a little more to protect the amount that goes on the wine itself from being eaten away by these increases.
Consider our handy illustration of “
where your money goes” which we produced last year (with figures from the 2012 Budget).
You can see that there is about 11p worth of wine in a £5.00 bottle with Excise Duty at £1.90.
This year’s Budget makes two changes to these figures; add 10p to Excise Duty (making it £2.00 per bottle) and therefore deduct 10p from the wine element.
It doesn’t leave much wine in the £5 bottle does it!
It’s why you don’t see bottles for sale at £5.00 on our shelves.
If you shuffle that 10p from wine to Excise Duty in the other 3 bottles in the illustration there is still plenty left for the wine element of those. On the 2012 Budget figures the wine element of 11p in a £5.00 bottle goes up to £1.78 in a bottle at £7.50 – an increase of 16 times. However, the 2013 Budget leaves us with only 1p of wine in a £5.00 bottle but £1.68 of wine in the bottle at £7.50 – that’s now an increase of 168 times! You can reasonably expect £5 bottles of wine to be significantly inferior pretty quickly. Some consumers won’t see the difference of course, and will keep buying their £5 bottles, but my bet is that since you’re reading this you probably won’t be one of them.
With the recent duty increase it has never been more important to understand the difference between “cheap” and “good value”.
Put another way, if the only aspect of your purchase that you understand is how much it costs you should beware of the pitfalls.
After all, you wouldn’t buy a car just on price would you? Or a holiday? Or a lasagne ready meal?
Well, not now anyway.
Time to be smart and buy the best wine you can for your budget, and that means that if your budget is £15 you’re better off with 2 bottles at £7.50 each rather than 3 bottles at £5.00 each. It’s just maths really and with 2 bottles instead of 3 your GP will be happy too...
To make best use of your budget we would naturally suggest spending enough on the bit which you drink. Visit the Wines of Interest website to browse our wide range of wines or visit the Wines of Interest shop and have a chat. We are always happy to help at Wines of Interest. Buy wine online now - click here to start shopping.
