SA winemakers are reeling at their Christmas present from UK Prime Minister David Cameron – plans to ban the sale of alcoholic drinks at under 40p a unit in the UK. At the minute, wine is taxed at 19p a unit in Blighty plus 20% VAT and a precipitous increase in tax will hit SA producers especially hard for two reasons: SA dominates the lower price points on the UK supermarket shelf and blessed with abundant sun, produces wines with above average alcohol content. This double whammy could be the last nail in the coffin of SA wine exports to its largest traditional market.
For the UK taxman, a unit of alcohol translates to 10ml of pure alcohol, so a 750ml bottle of 12% elegantly Elgin Sauvignon Blanc sneaks in at 9 units while the mighty Mullineaux Shiraz that forms part of Dave Trafford’s Placemat range of Terroir Syrah is 12 units for 16% alcohol and a brand that rhymes. Which will mean a minimum cost for Elgin of ₤4.50 before VAT while the Mullie will needs cost ₤4.80. At the moment you can find wine in UK supermarkets at ₤2 a bottle but not from Elgin or the Mullies. What is not yet clear is whether Dave plans to force a minimum retail price for wine purely through tax or whether producers may be able to demand higher prices for FairTrade ends, for example.
The Daily Telegraph reports that “Scotland is currently proposing a minimum alcohol price of about 45p a unit and several councils in England, including Greater Manchester and Merseyside, are considering bylaws to set minimum alcohol prices.” If the heavy hammer of tax alone is used to fulfill Dave’s Christmas wish, this will be disastrous for SA wine sales as consumers might as well then pay up for Bordeaux as the Boland’s best will cost the same.
The remedy for the extended national suicide of SA wine exports lies on our doorstep. The Guardian reports that African middle classes are booming and quotes the African Development Bank: “Africa’s middle class had risen to 313 million people in 2010, 34% of the continent’s population – compared with 111 million (26%) in 1980, 151 million (27%) in 1990 and 196 million (27%) in 2000.” In Africa, high alcohols are a positive feature and Distell is leading the charge to sate the thirst of a continent. Forget about fixing a broken WOSA, its WOA – Wines of Africa – that is needed with offices in Lagos and Lusaka, not London and Liverpool.
I’m not sure what you are basing your calculations on for this article as duty in the UK is a flat £1.81 per bottle of wine. VAT, charged at 20% of the selling price, is also added at the point of sale.
I accept that tax on wine is far too high in the UK and is only going to increase thanks to the escalator on duty imposed by the previous government, however this duty is applicable across the board and makes no distinction between South African wines, European wines, or wines from anywhere else. Even English wines have to pay the same taxes!
While Scotland is looking at various minimum pricing options, it is generally accepted that any measures introduced will likely be illegal under European anti-competition laws.
South African wines have a great future in the UK because of the outstanding quality of wines produced by the likes of Newton Johnson, Uva Mira, and of course Mullineux. The recent change in the exchange rate will only enhance the appeal of these wines in the UK.
As for sub £2 wines, they simply don’t exist in the UK and it’s almost impossible to find anything below £5 that is remotely worth drinking.
Fair enough Neil. The Daily Telegraph story is full of holes and wildly inaccurate. I would normally expect better of them.
The ‘recent study’ referred to is probably the Sheffield Report published in 2009 which came down heavily in favour of minimum pricing per unit to discourage switching between different types of alcoholic drinks.
One thing is certain though, taxes WILL go up on alcohol in the UK one way or another which is why it is important to focus on quality wines rather than try and make ever cheaper bulk wine to meet a particular price point.
We’ve not seen a £2 bottle of wine in the UK for l years. As Darren said, wine tax plus VAT accounts for £2.
Don’t understand the Telegraph £2 – although the story says it ‘can’ be sold. Working backwards, using the 19p a unit cost it would have to be a wine of very low alcohol and wholesaleing at a few pence.
I think you may have gotten hold of tail in this tale, Neil.
South Africa did initially position itself in the cheap and cheerful “3 for 10 quid” bracket but found that hard to maintain as the exchange rate and and rising costs hit home. In fact you yourself have gleefully reported on export “freefall” in the lower price brackets.
Ironically a higher duty will help even the trading playing field with countries who can produce wine more cheaply than us, and we will become slightly more competitive, once again, in the aisle ends of ASDA, Tesco and Sainsbury.