Duty changes and the sparkling opportunity - opinion, Alex Green, Beyond Wines
The planned changes to alcohol duty will see sweeping changes from August 1 this year, which will have a seismic impact on the way wine is bought, sold and made.
Sparkling wine will arguably feel the most change, with a reduction overall reduction and products being taxed differently according to their abv.
The August change takes most sparkling products, that sit between 11.5% and 14.5% abv, from a rate of £2.86 per bottle to £2.67. This is a welcome relief for products such as Champagne and cava, and a boost to English sparkling wine. In addition to that 19p benefit, fizz will enjoy a better position relative to still wine, which has been hit hardest by the government.
Duty on still wines will go up by 44p per bottle, which means most sparkling wines are poised to look more than 60p cheaper overall. Even more staggering is the saving to be made on wines at 11% abv, the duty on which will be £2.35, a further 32p saving. Prosecco is the easy winner here, which with its lighter style sits at 11% – and sometimes even lower.
The overall saving here is 51p per bottle less than the current duty rates. Taking the increase in still wine duty into account, it’s looking almost £1 per bottle better value. To add further incentive for lowering alcohol content, the duty will be around 11p less for every 0.5% abv below 11%.
This has the potential to fundamentally change consumer behaviour. Especially in supermarkets as shopper knowledge is limited, and they choose wines on price and visual cues. If Prosecco, and other lighter sparkling options, become £1 better value than the other products around them overnight, you can be sure this will have an impact on what goes into people’s baskets, particularly in the current climate where people have been asked to simply accept that we have less money.
There are questions yet unanswered. Will producers that supply duty-paid look to offset spiralling costs with the duty relief? Will retailers pass on total cost increases or decreases to consumers on a product-by-product basis? Or will they try to balance the pain that will be felt in the larger still wine category by holding back the savings on sparkling wine? There’s an argument for doing this, given that many people’s favourite wines will otherwise become more expensive – possibly too expensive – to buy.
We could see a complete reset of what is bought by consumers, and commercial buyers will have to respond. The wine aisle could fundamentally change overnight with a huge shake-up in what varietals and countries are popular.
Within sparkling wine, Champagne will feel the impact least because the proportion of the overall cost accounted for by duty is lower. However, cava, which is having a small resurgence after many years of decline, may lose out to Italian fizz again. Similarly, English sparkling wine will struggle to reach the magical 11% abv cut-off to benefit from the cheaper duty.
By the time we reach February 2025, when full duty banding by abv comes into effect, the wine category will look very different. Producers will do their best to reduce alcohol levels in their ranges, and this will be easier for some than others. Countries that produce naturally lighter styles will win. Buyers will be looking to increase their ranges at 11% abv and below, and consumers will react with their wallets.
My hope is that consumers feel the benefit, that producers and countries that take a tax increase do not feel too much of a negative impact on their sales, and that reducing the abv is never done to the detriment of wonderful wines.