From August, most wines will be 44p more expensive, thanks to the Chancellor. It presents a new challenge to a trade already struggling with rampant inflation. But better news could be on the way
Wine is getting more expensive for everyone. In specialist independent shops last year, the average price per bottle shot up by 60p to £15.70. This year, we can expect that figure to leap by at least another 44p, thanks to the duty increase that will hit most still wines in August.
It’s unwelcome news for the wine trade, in the midst of a cost-of-living crisis and at a time when almost all costs are increasing. Hallgarten & Novum Wines has indicated it will not be passing on the extra duty until September, anticipating the chaos that the rise will create, particularly for its on-trade customers, in the height of the summer season. Other big suppliers say they are considering their options. But the vast majority just don’t have the wherewithal to swallow a tax hike of this size, even temporarily. Their margins are fragile enough.
Doug Wregg of Les Caves de Pyrene spells out the inflationary pressures facing wine importers. First, there is the cost of the juice itself: “So many disaster vintages leading to growers needing to purchase grapes, which pushes up the price.”
Glass is experiencing “enormous increases”. Bureaucracy is more time-consuming and expensive. Pallets are dearer. Bonded warehouses are charging more. Wineries are passing on the increases they’re seeing in their own rent, utility and wage bills.
Cash flow is under pressure because “producers are increasingly asking us to pay upfront, in full or in part”. Freight companies are offering spot rates rather than fixing tariffs for the year.
Wregg adds that importers are being forced to hold excess stock. “Increased shipping times and other costs mean that we have to order larger quantities to make shipping worthwhile,” he says. There’s still a global shortage of 20-foot shipping containers, which doesn’t help. Exchange rates remain volatile, with sterling’s crash against the dollar last autumn adding to the UK wine industry’s woes.
Les Caves de Pyrene published its list in April, with prices going up, on average, by 5% to 7%. “We had a lot of favourable feedback about how reasonable the increases were, given the massive inflationary pressures,” Wregg says.
“In certain cases, we must accept that glass ceilings will be shattered. The price rises in Burgundy – Chablis, in particular – have been marked, and there is no point depressing the prices of these wines anymore.
“We now roll with it, keep our own costs as low as is practicable and hope that our internal efficiencies can offset some of the bigger price rises.” Les Caves is now working on some own-label projects in a bid to preserve margins and to offer customers best value.
After Brexit, some transporters did really not want to divert their drivers into a crossing that was fraught with time delays etc. So we have had issues on the shipping side from all directions, but that is starting to ease.
Nik Darlington of Graft Wine says “greater costs of production and transport” are the main inflationary pressures. “While the additional challenge of duty increases is unhelpful, it has to be considered as just one factor among many,” he says.
“After holding our prices for two years during the pandemic, the general inflationary pressure could be absorbed no longer – neither by us, nor by our producers. This is an experience we share with most if not all competitors.
“In light of all this, I’m pleased to say that we have managed to keep recent price changes of our own, most recently in March, significantly below the rate of inflation. We will continue to work hard with our producers and logistics partners to do our best to manage these cost pressures on behalf of customers throughout the UK.”
Andrew Bewes, MD of Hallgarten & Novum Wines, describes himself as “an eternal optimist” and sees some glimmers of light amidst the gloom.
“We have a reputation for very modest price rises,” he says. “We wince a bit at 2% or 3%. This year, it probably averaged about 7%, so still below inflation. Obviously, there were some extreme rises from some areas, as a result of a real combination of things coming home to roost. In particular shipping FX wasn’t great when we set our pricing.”
Bewes reports that shipping costs are starting to come down. “It wouldn’t be an overstatement to say there was an international shipping crisis with millions of containers sitting on the sea trying to get into Chinese ports or trying to get out of Chinese ports, and that had a knock-on effect, particularly on deep sea,” he says.
“After Brexit, some transporters did really not want to divert their drivers into a crossing that was fraught with time delays etc. So we have had issues on the shipping side from all directions, but that is starting to ease.
“In terms of internal distribution, of course prices went up in line with the oil prices; one would hope that that will soften out a little bit. So many of the UK drivers stopped working for trade distribution and went into retail distribution – Amazon etc. That has eased a bit.
“So all round it’s starting to ease. We haven’t seen any real improvement in the FX rates for the euro, but it’s starting to look a little bit better with the Australian and New Zealand dollars. I think the US dollar has peaked as well and it looks to be going in the right direction.”
While not downplaying the pressures facing independents, Bewes believes that stratospheric price increases in some categories could be good news for others.
“Certain traditional areas of fine wine have become very expensive. Burgundy is an extreme example, but that does open up opportunities for independents. If someone’s looking for Meursault, for example, most independents can now recommend wines from Greece or from various other regions that offer spectacular value for money.”
ABS will pass on savings as Aussie costs come down
For the first time in 40 years, ABS published its list in November with a separate slip of paper containing prices. Director Elliot Awin says this may have seemed like a cynical ploy to allow an extra increase before the next list was printed. But it also anticipated that some prices could decrease, or at least not rise as much as much as feared.
“Freight prices have come down, and so we have every intention of bringing the freight element of our prices down,” he says.
“A container from Australia has actually halved in price from the point at which we costed it, so that of course will come down.
“We’ve always treated duty as a cost of goods. It’s something that we fund for our duty-paid customers for the period of time that we offer them credit, so 30, 60 days. It is no different to the freight price, or the warehousing costs that we incur. And because we do everything through third-party logistics, we just pass on exactly what we are being charged for each of those.”
He adds: “We like to operate on an everyday, fair, honest price that we can give our customers for as long as possible.
“This year, we released our list with an intention of revisiting it after six months. But of course, with the duty change coming into place in August, we’ve extended that to August 1.”