With the myriad of price increases we’ve all experienced since the beginning of the recession, one increase which has been hard to get to grips with, is the price of wine. This is because the industry has been hit from all sides at once.
Obviously there is the string of excise duty increases put into place by the former labour government which has increased a bottle of wine by 36 pence, plus vat of course, making it 42 pence per bottle. Thanks to their legacy, it’s set to increase again in 2011 by 2% over inflation which is currently 5%, so 7% in total, with the vat adding another 1.2%. On it’s own this would be no problem, we accept we have to pay a bit more. The biggest increase has come from the extremely weak pound. As (virtually) all wine is imported, we’ve seen increases in the basic cost of the wine by as much as 40%. Add back on the excise duty increases and you can see why the price on our shelves has increased so much. In January we have VAT increasing to 20%!
So how have the supermarkets coped?
We all remember ’3 for £10′ and although this wine was frankly all crap, it was still affordable. 85% of all retail wine in the UK is sold through the supermarkets and they’ve dominated the market for years, forcing producers to repeatedly cut costs till many went out of business, so they could maintain their price points. Many brands have to pay the supermarkets to have a presence on the shelf! Have the supermarkets cut their margins while the rest of us struggle? No! They still make around 30 to 35%! You may have noticed prices creeping up on the shelves as there is simply no room left for the producers to manouvre. Asda has moved to 3 bottles for £12 presumably to acclimatise consumers before the vat increase. According to inside sources supermarket buyers are instructed to source wines at no more than 34 cents a bottle – about 22 pence. This makes sense on a bottle of wine at £4, as it leaves £1.75 for duty and customs tax, 60 pence vat, 22 pence for the producer (including the bottle, cork and labelling, leaving only 5 pence for the wine!), 20 pence shipping, and a nice 30% (£1.00) for the supermarket.
So next time you see a wine on the shelf in a supermarket at an affordable £4, stop and think what is actually in the bottle – a product that is actually worth about 5 pence! Would you buy orange juice at that price, or milk, or even a piece of fish? No way, at that price you would expect it to be crap! So why are we still surprised when we get the wine home, open it and attempt to drink it? Yes, it is crap! But on the shelf it said ‘Half price, reduced from £8 to £4 so I thought it might be good……’ People are being routinely disappointed time after time in the supermarket, while the supermarkets make literally billions of pounds per year from us. Thankfully many people are beginning to wisen up and look elsewhere for their wines, accepting that due to the weak pound and punitive duty rates, good wine now costs at least £8 per bottle. But those of us on a tight budget, and let’s face it that’s most of us at the moment, will continue our regular bout of weekly disappointment, but at least by the following morning we can’t really remember how bad the wine tasted, because we’re struggling with a horrendous hangover from the 80 different chemicals that were added to it to keep the price down!