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Below cost ban means average bottle of wine must sell above £2.41

Published:  05 February, 2014

An average bottle of wine should not be sold for under £2.41, according to the government's new rules on below-cost selling.

The government's new rules define below cost as duty and VAT combined, and the ban is expected to take effect on April 6, 2014, once approved by Parliament.

Individual calculations will have to be done for each product based on its abv content and which duty bracket it falls into. For a 75 cl bottle of 12.5% abv wine, government calculations state that it must not be sold for under £2.41; while a 70cl bottle of 37.5% abv vodka must not retail at under £8.89.

Retailers must bear in mind the different duty rates for beers, wines and spirits.


Spirits permitted price = (volume (litres) x strength (% abv) x duty rate) + VAT

 = (0.7 x 37.5 x 28.22) x 1.2

 = 888.93, rounded up to £8.89  

Wine permitted price = (volume (litres) x duty rate) + VAT

 = (0.75 x 266.72) x 1.2

 = 240.048, rounded up to £2.41

Calculating the minimum price a pre-mixed cocktail should retail at is more complicated, as retailers must calculate the abv of whatever type of alcohol in the mix, whether it is spirits or wine, and combine them.

When it comes to multi-buy promotions, the guidance states: "Businesses can continue to sell alcohol as part of buy one get one free promotions. However, businesses will need to ensure that the total purchase price for the package of products is not below the aggregate of the duty plus VAT permitted price for each product comprised in the package. To achieve this, businesses will need to calculate the total of the combined permitted price of each alcoholic product in the promotion."

The guidance also urges caution on the use of coupons and staff discount to make sure the price of alcohol does not fall below cost.

The ban will be enforced by local authorities including licensing authorities, Trading Standards and the police.

 Miles Beale, chief executive of the Wine & Spirit Trade Association, said: "The WSTA welcomes the introduction of a below cost sales ban, which is supported by the industry, to deal with the worst cases of deeply discounted alcohol. We will be working with the Home Office to ensure that the guidance is widely understood and retailers have enough time to properly comply with the changes."

 "Our retail members are already committed to the responsible retailing of alcohol and were instrumental in the development of Challenge 25 and Community Alcohol Partnerships."