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Soapbox: Why is the government so disinterested in the wine trade?

The most recent Kantar numbers that show a decline in off-trade volume of 9% should concern all of us. One month does not indicate a longer-term trend, but it is a standout number. This is for September. So, is this a consequence of the rise in duty and the associated price rises experienced across the industry? It is too early to say, but coincidence in business is rare and we should all take note.

Since then, there has been huge price volatility across the industry with prices rising and then being discounted. It’s a process which, in the circumstances, is unavoidable, but further erodes consumer confidence in pricing and this looks to be set in for Christmas and beyond. The irony being that a volume decline in wine sales will reduce, not increase, the returns for the Treasury.

• Read more: Soapbox – Somm tips on ordering wine

We can celebrate the recently announced duty freeze for a moment, but the spectre of further duty increases remains. A casual observer may wonder what we and our customers have done to deserve such industry-destroying measures? But this is not one issue affecting the industry and I will argue that our industry is at an inflection point where rising costs, rising duty and ill thought-out and expensive legislation are all impacting us at the same time. Hindsight will show that purchasing is significantly reduced and pressure on business and winemakers – already fighting the impact of inflation – signals trouble for some, even many.

Packaging Recovery Notes (PRN) are a case in point. In 2020 The Wine Society spent £80k on PRNs. We are now spending around £600k, despite reducing bottle weights. Why? Because a system has been created that was not thought through, took no account of the impact on business and now operates on a basis of opaque, even questionable, practices.

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Lack of strategy

The Scottish Deposit Return Scheme may have disappeared for glass, but we still have the bizarre situation where Wales may break rank with the rest of the UK and plough ahead. The Scottish scheme has already cost businesses significant amounts with no returns; the stop-start nature of the legislation contributed to this and highlighted incompetence and lack of strategic thinking.

Ditto Extended Producer Responsibility (EPR – adding environmental costs to the final market price of a product) –delayed again, more opaque than ever and without a clear view for business on how it will operate or how much it will cost. Projects like these in any sensible business either would never happen or would see real consequences for failure.

The world is volatile enough without this absence of joined-up thinking and, in the meantime, at The Wine Society, we have seen close to £1m of additional cost with a further £3.5m that we have invested into price to avoid members having to swallow the impact of the rise in duty. Our producers also suffer, having to deal with changing dates, labelling requirements and shipping paperwork. The UK is becoming a significantly less attractive market for many suppliers.

This brings me back to where I started. Eighteen months ago, we sat round a table with Helen Whately MP (minister of state department of health and social care) and Charles Barry (lead official for HM Treasury) to discuss the new government proposals for duty. They were there to listen and to discuss the proposals, both the impact and the practicalities of implementation. It soon became clear that this was a box-ticking exercise – listening but not hearing, and placing political capital way ahead of sensible business considerations.

We now find ourselves in a position of hoping we can maintain the current temporary easement and avoid the convoluted and complicated full proposal. The reality remains that this, with other inflationary costs, plus global uncertainty and a host of other pressures, will lead to contraction, not growth.

We all recognise the part that business has to play in sustainability, in helping the Treasury out in difficult times. This is not the cause of my frustration. Any of us, with the Wine & Spirit Trade Association and specifically Wine Drinkers UK, could advise this or the next government on how revenues can be maximised by taking a more pragmatic stance, encouraging and not frustrating business, while helping consumers manage in a higher cost environment. The law of unintended consequences has never been a more apt appraisal for the challenges we face.

• wine
• Business
• industry
• decline
• Wine Society
• volatility
• rising prices