CHANCELLOR HITS FABs

Published: 23 July, 2008

In a mixed Budget for the drinks trade, Chancellor Gordon Brown froze duty on beer, wine and spirits for the fifth year in succession, but hit the RTD (Ready to Drink) or FAB (Flavoured Alcoholic Beverage) market with a 61% duty increase. The controversial rise, which will add 11p to the price of a 275ml RTD/FAB bottle, has angered top producers such as Diageo (responsible for Smirnoff Ice) and Bacardi-Martini (Bacardi Breezer). This decision effectively discriminates against these products [and] opens up a significant gap between them and the premium packaged lagers (PPLs) of comparable levels,' said Diageo GB managing director, Don Goulding. This is an anti-competitive tax on innovation and success and could significantly distort established competition in the market,' added Bacardi-Martini marketing director, Maurice Doyle. Neither producer could confirm whether they would start producing RTD/FAB products from malt liquor, as is the case in the US, to avoid the tax hike. Cheekily, however, BRL Hardy's CEO, Christopher Carson, welcomed the move, saying: We believe this could lead to greater opportunities for wine to be marketed to the 18 to 25-year-old age group.' Beyond the RTD/FAB market the freeze on duty was welcomed, although some spirits producers were disappointed that the Treasury did not take steps to harmonise spirits duty with other alcoholic drinks. We were pleased with the Budget as a whole, but we were slightly disappointed that the government chose not to end duty discrimination,' said Karen Prentice, government affairs manager at the Scotch Whisky Association, which had been lobbying for a 4% drop in spirits duty. The trade also welcomed the government's announcement that it no longer plans to introduce strip stamps' to the top of spirits bottles as a means of certifying that excise tax has been paid. A consultation panel featuring delegations from the CBI, the multiples and the spirits trade had apparently been successful in persuading the government that the scheme would be both ineffective and cripplingly expensive. We are delighted that the government has chosen not to adopt the system', said Quentin Rappoport, director of the Wine and Spirit Association. We have lobbied against the proposal due to the financial and logistical burdens it would put upon the trade. We will work closely with the government to find more effective ways of fighting smuggling and fraud.'

Printer friendly version