VAT increase: retailers take measured approach

Published: 14 January, 2011

Retailers are taking a measured approach to the recent VAT increase - but wine suppliers are braced for difficult conversations if higher retail prices start to impact on sales.

Retailers are taking a measured approach to the recent VAT increase - but wine suppliers are braced for difficult conversations if higher retail prices start to impact on sales.

One major wine importer said: "We had a little bit of pressure before Christmas and we did what we could, where we could. It's part of normal commercial discussions to put the right price in front of the consumer. But there was no undue pressure.

"Some prices have moved and some have not. Retailers are probably waiting to see if there's a significant detrimental effect on sales and if there is they are going to do something about it. I suspect they will come back and ask for our help."

He added that big-selling wines might not see any price increases but "some of the lines that don't get much exposure will probably edge up in price by more than just the VAT increase".

Another smaller supplier said suppliers had received no benefit from retailers when VAT temporarily reduced to 15% in December 2008 and should not be forced to shoulder the burden now that it has increased from 17.5% to 20%.
He added: "One big retailer asked whether we would help support it but we didn't agree to it. The margins aren't there - I don't think there's anything more to give.
"I think prices are just going to have to go up in a lot of cases. Retailers have moved away from 99p price points so there's a little less pressure in that respect."

Sainsbury's senior wine buyer Julian Dyer said: "We do not expect our suppliers to absorb VAT. We're doing everything we can to keep prices low for our consumers at this time of year." He said that although some price increases were inevitable, "all the promotions at the moment are at previous prices".

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