Wine shelves will “change shape significantly” with “almost every other wine” increasing in price after the government failed to freeze duty or row back on tax changes set to come into force next year, one of the UK’s leading specialist wine distributors has warned.
Jim Wilson, portfolio director at Hallgarten & Novum Wines, said decisions to increase National Insurance contributions for employers, hike taxes in line with inflation, and not keep transitionary wine duty rates in place in last month’s budget were “a huge setback for the drinks and retail sectors”.
“There is going to be a large increase in costs for us, notably as a result of changes to National Insurance contributions,” said Wilson.
Although Hallgarten was “in a position to handle these increased costs”, a bigger challenge came from new duty rates due to hit wine next February, Wilson said.
Why is wine duty changing?
Presently, all wine between 11.5% abv and 14.5% abv sold in the UK is taxed as though it is 12.5% abv, after the Conservative government introduced a transitionary rate of relief in August 2023.
This wine easement period was designed to enable the industry to prepare for a new system, in which wine is taxed in 0.1% abv increments according to its strength.
The new system – due to come into force from February 2025 – will bring wine duty in line with other alcoholic drinks categories. Critics, however, argue the new rates will increase the administrative burden on winemakers and retailers, further pushing up prices.
The failure of the Labour government to make wine easement permanent presented a two-fold challenge for the wine industry, Wilson said.
“Firstly shelves across the country will change shape significantly as the vast majority of wines are sold at between 12.5% and 14% abv,” he said. “The [inflation-linked] duty rise of 3.65% further means that almost every other wine on an average wine shelf will also see an increase in price.
“Secondly, and in fact the bigger challenge, will be to help our customers manage the fact there will be a constantly changing cost base as wines move from one vintage to another,” he continued. “These customers have broadly been used to having an agreed price to take them through the duration of a vintage, allowing them to print their marketing materials and programme till systems with the certainly of a fixed cost price.”
Although the industry ought to be careful not to “blow the scale of changing prices out of proportion”, it would “only take one or two wines to change price” for marketing materials to be out of date, Wilson explained.
Hallgarten not planning to scale back imports
Despite this, Hallgarten, which offers a selection of 1,800 wines from around the world, had no plans to scale back the number of wines it imported, Wilson said.
“The recent announcements in the budget, whilst they are a huge setback, have been in the pipeline for some time,” he said. “This has allowed us to prepare for this eventuality.
“The key is [for us] to have a selection of wines that meet the new price points without compromising on quality.”
Established in 1933, Hallgarten & Novum Wines is one of the UK’s leading specialist wine distributors. The business, which was acquired by Coterie Holdings in 2023, predominantly supplies the on-trade and premium off-trade retailers.
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