Retailers must pass on duty hike - suppliers

Retailers must pass the cost of alcohol duty hikes to consumers, suppliers have urged.

Wine, beer and spirits companies have warned they will not be able to absorb the hefty duty increases announced by Chancellor Alistair Darling in his Budget speech.

Spirits duty – which has been frozen since 1997 – will increase the most, by 55p a bottle from midnight on Sunday. Tax on still wine has gone up by 14p a bottle – almost 200% more than last year’s hike. Beer duty will go up by 4p a pint, and cider by 3p a litre. Sparkling wine duty will rise by 18p, and fortified wine tax goes up by 20p. Cigarette duty rises by 11p for a 20-pack, while a five-pack of cigars will attract a 4p increase.

The Chancellor also said alcohol duty will go up 2% above inflation every year for the next four years.

Paul Letheren, director of Yellow Tail supplier Off Piste Wines said the 14p increase would definitely be passed on, either through a change of terms with its Australian supplier or in agreements with supermarkets.

Antony McIndoe, director of Discovery Wines, said: “It’s a consumer tax and it’s going to have to be passed on to consumers. And they’ll probably all go and buy cider as that’s only gone up by 3p.”

Greg Wilkins, director of First Cape wine supplier Brand Phoenix, described the move as a “stealth tax on the middle class”. Wilkins said he would be considering “all the available options” before starting pricing discussions with retailers.

Spirits suppliers said the move puts their businesses under unwanted pressure. Rob Preston, director of Romsey-based United Brands, said: “It’s not good news for anybody but it’s especially bad for the smaller boys. They are the ones who are going to be punished.”

Pauline Clarke, UK brand manager for Cockspur Rum, said: “It puts an added strain on our industry and especially for us as small island rums and small companies competing with the likes of the Diageos of this world, the impact is huge. It’s a bitter pill.”

Scotch Whisky Association chief executive Gavin Hewitt described the spirits duty increase as "a blow to international competitiveness … it sets a damaging precedent that export markets may follow".

Stuart MacFarlane, President of InBev UK, said: “I am disappointed with the duty increase announced in today’s budget, which will hit drinkers and retailers alike and add to the increasing pressures already facing the industry in 2008."

Other suppliers said retailers may resist pressure and hold firm on prices. Castel UK managing director Anne Burchett described the 14p hike as a “bold move” and said retail prices would move up at entry-level.

Suppliers and retailers will discuss post-Budget pricing over the next few weeks. Tesco’s head of beer, wine and spirits Dan Jago said he would not comment on pricing until after internal discussions were complete.

Martin Swaine, managing director of specialist chain Rhythm & Booze, said retailers would be forced to increase costs on all types of alcohol. The hikes were “punishing the majority of moderate drinkers because of binge-drinkers” he added.

Independent wine merchant Samantha Jackson of Scatchards in Chester said she will be forced to add 25p to the cost of a bottle of wine. The duty rises could hit trade hard, she added.

The Wine & Spirit Trade Association, which has lobbied against duty increases, condemned what it described as an "attack on consumers". Chief executive Jeremy Beadles said: "This tax hike will simply make things worse for the average consumer."

Both Camra and the Society of Independent Brewers said the beer tax price hike would drive trade from pubs to off-licences – seemingly forgetting that the tax applies to both on and off-trades.