About Me

My photo
Dublin, Ireland
Hi, I'm a Master of Wine (MW) having passed in 1997. I am about to open a wine shop in DĂșn Laoghaire, Ireland, called The Wine Library and this is my wine blog. There should be no conflict of interest between my work with The Wine Library and the opinions expressed herein but I will do my utmost to be fair and responsible in my posts – please read my Who Pays article. I have worked in wine education, retail, and consultancy. From June 2013 until May 2017 I was the Retail Manager for The Wicklow Wine Company. I was a member of the Council of the Institute of Masters of Wine (IMW) from 2008 to 2014 and was also a member of the Events, Trips and Governance Committees Having had problems with potentially libellous comments from unidentifiable posters, I now require that if you post a comment, you must identify yourself properly or it won't be published. Please note that I do not review products or services on request so kindly don't ask. I value my independence and I believe my readers (few that they may be) do so also.

Wednesday, October 16, 2013

The downslide...

Yesterday's Budgetary increase in duty on wine made me pause for thought. This is a summary what I thought: over the past year the wine retail sector has seen a reduction in gross profit of 28% and yesterday's duty increase could make that 42% in 2 years. How? Read on...
The wine market in Ireland is pretty steady with about 8 million cases of wine sold per annum. The average bottle price on the shelf is about €8.50 and, since a case is 12 bottles, this means the average retail value of the wine market is €816 million.
Up to last year's November increase of €1 on duty, this €816 (we'll forget the millions) was broken down as follows - VAT €187.68, duty €189.12, cost of landed wine €160, leaving €279.20 to cover all operating costs and overheads. That's the wages of all staff, as well as electricity, rates, rent, marketing, maintenance, depreciation etc. etc.
Now, last year's increase saw no major reduction in the size of the market so the figures would have read as follows - VAT €187.68, duty €266.88, cost of landed wine €160 leaving €201.44 to cover everything else. So, the retail trade has to make ends meet from a gross profit figure which was reduced by 28% at the stroke of a Ministerial pen.
Yesterday's increase, assuming the market size does NOT shrink would mean that for this coming year the figures are as follows - VAT €187.68, duty €305.92, cost of landed wine €160 leaving €162.40 to cover everything else. Over 2 years that's a decrease in gross profit of 42%!
Now, no industry can claim to be so special that it should not bear its fair share of the burden facing the country but one has to ask are the banks, or any other industry, so heavily taxed? Yes, it is a small part of the retail sector but given the special treatment which the hospitality industry received it seems odd that the wine trade should be so heavily hit - those restaurants and hotels which campaigned for no increase in the 9% VAT rate make their biggest margins on the wine they sell - often as high as 70% on return (that's 333% on cost)! While tourists rarely spend much time in wine shops the wines they buy in hotels and restaurants are supplied by a trade which has had a noose put around its neck and tightened. Is this really the way out of our woes?

No comments: