State's cut above the rest

It seems ridiculous that something that earns the producer less than a euro ends up costing the consumer more than 10 times that State's cut above the rest, writes JOHN WILSON

At one time in this country, wine was the love that dared not speak its name. The mere mention of the word brought about either a sneer or a giggle from the rest of the population. Wine was seen as an elitist drink, supped only by the very rich, the pretentious, or foreigners. Judging by the commentary on the massive hike in wine duty, not much has changed.

Arguing against the recent increase is asking for trouble. Compared to the financial misery that many are going through at the moment, and to the swingeing cuts faced by many following the Budget, wine-drinkers can expect little sympathy. Although this is certainly an attack on the middle classes, these days a wine drinker is more likely to be female, between the age of 25-40, and from any social background. I also know that for many hard-pressed couples unable to afford to go out, wine provides a little simple pleasure with dinner on a Friday night.

I received many angry complaints from the public and trade about the duty increase. The most heartfelt were from two foreigners; both from countries that consider wine a natural part of everyday life rather than a luxury. I am not sure why wine was singled out for such harsh treatment by the Minister; possibly because it is not produced in this country. The increase seems to suit the multiples, which can afford to use alcohol as a loss-leader whenever they chose, knowing they can make up the shortfall from other products. Expect to see further job-losses in the hard-pressed independent sector.

You may wonder how so many retailers were able to keep their prices unchanged prior to Christmas (and some still have). Some in the wine business saw a big increase on the way, and duty-paid large quantities of wine before the budget. But by now most of these stocks are exhausted and the increases have started to kick in. The buyer for one of the major retailers told me he expected consumers would continue to pay exactly the same for a bottle of wine as before. The difference being the wine they drink will not be as good.

Once the increase of 81 cent (excluding VAT) in duty is included in the cost of wine, it will mean an increase of €1.50 or more on a bottle of wine currently selling for €8. From that €9.50, roughly 50 per cent will go to the Government. I give a rough breakdown below on how the price of a €10 bottle of wine is calculated. It seems ridiculous that something that earns the producer less than a euro (including bottle, cork, label and case) ends up costing the consumer more than 10 times that. However, that is the logic of our current system.

There are a few ways of cutting corners. By importing a full container of wine, the cost of shipping can drop to 18 cents a bottle, less if it is shipped in giant bladders and bottled in Europe. Larger importers will have their own bonded warehouse (although they still must pay extra staff costs). Many of the larger retailers now buy and import a proportion of their wines directly, cutting out the importers’ margin. Some pass on the saving to the consumer; others merely increase their own margin. An increasing number of smaller retailers now ship directly too, although they may end up paying more for both wine and shipping. The margins I have given to retailer and importer are obviously flexible.

Cost of wine – €1.50. Shipping and warehousing – €0.40. Excise duty – €2.78. Importer margin – €1.17 (20 per cent). Delivery – €0.25. Retailer margin – €2.11 (25 per cent). VAT – €1.87 (23 per cent). Total – €10.

The Government’s share works out at €4.65 per bottle. As argued in these pages many times before, paying a little more for a bottle of wine will usually get you far better value. Using the same calculations as above, a bottle of wine on sale for €15 would cost €3.30 at source, more than three times the €10 bottle. It should taste so much better

For those on a tight budget, Lidl has four wines that will be promoted during the month of January, all at less than €4.40 a bottle and one, a Bordeaux, at €3.49. Given the Government’s take is a minimum of €3.42 (€2.78 duty plus VAT), somebody is being very generous indeed.

Bottles of the week

Bordeaux 2011, 12.5%, €4.49 reduced to €3.39 (from January 21st-27th)Light blackberry and cherry fruits with a dry finish. It has no real concentration, but is recognisably Bordeaux, and would go nicely with red meats. Stockist: Lidl

Pinot Grigio 2011, Provincia di Pavia IGT, 12%, €5.39 reduced to €4.39 (from January 28th to February 1st).A slightly confected nose, crisp acidity and light green fruits. It doesn't exude class, but is a perfectly drinkable wine. Stockist: Lidl

Domaine Modat Comme avant 2010, Côtes du Roussillon Carmany, 14.5%, €18.99 .Full-bodied and smooth with plenty of lightly spicy swarthy ripe dark fruits, a winter warmer. Stockist: James Nicholson, Crossgar

Alois Lageder Pinot Grigio 2010, Vigneti delle Dolomiti, Alto Adige, Italy, 12.5%, €19.99Refined with lightly floral aromas, and clean crisp green fruits. Stockists: Donnybrook Fair; Thomas's, Foxrock; Redmond's, Ranelagh