Sunday, March 3, 2013

How to get more money out of the Alcohol industry

The post budget price increases are really kicking in now with new price lists from the main importers coming in and looking scary. Even the supermarkets have all put up their prices and look set to become even more dependent on price promotions to sell their wine.

From our own point of view, we have something of a philosophical quandary that we haven't yet quite got our heads around. One of our principles has always been that we won't sell anything that we wouldn't be prepared to drink ourselves. This principle is mainly driven by fear that we bring in a shipment of wine that we can't sell and we end up having to drink it ourselves. Thankfully, it doesn't happen very often. Operating on this principle, we were able to get wine out under a tenner and still be happy that we were selling decent stuff. However, under the new duty regime, all the wines we like are over a tenner.

Now, it's not like the customer has any more money in their pockets; in fact they have even less year by year. So, naturally, they still want to drink wine, but they want to pay less, not more. At the other side of the equation, we have producers who obviously want to put up prices, not reduce them. So the hike in duty could scarcely have come at a worse time. But come it did. We expected that alcohol would be hit, I mean every other sector gets hit, so why not alcohol? Well, there is really no reason why not.

"So, we need to get more money from the alcohol sector. Let's sit down and think about how best to do this" the mandarins in the Department of Finance didn't say when considering this issue. Instead, the logic seemed to be "Let's stick it to the wine drinkers - they won't dare complain". You have to remember that the big players in alcohol in this country are Diageo, the publicans and the supermarkets. Wine importers are a fragmented group of people afflicted with varying degrees of eccentricity - certainly not a group who have the wherewithal to sit at a table with the Department of Finance and make them tremble in their Clarks. Faced with a choice between upsetting this random selection of oddballs and sitting down to argue the case with English multinationals like Tesco and Diageo, there is really no choice if you are a middle ranking official in the Dept of Finance who dislikes confrontation. Easy money, like taking candy from a baby.

Or is it? Let's take a step up and look at this in context. We are trying to attract tourists with a concept called the Gathering this year. Restaurants have worked really hard in the last few years to get prices down to the point where we have a really interesting range of places offering great food at great prices - a key piece in the puzzle of getting the tourist offering right. This increase in duty, if everybody passed it on at full margin, would result in a €4 increase in a bottle of wine at restaurant level. So, not great for tourism.

What about unemployment - surely increasing excise will create jobs? Err, no.

What about health - we are trying to combat anti-social drinking - putting up the price is good? Well, as I have pointed out before, nobody goes out on the street and starts a fight after a couple of glasses of wine with their dinner. It's slabs of beer, it's cheap vodka, it's Red fucking Bull. This merits a separate post, so I won't rant on here.

Ok, so it won't tackle anti-social drinking, it will destroy jobs, it's bad for tourism, but the government needs the money, so stop your whining and suck it up, Mr Fancypants Wine Drinker. Ok, but let's take into consideration the reduction in the number of bottles through people shopping abroad, reduced consumption and smuggling and we will be lucky if the revenue taken from wine stays at the same level - I fully expect it to reduce.

So how do you get money out of the alcohol lobby that doesn't damage tourism, destroy jobs, that is fair to all sectors of the market and which could tackle anti-social drinking?

3 simple measures:

  1. Ban below-cost selling on booze - I would love to know how much this costs the revenue every year. Lets say I buy a bottle of wine for €10 + vat. Total cost to me is €12.30 - of which I claim back €2.30 from the revenue. I then, as part of a promotion, sell this below cost at €8. The VAT part of this is €1.50 which I pay to the revenue. So, the revenue is down €0.80 on this bottle.  The revenue commissioners are actually part-funding the below cost selling of alcohol by supermarkets (or by anyone who wants to do it).
  2. Charge for off-licences as a % of Turnover - we pay €500 for a licence for a small wine shop on a side street in Dalkey. A massive supermarket pays the same even though their turnover on alcohol is huge by comparison. Make €500 the floor and then charge by turnover. Simple.
  3. Increase duty by a small amount across, wine, beer and spirits so that everybody take a hit.
I know, I know these measures seem too simple and fair, they would never work. Tesco and Diageo would never go for it.

1 comment:

Angelica said...
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