Consumers benefit as alcohol duty relief slows price increases dramatically

  • Alcohol price increases in shops and supermarkets have slowed to under half last year’s rises and average beer prices decline;

  • Evidence shows abolition of alcohol duty escalator and cuts to duty are being passed on to consumers and helping to halt volume declines;

  • Sparkling wine's exponential growth continues, yet still wine volumes decline for the fifth straight year in both on and off trade

New research from the Wine and Spirit Trade Association shows that price increases in the off trade have slowed significantly since the Government scrapped the alcohol duty escalator, cut beer duty and froze duty on spirits in the 2014 Budget.

The latest research, which includes a full year of data since then, found that the average cost of beer had fallen - at least in the off trade - by 1% after two successive beer duty cuts. Wine and spirits, which received an inflationary duty rise and a freeze respectively, both grew by just 2% - less than half the annual growth rate seen in the previous two years and the lowest increases since the WSTA market report began 5 years ago.

With nearly 80% of a bottle of spirits and 60% of a bottle of wine made up of taxation, the inflation busting duty increases through the Alcohol Duty Escalator had meant that alcohol prices were higher than other food prices. This shows that the lower duty rates have been passed on to consumers and will be welcomed by the Treasury and consumers after the Government’s 2% duty cut for beer, spirits and cider and the freeze in wine duty announced last week.

Miles Beale, Chief Executive of the Wine and Spirit Trade Association said:

"It’s welcome news for consumers that the Government’s decision to scrap the Alcohol Duty Escalator and take the first steps towards rebalancing the duty regime is being passed on.

The rates of price increase in the off trade are the lowest we have seen for some years. Whereas average prices for wine and spirits have been increasing by about 4% or 5% every year due to the Escalator, what’s surprising is how quickly its abolition has fed through to help prices grow much more slowly.

But what's most exciting is that these results mean that 2015 Budget measures announced by Government last week should see price increases slowing further. The Chancellor can therefore have confidence that and wine and spirit businesses are prepared to pass on that benefit to consumers. It's also great news for our members and the wider hospitality trade that the Government has recognised the benefits of a more stable and supportive tax environment.”

In other key highlights:

  • Volume sales in the on trade continue to decline but the 2% fall was the lowest annual fall in 5 years and overall values were up 2%, the first rise since 2013, showing signs that the market may be stabilising;

  • Sparkling wine sales continue to rise exponentially with 26% volume increase in the off trade and 16% in the on trade. Outstripping Champagne which saw a small decline of 1% in the off trade and a 5% increase in the on trade;

  • Wine continues to face a tough trading environment with still wine volumes down 3% in the off trade and 2%, making this a fifth straight year of declines across the trade. Total wine volumes are down 14% in the off trade and 10.5% in the on trade since 2011;

  • Spirits volumes climb slightly in the off trade, thanks to growth in both Gin and Vodka, while volumes decline by 4% in the on trade with declines of 6% and 5% for vodka and whisky respectively. Gin bucks the trend with an 8% increase and Tequila sees a 17% rise;

Miles Beale, Chief Executive of the Wine and Spirit Trade Association said:

“Overall it’s a mixed picture for the trade. While it is welcome that the volumes are holding steady in shops and supermarkets and the decline in the on trade is slowing, it is still an incredibly tough trading environment for most businesses.

While sparkling wine continues to be the standout category with some impressive growth, still wine is still seeing a marked decline and highlights how the Government, having left it out of the duty cuts last week, needs to go further to support the industry which is responsible for over 270,000 jobs across the UK.”

Twitter @wstauk

WSTA are plsd to hear ⁦@tradegovuk⁩ have agreed a continuity of Mutual Recognition Agreement with Australia 🇦🇺 Good…

RT @WSTA_Miles: Brexit must be postponed, says WSTA @wstauk @imbibeuk @imbibe

We've partnered with @CrimestoppersUK to help you report alcohol fraud, like this vodka that was recently discovere…

Connect with us