12 minute read
Off-trade
Alcohol up in Lockdown
Unsurprisingly, with the closure of the on-trade over the months of March, April, May and June figures from the Department of Finance show that the off-trade channel benefitted through increased alcohol sales from the move away from the country’s pubs, bars, restaurants and hotels.
The Department of Finance’s Tax Strategy Group Papers, published ahead of this month’s Budget, show that people actually consumed more alcohol in the seven months to the end of July than in the same period in 2019 despite the pubs being shut.
While beer, spirit and cider volumes were down 17.4%, 9.8% and 9.4% respectively in the second Quarter of this year compared to the same Quarter in 2019, wine volumes showed an increase of 10% according to Revenue’s calculations.
“Despite the closure and ongoing restriction of the on-trade, we are not seeing a decrease on a similar magnitude in overall alcohol sales volumes,” state the Departmental Papers.
“This indicates that in Q2 2020 alcohol sales in supermarkets have increased significantly due to a substitute purchasing effect.”
Excise tax on alcohol accounted for €1.232 billion in 2019, down from 2018’s €1.239 billion figure.
But the Papers point out, “Total excise receipts on alcohol to the end of July 2020 (at €669.1m) is marginally higher than for the same period in 2019 (€666.8m),
Wine volumes showed an increase of 10% in the second Quarter of this year compared to the same Quarter in 2019 according to the Department’s calculations.
reflecting a strong substitution effect when the on-trade was closed”.
The report also notes that consumer tastes changed too.
“The increased consumption of wine has had implications for the pub trade, as over 80% of wine is purchased in the off-trade,” notes the report, “Given that excise duty on alcohol is largely unchanged as a proportion of price over the years, it is unlikely that tax is the driving factor in consumption changes. In this regard, the consumption and composition of consumption of alcohol products is driven by factors such as personal disposable income, individual consumer preferences, the availability of alcohol products, the pricing strategies of retailers and publicans and cultural changes”.
The Strategy document illustrates the trend in excise duties as a percentage of the national average price of the representative pint of stout, lager, cider and glass of whiskey sold in the on-trade.
“Since 2014” it notes, “excise duty as a percentage of the retail price has fallen across all these products, due to pub price inflation.”
The Department of Finance Papers compare this with the trend in excise duties as a percentage of the national average price of the representative can of lager or cider or bottle of wine or bottle of whiskey sold in the off-trade.
“Broadly speaking, the trend has been relatively flat since 2014”, states the report, indicating that average retail alcohol prices in the off-trade have not changed much since 2014.
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OFF-TRADE DEVELOPMENTS 15 8 Proposed legislation allows Ireland option of charging excise on duty-free products for travellers
Duty-free sales could be restricted here post-Brexit
With the space between the UK and Ireland likely to become a duty-free zone, the wider availability of lowpriced tobacco and alcohol products threatens the Exchequer take as the short distance involved could well promote “fiscally-motivated” travel by RoI citizens according to the government’s Tax Strategy Group.
The Group’s Brexit Readiness – Taxation and Customs Issues report, published recently, points out that under the present Brexit agreement, post transition, the UK (excluding Northern Ireland) will be considered a “third country” for the purposes of excise duty and VAT.
“In the absence of any action on behalf of the UK and Ireland, Duty Free sales would emerge between the UK and Ireland due to the UK’s status as a ‘third country ’post transition,” states the report.
“This has the potential to significantly affect the Government’s Exchequer figures. As matters stand, a dutyfree regime for UK/Ireland travel will create significant tax administration difficulties and compliance costs, will reduce indirect tax revenues and will have a negative and distorting impact on the retail sector in Ireland given
A new off-licence opened its doors in Dublin 2 on the back of the recent
Lockdown in the city.
With Dublin being put into Level 3 of the new road map, the Director of the Nassau Street Porterhouse Dave
Morrissey decided to act quickly and turn a section of the front of the premises into a craft beer and premium local spirits off-licence.
‘The Bottle House’ was the idea of hospitality veteran Dave and
Porterhouse Director Elliot Hughes.
Within 72 hours the venue was transformed.
“It’s been an incredibly difficult week for hospitality” explained Doug
Leddin, Marketing Manager for the the frequency of air/sea passenger movements involved.”
This will apply not just in relation to excise products, but also in relation to retail trade in other high value items eg jewelry, cosmetics, IT devices.
However, the report adds that a legislative measure was included in section 63 of the 2019 Brexit Omnibus Act which provided for an option to restrict duty-free sales, in relation to excise duty, in the case of passenger travel between Ireland and the UK.
“The measure provided that excise duty would apply to alcohol and tobacco products sold in tax-free shops in Ireland to passengers travelling to the UK, post Brexit,” states the report, “The policy intention was to commence the measure in the event that the UK decided to restrict the scope of duty-free sales on excise products (alcohol and tobacco products) on a reciprocal basis.”
The proposed legislation allows Ireland the option of ensuring that excise is payable, where applicable, on duty-free products for travellers, leaving Ireland, going to the UK (not including Northern Ireland).
“When the transition period ends the UK will assume the status of a Porterhouse Brew Co, “but the team at Porterhouse aren’t the type to lie down and stop. Dave has worked tirelessly to ensure that if Dublin was to be locked down again we’d have an opportunity to generate revenue, support local suppliers and most importantly stay employed.
“We opened our doors on Saturday the 19th of September and plan to open seven days a week from 2pm - 10pm, selling local craft beers, premium local spirits and an amazing selection of wines from our local suppliers.” ‘third country’ in terms of their trading relationship with the European Union,” a spokesman for the Department of Finance told Drinks Industry Ireland, “In the absence of any action on behalf of the UK and Ireland, duty-free sales would emerge between the UK and Ireland due to the UK’s status as a ‘third country’ post transition.
“The ‘Brexit Preparedness – Taxation and Customs Issues’ Tax Strategy Group paper (see link https://www.gov. ie/en/collection/dc3850-budget-2020tax-strategy-group-papers/) set out a possible scenario around duty-free post transition. Were the UK to decide not to introduce duty-free sales for passengers travelling to the EU post transition, the approach to date has been to look to reciprocate the actions of the UK. In reality, this meant that we could only legislate to apply excise duty on alcohol and tobacco products, as the EU VAT directives provide that no VAT is payable on duty-free products to Third Countries, subject to quantitative limits.
“The UK has announced recently that duty-free will apply between the UK and the EU post transition. However, the Government has yet to
8 Porterhouse Bar, Nassau St, reacts to latest Dublin Lockdown
Porterhouse ‘Bottle House’ Off-Licence opens
announce its position in this regard.”
The Bottle House - offering the Porterhouse an opportunity to generate revenue, support local suppliers and most importantly stay employed.
8 UK government’s “red tape requirements” to push up price of wine for consumers and cause “chaos” for wine industry
Red tape to cause chaos & price hikes for UK wine
A new report from a committee of UK MPs shines light on the impact on the UK’s wine business of the government’s new red tape requirements. These will push up the price of wine for consumers and cause “chaos” for the wine industry.
Following an inquiry into the impact of introducing a number of controversial new wine import requirements (including the introduction of the infamous VI-1 forms which would “be chaos” for all those companies buying and selling European wines which are unfamiliar with VI-1s and lab tests) the All Party Parliamentary Group for Wine and Spirits published a report on the subject.
Wine companies there have spelled out the cost to consumers and businesses of a series of new inspections and paperwork requirements voluntarily proposed by the UK government for wine imported from the EU from the 1st of January next year.
If the government refuses to scrap plans such as those to introduce wine import certificates (so-called VI-1s) and lab tests, experts warn that businesses could fold or be forced to relocate outside the UK. Job losses are inevitable and the Treasury will lose tax revenue.
Worried UK wine firms gave or submitted pages of evidence to the
Fine wine merchants have told MPs it will be impossible for them to meet the testing requirements (which would mean opening and thereby ruining expensive bottles of wine) and remain competitive.
inquiry citing a catalogue of concerns. “This is going to be unbelievably
The report was published in difficult to implement” added Liv-Ex, the same week as an amendment a leading global trader in fine wines, in from Lord Holmes of Richmond giving evidence to the effect that Livto the Agriculture Bill calling for Ex alone will have to produce at least a Government review into the 15,000 forms and “600,000 or more requirement for VI-1 forms and forms are going to be produced” Livcalling for a “revolutionary electronic Ex predicted. alternative” for any necessary Fine wine merchants have told MPs information. it will be impossible for them to meet
“For those suppliers who were the testing requirements (which would trying to be proactive and work out mean opening and thereby ruining what to do, they’re getting little to no expensive bottles of wine) and remain information from their own Customs competitive, which will inevitably result officers,” said a spokesman for one of in businesses having to relocate from the companies, Direct Wines, as part of the UK to avoid using the forms. the inquiry. As well as the huge cost to wine >>
8 Off-sales growth slowdown as people now more inclined to socialise out of home
Take-home growth begins to taper
After months of exceptionally strong growth, take-home alcohol sales have begun to taper off according to Kantar’s survey data on the grocery sector.
In the four weeks to the 9th of August, growth in sales of takehome alcohol started to slow down with consumers more inclined to socialise outside of their homes as lockdown lifted.
Alcohol sales increased by 56% in the 12 weeks to the 9th of August, which represents a significant decline from the 76% growth recorded in the previous month’s 12-week period according to Kantar.
“This represents a significant slowdown from the 76% growth rate we saw last month as people get used to new rules and are more inclined to socialise out of home,” said Emer Healy, Kantar’s Retail Analyst.
businesses – estimated at over £70 million a year – there will be a big reduction in range and choice.
One independent wine merchant said, “UK customers have become accustomed to being able to buy the food and drink they like from all over the world. If they’re suddenly unable to buy major brands from Bordeaux, Champagne, Rioja, Prosecco, I think they’re going to be very unhappy”.
Other wine businesses stressed that this was an opportunity for the government to move forward rather than take a step back.
Chainvine, experts in digital systems, said, “The Government should declare a ‘War on Paper’. It is wasteful, unsustainable and in the long term not resilient as Covid-19 has shown us”.
The report concluded that the introduction of import certificates for EU wine, something that isn’t required of any other category of alcoholic drink, will add further time and costs which will ultimately fall to the consumer, with no demonstrable benefit.
MPs were told it would push up the price of the nation’s favourite alcoholic drink and reduce the range of wines offered to the UK’s 33 million wine drinkers.
Last year the Wine & Spirits Trade Association warned that the new inspections for imported EU wine would treble the workload of UK wine inspectors overnight.
On top of this the report pointed out that VI-1 forms will damage the UK bottling industry and could hinder the growth of the English Sparkling wine industry.
“Sadly Defra [Department of Environment, Food & Rural Affairs]
Alcohol was the highest-growing category in the four weeks to the 30th of August according to
Nielsen. Nevertheless, at 37% up on the same period in 2019, this was the lowest growth rate that the alcohol category had experienced Ministers are stubbornly ploughing ahead with the introduction of costly VI-1 certification for EU wines” said WSTA Chief Executive Miles Beale, “meaning that at the end of the year wine drinkers will be facing price hikes and inevitably find that some of their favourite European wines will vanish from the shelves.
“It’s madness! More than half our wine comes from Europe. Instead of choosing to suspend and reduce red tape and costs for wine, Ministers have elected to apply additional burden and some £100m in costs for UK businesses and consumers. And with no idea where the lab testing capacity will come from.
“Deal or no deal – it’s within Government’s gift to reverse this decision. It’s baffling why the politicians seem hell bent on pushing up prices for British consumers and punishing British business.”
The APPG’s Co-Chair Neil Coyle MP said, “Wine import certificates were designed by the European Union to make importing wine from outside the EU more difficult. The UK is the second-largest importer of wine, by volume and by value, in the world.
“About 99% of wine consumed in the UK is imported and it makes no sense for the UK Government to retain or extend these costs. This would contradict the Government’s claim of opening up the country to world trade and would hit consumers and our economy.”
APPG Co-Chair Helen Grant MP added, “I hope officials will consider our recommendations and remove barriers to trade, incorporate new technology and reduce
8 August alcohol sales up 37% in off-trade
August alcohol – fastest FMCG growth category
bureaucracy”. since March.
Compared to this, Fast Moving Consumer Goods sales (in multiples & convenience stores) reached €1.04bn for the four-week period, up 13.1% on the same period in 2019. n
