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?
About Me
- DermotMW
- Dublin, Ireland
- Hi, I'm Dermot Nolan, and I became a Master of Wine (MW) in 1997, and resigned from the Institute of Masters of Wine in 2023 after being an MW for exactly 26 years. I opened a wine shop in Dún Laoghaire, Ireland, called The Wine Library, which closed in 2018, and this is my personal wine blog. I will do my utmost to be fair and responsible in my posts – please read my Who Pays article in re the ethics of wine trips and writing. I have worked in wine education, retail, and consultancy since 1990. I was a Director of the Institute of Masters of Wine (IMW) from 2008 to 2014 and was also a member of the Events Committee, founder of the Trips Committee, and member of the Governance Committee. 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.
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