Australian wine exports to the UK will soon be hit by biggest single duty hike since 1975.
The alcohol duty freeze introduced during COVID-19 will end on 1 August and the duty on wine will increase with inflation – which is currently running at 10.1% RPI. A new duty regime has also been introduced, which will broadly tax alcohol according to strength, meaning wine drinkers – and exporters – are set for a staggering 20% price hike.
The news adds to the woes of Australian wine exporters, who faced a challenging year in 2022. Wine Australia’s latest Export Report shows the UK market – which is Australia’s top export market by value – was down 18% by value to $373 million and down 11% by volume.
The UK’s Wine & Spirits Trade Association Chief Executive Miles Beale said: “The Government’s decision to punish wine and spirit businesses and consumers with a 10% duty hike for spirits and a massive 20% for wine, from 1 August, is staggering.
“This Budget directly contradicts what this Government claims it is trying to tackle. It will further fuel inflation. It will heap more misery on consumers. And it will damage British business, especially those in the hospitality supply chain, who are still trying to recover from the pandemic.
“The double whammy tax hike for wine is a particularly bitter blow for the UK’s SME-rich wine businesses. It begs the question – yet again – what does Government have against people who choose to produce and drink wine?
“These crippling inflationary tax hikes will be lumped on top of stealth tax rises for some alcoholic products, which the Government has built into the move to taxing alcohol by strength.
“After all the effort to relaunch hospitality supply chains in 2022, the Government is offering no help in 2023 for the wine and spirit trade – and particularly for the UK’s 33 million wine drinkers who will see their – and the nation’s – favourite drink hit with a 44p duty rise in the midst of a cost-of-living crisis.”
The impact for Australian winemakers
Australian red wine tends to have a higher ABV, meaning it will be disproportionately hit by the new tax regime.
“Australian wine would take a bigger hit from this increase in taxation than wine from any other country, with 93% of Australian wines sold in the UK going up in price,” Beale noted when the measures were first mooted in 2021.
Tony Battaglene, then chief executive of industry body Australian Grape and Wine, told the Australian Financial Review: “For many products, our cost base will make it unprofitable to send to the UK.”
Accolade Wines chief executive Robert Foye told The Australian in November: “The reality is that the benefit of removing tariffs on wine under the new free trade agreement of up to 20 pence a bottle of Australian wine could be entirely cancelled if a new alcohol excise duty is imposed.”
Biggest showcase of Australian wine returns to London
The news follows the Australia Trade Tasting returning to London in January, showcasing more than 700 wines from 200 wine producers to hundreds of trade and media in the UK.
The annual event – connecting UK wine trade with UK-based distributors and Australian wineries both in market and seeking distribution – has run for more than 30 years, with a brief hiatus in 2021 due to COVID-19.
Wine Australia General Manager Marketing Paul Turale said: “It’s clear there’s a real appetite from the on-trade and buyers to see more producers in market, pouring their wines and telling their stories about what makes Australian wine unique.”
Wine Australia Regional General Manager for the UK and EMEA Laura Jewell MW said: “It was great to see the enthusiasm for our diverse range of wines at the Australia Trade Tasting. From the conversations I had with guests, it’s clear that Australian wine continues to be a key category for the UK trade, and I’m hopeful that this will translate to new opportunities for our producers and increased sales of Australian wines.”