Tax rises drive wine makers out of UK

[Nepenthes]

source: http://www.telegraph.co.uk/finance/n...out-of-UK.html

Mr Christensen said that when consumers spend £4 on a bottle of wine, £2 goes directly to the Government on duty. A further £1 goes to the retailer, meaning that the wine’s producer gets just £1 – or often less – per bottle. It gets very difficult. As a global business we have the opportunity to invest anywhere in the world,

Eeek. And you have to wonder what that means for the quality of the wine as well...

Constellation sells 25m cases of wine each year in the UK and Europe, and employs hundreds of people in the UK through its 50pc ownership of wine wholesaler Matthew Clarkeand its bottling plant in Bristol.

Quick back-of-envelope calculation here tells me that they pay £600m(25m*12*£2) in alc taxes, take £150m in retail themselves, and £300m to make the stuff. Say they have a profit margin of 5% (let's be generous), that leaves £22.5m of which the taxman grabs another 40% (after business, corp. taxes etc), so, for all this effort, the company clears at most £13.5m, of which the investors then have to pay 40% tax... which leaves them with £8.1m, whilst HMRC cleared £600m+ some other substantial sum after you tot up all the dribbles of taxes here there and everywhere else. Even if my numbers are wildly off and they indeed make more than 2% of what the tax man takes... I wonder why anyone bothers getting out of bed sometimes.

Why don't they just sell the company to the taxman and tell HMRC to do their own donkey work and take all the risk, since they are the biggest beneficiaries anyway?

Nepenthes

Ps.: Their annual reports: http://cbrands.com/CBI/constellation...AnnualReports/ -- shares lost $1.40 last year. Maybe they should label the remaining batches with wine making recipes and inform punters of the true size of the tax rake and shut up shop...

[ukric]

hmmm

[lockwood1956]

The rate of duty for wines below 15% alcohol by volume is £1.32 per bottle. (£1.76 per litre)

Rates of duty don't affect their business, they just pass it on to you and I as consumers, as every company has to charge it.

Their profit is made on the non duty portion of it.

They have huge tax breaks on machinery, plant, vehicles, and any number of things, thses people are not poor.

I'm not sure what you are trying to illustrate here, if it is the plight of the wine industry then fair enough, we can have a debate about that, but I don't see many poor winery owners.....the duty is the same on a £25 bottle of wine as it is on a £4 bottle, their real problem is that they cant get more than £4 a bottle for some of the garbage they make.


but we don't do politics on this site.

[Nepenthes]

The rate of duty for wines below 15% alcohol by volume is £1.32 per bottle. (£1.76 per litre)

From the article: "Around £1.60 goes on excise duty, 65p on VAT and 11p on the Common Customs Tariff."

Rates of duty don't affect their business, they just pass it on to you and I as consumers, as every company has to charge it.

It means you sell less, because people don't have enough money to buy things and the quality you can offer has to be lower so you stay within the acceptable price range that people can afford. A bottle of wine that is worth £4 in true value is going to be much nicer wine than a bottle that is £1, and in the end, the result is that nice wine is the privilege of the few rich, instead of being something we all can afford to enjoy.

Their profit is made on the non duty portion of it.

Doesn't matter how you divide the cake, what matters is what is let over and who gets the biggest share. The punter does not care why your stuff costs so much, just that they cannot afford it. Telling them that you're that expensive because you have to pay crazy amounts of tax isn't going to make them think your stuff is good value, or that cheap stuff is better quality.

They have huge tax breaks on machinery, plant, vehicles, and any number of things, thses people are not poor.

Beg to differ here, kit is not profit.

I'm not sure what you are trying to illustrate here, if it is the plight of the wine industry then fair enough, we can have a debate about that, but I don't see many poor winery owners.....

Minus $1.40 per share? That is a terrible result, especially when the tax take is many times larger than the profit margin.

but we don't do politics on this site.

I have no absolutely no inclination of discussing politics(I don't even vote, waste of time, they all are as bad as each other) or to kick of a flamefest ), but I genuinely thought this was on topic because wine is part of our culture in general, and if the big guys are in trouble and consider giving up, what state are the small guys in???

Think about it -- normally running a company like the one we're talking about it is a license to print money even in a recession and a lot easier and less risk than a small pub, or an off-license, or even a small craft brewer.

On the positive side, it may make more people take up home brewing

Nepenthes

[lockwood1956]

OK...point by point..

Wine Duty:
the duty on a bottle of wine is £1.32 not £1.65 (FACT...newspapers arent so good at facts )) and common customs tax is only on foreign imports, VAT is claimed back also on kit, and fuel and materials

They sell less:
yes fair point, but it IS a level playing field for all combatants, but I totally take your point on their share being less cuts their profitability, but then they were the industry (new world winemakers) that decided to go for quick return small profit ......but i concede they sell less

kit is not profit:
well no....however kit is written off over a four year period, (with up to 60% off in the first year)so that the full value of said kit, and depreciation of vehicles etc is deducted from profit, so less tax is paid (FACT....I train self employed people how to run their businesses)

minus $1.40 per share
We are in a global recession, they are a luxury item, and are managing to stay in business, thats a real plus, most service industries are crashing and burning, they arent doing as well as before, but then they should have contingency plans when they were making vast profits, as its an up and down business they are in. They simply want to split, when it isn't as lucrative. (their prerogative of course)

Politics:
excellent...i think they are all tarred with the same brush too....so best left alone

Flamefest:
naaaah far from it, we dont do that here.

if the big guys are struggling how does it affect the little guys?
they are doing better because they are normally local, and higher quality than the crap turned out under brands such as Carlo Rossi ($4.99 a gallon, and you get a nice DJ afterwards) English wines are selling at a furious rate, and commanding good prices, my local Vineyard is getting $8 a bottle comfortably, Three choirs vineyard is commanding over £20 a bottle for some of its stuff, so all is well with the English wine trade (or should i say the trade in English wine)


wow i need a glass of wine now


Will it chase more people to homebrew?.....I sincerely hope so

[lockwood1956]

Sorry....forgot to add

it was indeed on topic, but it "could" have been a political rant at first read

alls good

[ukric]

OK...point by point..

Will it chase more people to homebrew?.....I sincerely hope so

I firmly believe there is no greater motivator than lack of funds to make people do things for themselves.

I'd also say that it already HAS, case in point take a small 'local' event like Grapefest and check how the numbers increase year on year.... you'll need a bigger house soon :-p

[David]

The rate of duty for wines below 15% alcohol by volume is £1.32 per bottle. (£1.76 per litre).

I read that article, and I'm sure they said the tax was £2/bottle and either the producer or the sales outlet got £1, which got me wonderining about those 3 bottles for £10 offers..........................

But I can't find my copy of 'The Telegraph', as I think it went to my alloment to use as spring mulch around my blackcurrent bushes.

I think that rather nicely sums things up from my perspective.

[kampervan]

david that made me laugh as it really made the point i was thinking.

[lockwood1956]

But I can't find my copy of 'The Telegraph', as I think it went to my alloment to use as spring mulch around my blackcurrent bushes.

Just too funny