The head of beer, wine and spirits at Tesco is calling for a shake-up of wine duty to boost growth of lower-alcohol wine, The Grocer can exclusively reveal.
Speaking at the launch of a Finest Vintage 2000 wine range last week, Dan Jago said that instead of having a flat rate of duty for all non-sparkling wines from 5.5% abv to 15% abv, tax should be based on each 1% increase in strength.
Wines with an abv lower than around 12.5% should pay less duty than the current rate to encourage producers to bring more lower-abv wine to market and, in turn, give consumers a wider variety of lower-alcohol alternatives, he said.
At present, all non-sparkling wine between 5.5% abv and 15% abv has duty levied at a flat £225/hl, whereas beer and spirit duty both increase for every 1% of strength per hl.
"Beer duty is calculated on a gradient system, whereas wine falls into an unwieldy block," said Jago. "If you applied a similar system as beer to wine, someone producing 9%-10% abv would have an advantage over a higher-alcohol wine and could sell less expensively, providing an incentive to buy lower alcohol products, fulfilling corporate responsibility."
By setting the current rate at about 12.5% abv, the highest-strength wine would not be "significantly disadvantaged", said Jago. Producers would be able to fund the resources and technology to produce lower-abv wine, he added.
Duty rate bands are set by the EU Structures Directive, currently under review, but any change would require agreement by all member states so was unlikely to happen in the short term, said the WSTA.
Supplier Australian Vintage, which is gearing its portfolio towards lower- abv wines, backed Jago's call. "Perhaps it is time to look at how the rate of duty is administered," said Paul Schaafsma, general manager, Australian Vintage UK and Europe. "At McGuigan a key part of our strategy is delivering wines that are sophisticated and naturally lower in alcohol. To that end, any sliding duty rate can only benefit our business as our portfolio will be largely geared toward the proposed lower rate."
However, Jo Wehring, UK market manager at Wines of South Africa, argued that such a system would be bad for producers in warmer climates and confuse consumers. "If somebody is deliberately making lower-abv wine then a duty reduction is arguable, but to penalise countries with warmer climates wouldn't be helpful," she said.
Tesco's 11-strong Finest Vintage 2000 wine range rolls out on 14 July and comprises decade-old wines to celebrate Finest wine's 10th anniversary.
Speaking at the launch of a Finest Vintage 2000 wine range last week, Dan Jago said that instead of having a flat rate of duty for all non-sparkling wines from 5.5% abv to 15% abv, tax should be based on each 1% increase in strength.
Wines with an abv lower than around 12.5% should pay less duty than the current rate to encourage producers to bring more lower-abv wine to market and, in turn, give consumers a wider variety of lower-alcohol alternatives, he said.
At present, all non-sparkling wine between 5.5% abv and 15% abv has duty levied at a flat £225/hl, whereas beer and spirit duty both increase for every 1% of strength per hl.
"Beer duty is calculated on a gradient system, whereas wine falls into an unwieldy block," said Jago. "If you applied a similar system as beer to wine, someone producing 9%-10% abv would have an advantage over a higher-alcohol wine and could sell less expensively, providing an incentive to buy lower alcohol products, fulfilling corporate responsibility."
By setting the current rate at about 12.5% abv, the highest-strength wine would not be "significantly disadvantaged", said Jago. Producers would be able to fund the resources and technology to produce lower-abv wine, he added.
Duty rate bands are set by the EU Structures Directive, currently under review, but any change would require agreement by all member states so was unlikely to happen in the short term, said the WSTA.
Supplier Australian Vintage, which is gearing its portfolio towards lower- abv wines, backed Jago's call. "Perhaps it is time to look at how the rate of duty is administered," said Paul Schaafsma, general manager, Australian Vintage UK and Europe. "At McGuigan a key part of our strategy is delivering wines that are sophisticated and naturally lower in alcohol. To that end, any sliding duty rate can only benefit our business as our portfolio will be largely geared toward the proposed lower rate."
However, Jo Wehring, UK market manager at Wines of South Africa, argued that such a system would be bad for producers in warmer climates and confuse consumers. "If somebody is deliberately making lower-abv wine then a duty reduction is arguable, but to penalise countries with warmer climates wouldn't be helpful," she said.
Tesco's 11-strong Finest Vintage 2000 wine range rolls out on 14 July and comprises decade-old wines to celebrate Finest wine's 10th anniversary.
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