New Wine Duty System – An Explainer

With the wine duty easement coming to an end on the 1st of February 2025, we delve deeper into the various and far-reaching effects this will have on the trade – and how we have been working for 18 months to prepare for this day.

In the most recent budget of October 2024, Chancellor Rachel Reeves confirmed that from 1st February 2025 there will be an increase in alcohol duty in line with RPI, along with the end of the wine duty easement. In basic terms, this means that wines with a higher ABV will be subject to more duty, with a likely increase in cost. 

But the matter is much more complex, posing various knock-on effects and challenges. Our wine buying director, Jamie Avenell, sheds light on how we are adapting to the evolving landscape and supporting our trade customers. 

The challenge of vintage variation

“Different vintages of the same wine can have different levels of ABV and under the new system there will therefore be different levels of duty,” Jamie explains. “Our role is to work with our producers and our customers to facilitate this new way of working. We have invested in new systems and processes to ensure that any change in ABV can be managed effectively, with a view of implementing a seamless process for customers.”

“We have spent the last 18 months planning for this change across all impacted geographies and business units. We have invested in systems and solutions that will aid customers when ABV on any wine changes, to mitigate against the challenges the duty system change brings,” he says.

A knock-on effect

Jamie continues: “The changes add considerable complexity throughout the supply chain, with the need to ensure all wines are landed with the correct ABVs and are communicated to customers ahead of time.”

“There is also a risk that having wines with lower ABVs and a subsequent lower duty rate are prioritised over wine quality and the trade up opportunity, therefore potentially impacting the consumer perception of the overall wine category,” he adds.

A quality focus

The more you pay, the better wine you get. This might sound obvious enough, but considering the cost of packaging, logistics, VAT, total margins and excise duty, you get considerably more bang for your buck with premium products.

Our Vinonomics graph highlights that the more you spend, the better wine you get for your money. In two bottles of wine with a ABV above 14.5% the duty will cost £3.21. However, in a bottle that costs £15.65, £4.16 pays for the actual wine itself, compared to a bottle with the same ABV that costs £8.61, in which only £1.56 pays for the actual wine. 

Not only do you get better quality for your money when you spend more, but this value rises at a much faster rate with bottle price.

Jamie explains: “We are listening to our customers, and the wine consumer who is increasingly drinking less but drinking better. This wine drinker is willing to spend more on a really good glass of wine and is not willing to compromise on quality. We therefore need to balance competitive pricing with a quality portfolio.” 

 

Reduced ABVs

A natural result of this change will be a rise in lower ABV wines. Jamie says, “We are working closely with key producers to understand how a wine with a reduced ABV can be produced without impacting on quality. There isn’t a one size fits all solution so we will adapt our ABV strategy to best fit the needs of our customers and their target wine drinkers.” 

“Where the product is at a more price sensitive price point – like house wine – it is more likely that customers will look to reduce the ABV to maintain competitive pricing.” He adds: “Bibendum’s strength of partnership with key producers means that we can be agile in our approach to innovation, ensuring that we create wine solutions that meet the needs of our customers. We will monitor the changing landscape of wine over the coming months and ensure that our portfolio evolves as required.”

Supporting our customers

“Given the increased complexity, we began communicating the potential impact of these changes to our customers several months ago,” Jamie says. “Our sales teams are working closely with customers to ensure they are aware of the changes and what it means for their wine list.”

“As ever, we will collaborate to curate bespoke wine lists that optimise the wine opportunity for the target wine drinker, while also balancing the best value and profit opportunities. This is supported by our experienced in-house design team who optimise wine lists with a view to driving premiumisation,” he adds.

We will continue to keep our customer and producer partners up to date throughout the coming months. For more information or advice, customers are recommended to contact their account manager to join one of our upcoming briefing sessions.