Consumers may head North to get hands on cheaper wine
Irish drinkers have been late bloomers when it comes to wine, but their relationship with the drink has been intense over the past decade.
However, growth in wine consumption started to tail off this year, with concerns in the drinks industry that the increase in excise on wine may mark the end of the affair.
Distributors and off-licences are puzzled why the beverage has been singled out for a 50 cent excise hike inclusive of Vat, and say that it will cause drinkers to buy more bottles outside the state.
Prior to the increase, there was €2.05 excise on wine. This increase means excise will now be €2.45. The total price of the bottle is then subject to Vat (which brings the total increase to 50 cent).
Those involved in selling wine say that the government gets around half the price of the average bottle sold.
Wine accounts for 22.3 per cent of the alcohol market, beer share accounts for 49.1 per cent, spirits for 19.9 per cent and cider for 8.7 per cent. In 2007, 75 per cent of wine was purchased in off-licences and 25 per cent in pubs and restaurants, according to the Irish Wine Association.
About 100 million of bottles of wine were sold in Ireland last year, compared with 25 million in 1995.
Cathal McHugh, who owns two off-licences in north Dublin and is the spokesman for the National Off-Licence Association, said the increase was inequitable. ¡®¡®We have the highest duty on wine of the 27 EU countries,¡± said McHugh.
¡®¡®There are 15 countries in Europe which charge no duty on wine. In the likes of France, it works out at three cent a bottle. There is already a leakage in business up to the North, which you would imagine will be accelerated by this measure,¡± added McHugh.
Asked why he believed wine had been hit with the excise increase, McHugh said: ¡®¡®They were looking for easy targets. I think they probably felt there would be fewer objections to an increase in wine than there would be to an increase on beer and spirits.¡±
McHugh said that off-licences had already been hit by new legislation which restricts opening hours. Some off-licences have seen a 30 per cent fall-off in sales since the legislation came into effect in July.
The Irish Wine Association points out that wine sales growth has stagnated recently. Consumption was down 1.1 per cent in the first six months of the year, compared with the same period in 2007.PhilipRobinson, who works for distributor Findlater Grants and is chairman of the association, said he believed that the budget increase was ¡®¡®grossly unfair¡¯¡¯.
¡®¡®The increase is a rise of just over 20 per cent on the excise levels and it¡¯s going to affect prices by about 7 per cent,¡± said Robinson.
He pointed out that government excise receipts for wine were down 18 per cent in August, which indicated that wine sales were already under pressure.
He said wine prices in the North, where Vat was at 17.5 per cent, would be even more attractive to consumers in the Republic. ¡®¡®All the increase in Vat will do is drive more people up North, and I think the government is going to lose as much as it gains through the duty increase,¡± said Robinson.
He said the increase was proportionally higher on cheaper bottles as it was a flat increase across all wine, and he believed people would buy wine less frequently as a result.