Tough UK tax hurting wine sales: Foster's

TWO of the world's biggest wine producers, Constellation Brands and Foster's, have blamed Britain's crippling tax system for forcing them to look to continental Europe for expansion.

"UK has been a tough market for some time," Foster's spokesman Troy Hey said yesterday.

"We are not exiting (the) UK market but it is becoming increasingly less attractive for the group to generate sufficient profit from our wine business. We are shifting our focus for growth out of the UK to concentrate on continental Europe where we see more expansion opportunities in Sweden, Finland, Denmark and Norway since we started direct distribution to these Nordic countries."

Foster's cut 15 staff -- 10 per cent of its British workforce -- last year.

The company exports about 10 million cases of wine to Europe, two-thirds of which are for Britain's market.

Constellation Wines Australia also confirmed that its performance in Britain had been under pressure for the past couple of years.

Tax and excise had eroded its profit margin, and with increased competition from Chile and Argentina, British consumers were "spoilt for choice", spokeswoman Sheralee Davies said.

"The strong Australian dollar has also eaten into our profit margin. While the UK has been our traditional market for some time, we are finding it challenging to grow our business there and are looking to The Netherlands and Sweden for expansion opportunities," she said.

Troy Christensen, president of the European and Australian arms of Constellation, told London's The Telegraph newspaper that the US-owned company would never had invested in Britain had it known how big the tax burden was.

He said that when consumers spend pound stg. 4 ($6.54) on a bottle of wine, pound stg. 2 went directly to the government, pound stg. 1 to the retailer and less than pound stg. 1 to the wine producer.

"We are on our knees. We are not asking for a bailout, just a break," he said.

Constellation sells about 25 million cases of wine each year in Britain and continental Europe.

In the same report, Foster's managing director responsible for Europe, Middle East and Africa, Peter Jackson, said: "The UK is one of the highest tax regimes in Europe. Only Norway and Iceland are higher. We see continued increases in excise year after year.

"In Ireland last year the government reduced tax. Why aren't they doing that here?"