UK Supermarkets, Canadian Exports, Wine Tax

Super shenanigans

The UK Which? magazine is along the lines of Choice in Australia. It has released its best and worst UK supermarkets ratings. More than 7000 consumers were surveyed last November, and their top five for in-store experience, in order, were:

  • Waitrose
  • Aldi
  • Marks & Spencer
  • Lidl
  • Iceland

At the bottom of the ladder: Tesco and the Co-op.

For online shopping the top five were:

  • Asda
  • Iceland
  • Morrisons
  • Ocado
  • Sainsbury’s

Tesco and Waitrose Deliver came last.

For reasons not stated, Aldi in Australia has closed down its online drinks operation. Meanwhile, in the UK the company is adding about 20 wines to its online offering. Apparently, consumer feedback shows that though consumers in store favour Australian wines, those shopping online want a bigger French selection.

Aldi’s rival in the UK is Lidl. It’s also adding wines to its online portfolio, 57 in total for its spring wine promotion. Wines will come from England, France, Italy, South Africa, New Zealand, Argentina and fortunately three from Australia. Two are cabernet sauvignon, one Margaret River and one from Coonawarra, both retailing at £6.49 ($12.41), the third is a riesling from Clare Valley (£5.99). All are own label and we would wager the suppliers are pleased with the deal.

Strange happenings

Finding out that Canada exported C$1,582,316 ($1,578,831) worth of wine to the UK in 2015 came as a surprise. The fact that most of it was ice wine didn’t. But Canadian table wine is finding some traction in the UK, and it’s not cheap, retailing at about £30 ($57) and almost £100 in restaurants. In 2013 the amount of table wine shipped was C$35,000. Last year it was C$168,000. Good for Canada, but sales have to come from somewhere, and this is the top end of the market. Few pay £30 for wine and when they do it’s normally from France.

Australian wine exports to the UK in the higher price sectors showed an increase in 2015. The $7.50 to $9.99 a litre FOB rose 30 per cent to total $12 million, and the $10 and above segment increased 3.6 per cent to $22 million. Could it have been more if these other countries weren’t nibbling at the pie?

Stranger than Canadian wine in the UK is Rioja producer Marques del Atrio agreeing to import and distribute China’s Changyu Noble Dragon wine from the end of this month. Spain is overflowing with wine, with a lot of it flooding markets at less than 50 cents a litre. Why would anyone bother to import wine into Spain – especially a Chinese wine – no matter the quality?

Having said this, we note Max Allen has written about and reviewed wines from the Japanese producer Grace, now available in Australia (see the full story in the media section). Let’s hope Australian Millennials do not take to Japanese or Chinese wines as they and others embraced New Zealand sauvignon blanc.

According to the OIV (International Organisation of Vine and Wine) world wine production (excluding juice & musts) in 2014 was estimated at 270 million hectolitres (mhl). World wine consumption was estimated to be 240mhl. More is being produced than drunk, despite the 2014 production figure falling 6 per cent on the previous year while consumption remained steady. It appears every wine-producing country is looking to export as a means of off-loading the wine they produce. In 2006 27 per cent of global wine consumption was imported wine. Now it’s 43 per cent. The markets exporters are looking at are the leading markets for Australian wine: the US, UK and China. They all want what Australia, France and a few others have, and they are getting there a bottle, a case, and a pallet of wine at a time.

With too much wine in the world, the result has to be a downward movement on price. It means lots of complaining from growers and producers, and smiles from consumers. One area of profitability that Australian wineries are finding is wine tourism.

Other countries are catching on. Romania has 140 wineries producing bottled wine, with just 30 of them involved in wine tourism. But wineries are increasing at the rate of 5 to 10 a year and more are being encouraged to engage in tourism. Romania is the 13th largest producer in the world and 5th in Europe, and wants to increase tourism, hence sales, hence exports. They too want a bigger slice of the shrinking pie.

Taxing times

The UK budget is set for March 16. There is already fear of increased tax on wine. Last year wine tax contributed £3.8 billion ($7.2 billion) to the exchequer. That’s likely to pass £4 billion this year without any increases.

A breakdown, assuming average supply costs, sourced from Bibendum PLB:

Retail price 75cl bottle £5 £10 £20 £50
Tax accounts for 58% 37% 27% 21%
Logistics/packaging 11% 6% 3% 1%
Retailer margin 22% 29% 34% 34%
Value of wine 9% 29% 36% 44%

The Canadian Government of Ontario has announced its 2016 budget. Wine was targeted. A minimum C$7.95 ($7.93) retail price has been set for a 75cl bottle. This will be introduced in stages over the next three years. The reason given was to make the price of wine consistent with spirits and beer.

The minimum cost of cider, fortified wine and low alcohol wine will also increase over the next three years at yet-to-be-announced rates.

The Liquor Control Board of Ontario will increase the mark-up for wine products by two percentage points from this June. Another two percentage points will be applied in April 2017 and one percentage point in April 2019.

The basic tax on non-Ontario wine bought at winery retail stores is increasing one percentage point in June, and will rise by one percentage point further in April 2017, 2018 and 2019.

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