How do you reflect on 2024 going into next year - what have been the big moments for you as a business over the last 12 months?
It’s been a tough year, commercially and emotionally. We seemed to be waiting for much of the year for a general election and then a budget that would make things clearer for our business going into 2025. After all the time spent working out the impact of the government’s full alcohol tax policy on SMEs and wine importers, and sharing that with Tory and Labour ministers, it still came as a huge shock that we got nothing but pain out of the Budget.
We are not alone of course but SME Wine businesses seem to have been hit harder than any type of business.
Where were you in terms of achieving your commercial goals and targets?
Hal Wilson, speaking, has long used his position to stand up for the needs of independent wine merchants
We hit our gross margin targets and managed to contain costs. Trading was difficult, resulting in revenues staying the same as 2023.
What were the key reasons for those figures?
Nervousness about spending money among nearly all customers. Online and offline basket size fell though numbers of orders increased.
What are your thoughts going into 2025 and what you see as the big opportunities you can build on from this year?
We work in a number of channels and we are planning more targeted campaigns to offer compelling and relevant wines based on our own imports of up and coming, sustainable wineries.
There are a lot of concerns over the big changes in duty rates happening in February - how do you reflect on those changes and what impact they will have you and the business?
There are so many problems with the new policy that we are having expend lots of energy trying to communicate them to our suppliers, staff, customers and MPs.
Reflections: The government isn’t going to listen to the wine trade while the OBR (Office for Budget Responsibility) predicts that duty revenues will rise over the term of the parliament, an idea that at such odds with all recent evidence (10% fall in duty revenue in the last 12 months, falling consumption, basic application of the concept of elasticity of demand).
The OBR won’t listen to the wine trade either as its only client is the government. My feeling is that the wine trade needs to work together to build the evidence of the unworkability and negative impact on the policy on businesses small and large.
There was no good news for the drinks industry when it came to duty in this autumn's budget
I had been asked to produce an impact case study by the WSTA which was presented to ministers. The real impact of the new policy needs to be itemised, costed and shared to be as effective as possible.
Producers aren’t hugely interested in updating the ABV of every single wine in every vintage for their UK agents and customers. It’s a pain for everyone and producers are more interested in quality and sustainability than recording and sharing ABVs every time a bottling happens. Consequently the data supplied by producers and agents on invoices and in price lists is strewn with errors and omissions which that makes accurate costing of wines an almost hopeless task.
Wine buyers are still unsure of the detail of the policy and may well suspect the trade of profiteering when they see prices rise as a result of huge duty rises.
In February 2025 a 14.5% ABV Côtes du Rhône will carry £1.17 more duty per bottle (inc VAT) than it did in August 2023, a rise of 44%, while a Prosecco at 11% ABV will carry 65p less than it did before. Communicating our pricing policy has become very complicated.
What specific steps are you putting in place to handle the extra administration and complexity of the multiple duty rates?
We are asking everyone involved in the supply chain to carry out the necessary checks to minimise errors at the time duty becomes payable. Incredibly, HMRC does not have a sensible process for reclaiming duty that has been charged incorrectly. It has a notice N212 which states ‘There is no specific form to make your claim on, but you must make it in writing..’ WTF!
Will you be actively looking to source lower abv wines and if so what specific ABVs are you looking for?
Cambridge Wine Merchants sees no benefit in chasing after low alcohol wines just to take advantage of the new duty changes
We imagine demand will fall for higher ABV wines so we will reduce the number of 14% and 14.5% ABV wines we list. That doesn’t mean we will replace them with lower ABV wines but will look to thin the range with all the risk that carries for reputation and impact on our current business model.
What style of wine at lower ABVs would you consider listing in terms of how they are made - spinning come vs other dealcoholising methods?
The technology is still expensive and means the cost of reducing alcohol replaces the cost of the duty being saved. That makes the exercise of very limited appeal commercially. Qualitatively taking alcohol out of wine has a large and negative impact of the tasting sensation.
I fear that young adults will be exposed to inferior quality low alcohol wines and that will threaten their future interest in ‘real’ wine.
Do you also see opportunities and ways in which you can help and support customers with these changes - If so how?
We can commit to educating wine drinker about the regions and grape varieties that produce high quality wines at lower alcohol.
What other major plans do you have for next year in terms of wines, ranges, events, tastings and activity in the trade?
We have a huge job to inform and educate our customers about the changes to duty and about our own imports. We are going to host a lot more tutored tastings with groups of customers, working with generic bodies where possible.
* You can find out more about Cambridge Wine Merchants at its website here.
