Context is everything. According to Wine & Spirit Association (WSTA) and Nielsen statistics, UK at-home consumption of wine retailing at over £10 has risen by nearly a third.
This is great news, obviously, but before too many people crack open celebratory bottles of Prosecco, it’s worth considering a subsequent paragraph on the same (Chris Mercer) Observer news piece:
Unless my maths are wrong, this means that these wines now represent 0.7% of the market. Even so, they still add up to around a million 12-bottle cases, which is a reasonably substantial amount of wine.
Update: the WSTA has just told me that by their estimation, off-trade sales at over £10 amount to 1.2% by volume of the UK market (rather higher than my 0.7% but still small) and 3.2% by value. This would add up to around 1.66m 12-bottle cases. Around a seventh of the annual production of Yellowtail – for the sake of context.
If you want to sell a bottle of wine in the UK to retail at over £10, the blue slice of the cake is the bit you are looking to share with all those other producers with similar ambitions.
£10 ($15.78 / €12.66) may sound like quite a lot of money, but for anyone outside the UK – and a fair few within this country, it might be enlightening to know roughly how much of that price actually goes to the producer.
Well, firstly, as the excellent UK Wine Tax Calculator app
reveals, the £10 bottle carries a tax burden of 35.7% (made up of duty at £1.90 and VAT sales tax of 20%). But it obviously also has to include a set of other costs. Shipping will amount to around £0.13 per bottle (this could be as low as £0.08 or less for UK-bottled wine in lightweight bottles, but these don’t sell for £10). The distributor might take 15-25% (again, savings could be made here, but not on relatively slowly-moving £10 wine) and the retailer will pocket between 30% (for a supermarket) to 40% for the independent store most likely to be selling this kind of wine.
Put all these figures together and you find that the £10 bottle on sale in a nice independent UK wine shop probably left a European winery at around £2.40-2.50 (€3.50-$4). A UK supermarket in an unusually generous mood might pay a little more but this would be unusual and the higher price might well be offset by a request for marketing funds.
Given these diverse margins on which supermarkets, independents, importers and agents all work – and the fact that their demands may vary according to the sales volume and sales price of each wine – it is impossible to offer a precise set of formulae, but these two charts should help. They can of course be amended with an excel spreadsheet to accommodate different margins, costs and exchange rates. To the best of my knowledge, this is the first time they have been published online.
Note that the supermarkets and distributors may take a lower margin on lower-priced wine (as above). Also note rising transport costs based on the heavier bottles and cartons used for pricier bottles.
Note that the independent retailers take a higher margin than supermarkets and that distributors may also be more demanding on slow-moving, higher-priced wines. In the UK, non-European wines are subject to a Common Customs Tariff which does not apply to wines from the EU.
If you were to extend the chart downwards to take into account the cost of the bottle, closure, carton, basic production costs and a profit for the producer, it might be fair to say that when a UK consumer doubles her retail expenditure from £5-£10, the value of the liquid in the bottle may actually rise by 8-10 times.
This has, however, to be taken in the context of the basic lack of profitability of much of the cheaper end of the wine industry. As I say, context is essential.
Update: I’ve just discovered that Juel Mahoney (@winewomansong) approached the same issue in Bibendum Blog with even more brutal figures (suggesting that by doubling a retail spend for £5-£10, the wine value rises by 25 times)