Minimum Unit Pricing (MUP) on retail products that contain alcohol has been signed into our law in Ireland. It is now here to stay. Unlike VAT and Excise Duty this is not a tax on alcohol. It is simply a minimum price that must be charged by the retailer based on a products’ % alcohol by volume.
In the case of wine all standard bottles on sale are 75cl and their alcohol by volume varies between 8.5% and 14.5%. The latter therefore, defines any difference the MUP will have on wine. (The best, (and only?) calculator to how changes in alcohol levels affect MUP on wine can be seen at https://www.irishwinereviews.ie/minimum-unit-pricing-guide. It’s very good.)
Just like with the two taxes above we are none the wiser when we look at our shelf prices as to what we are actually paying for? Is it in any way transparent that the excise duty we are paying on wine is one of the highest rates of tax on wine anywhere in the EU and in the case of VAT is it obvious that we are paying a double taxation as this is a tax levied on both the cost price AND the excise tax?! Afraid not. The price on the shelf is more likely to shout out to us how much we are saving than any indication how much (above the odds) we are actually paying!
Then along snuck MUP.
MUP is very simple. It is 0.10 cents per gram of alcohol. (The Minister in question has the right to change this at any time which, most likely, means it will never go down below 10 cents …..).
On the 4th of January this year all alcohol products ended up with a floor price that retailers cannot sell below. In the case of wine the MUP price for a 12.5% 75cl bottle is now €7.40. Does this mean much?Not a lot! Our brand leaders, and biggest selling wine products, sell above this already. Retailers get to keep the price increase ex VAT – oh yes, an increase in the shelf price means an increase in the VAT regardless of whether any Value has been Added at all.
We have been told that MUP will save lives and improve the health of the nation.
Yes, in the case of spirits.
Possibly in the case of beers and ciders.
NO in the case of wine.
All that MUP has done for wine is to wipe out price competition to our brand leaders. Leading into Christmas 2021 they showed they were well capable of competing by tossing out six bottle cases as low as €35.00. How did they do this? Same as they have always done. They pay the bigger retailers for the privilege. Price support is a fun spectator sport. On a cyclical basis the brand price goes from a ridiculous high to an improbable low. Nothing sells at the ridiculous high but it allows retailers to give us a completely artificial discount which in turn is often paid for by the brand owner.
(Now to complicate things! SuperValu Wine Buyer, Kevin O’Callaghan, recently predicted a rise in excise on wine in the forthcoming budget. A RISE! This is hilarious. Wine in Ireland is, everyone agrees, grossly overtaxed already. But now that MUP is in from our Health Minister it would make sense for the other Minister, Finance this time, to push an excise increase through. After all if MUP is a health benefit so is an increase in excise!! NOFFLA (National Off Licence Association) has been campaigning for years and years for excise to be reduced. No joy. They have also supported MUP. Careful what you wish for. After all a reduction in excise was never on the cards as consumption was rising. The years’ long campaign may have just resulted in more excise and not less.)
Back to what we can Hope for. How about investing into wine education by the big brands. This is something that everyone can benefit by. It would result in trading up and away from the clutches of price offers. It can also be tied into better health messaging. It would also be ridiculously inexpensive compared to price support in the supermarkets. Quality wine education by trained professionals for everyone. Not just the trade. This would be good. Very good.
What can we Expect? There will, over the coming year, be quite a few brands introducing new and more expensive products as they construct and develop a brand architecture away from price points and MUP and towards a ladder of increasing sophistication. This would be good. Very good.
What will happen? Most likely very little in terms of education (junkets for the press and trade tastings are NOT education. They are marketing excercises, closely allied to sales and can be thought of as ‘influencing’. Too harsh? Maybe; but track wine recomendations with these and the positive correlation cannot be ignored. Our country, and trade, is too small for our wine trade press to be entirely objective). A host of new products will arrive and we will happily pay more for wine this year than we have over the past number of years.
Just like the separation of alcohol within our stores and the tightening of our trading hours for off trade sales MUP will have little or no effect on the wine trade in Ireland.
Seems like it’s a good time to enter into the trade? Well, maybe not …. MUP will impact on the excise raised by government as beer and spirit sales are reduced. This will most likely in turn attract an excise rise on wine. After all, wine consumption is rising. It will adversely affect our independent trade near the border. UK excise rates are lower in the North of Ireland and there is no MUP. It will also impact in a very real way with any independent whose livelihood relies on a mixed sale of wines, beers and spirits.
Oh dear. MUP on wine would seem to favour big brands, supermarket direct imports and multiple grocers. This is not what anyone wants or needs. It’s not what was intended but, careful what you wish for. Legislating towards health objectives by price modelling can only work if its intended to stamp that trade out. While that is not the intention of MUP the unintended consequences of its introduction will be far reaching and profound.