Isla Negra to have lower ABV to avoid higher alcohol duty

Wine brand Isla Negra will soon have a lower ABV in a bid to remain affordable as alcohol duty rises in the UK, stated a recent report.

Commenting on a planned duty increase for wine from Aug 1 – which will see wine taxed by around 44p more per bottle –  Simon Doyle, who is managing director at the UK office for Concha y Toro – the owner of Isla Negra said that the maker was looking at ways to try and reduce such a rise by making changes to one of its key products.

Pointing out that at least a 9 per cent rise in duty will take it up from £2.23 to £2.67 per bottle, he said that VAT would then be placed on top of that, as well as a retailer margin of 18-20 per cent, meaning that an entry-level wine could see its on-shelf price rise by at least 65p.

“When someone only has £5 to spend on a bottle, you have got to really work to see how you can mitigate these costs,” Doyle told The Drink Business, adding that the only way to do that is to reduce your duty exposure.

He claimed that the only way for wine producers to lower their duty exposure is to drop the abv on wines to avoid being taxed at the 12.5 per cent abv rate.

“We can afford to reduce the abv to offset some of the excise duty to get to 11 per cent or 10.5 per cent from around 12 per cent,” he said, speaking about Isla Negra.

The new alcohol duty system that will kick off on Aug 1 will see a system change in taxation, with alcoholic products being broadly taxed based on their alcoholic strength alone. The price of a bottle of wine with an ABV of more than 12.5 per cent will see a 44p increase, while a bottle of vodka and port could increase by 76p and £1.30 respectively, according to the Wine & Spirits Association (WSTA).

The Office for Budget Responsibility is estimating that the new alcohol tax will raise £13.1 billion in the 2023-2024 financial year. Rises in the price of most drinks is expected to further fuel inflation. The Scottish Whisky Association has also said that inflationary duty increase would deal a “historic blow” to the industry.