bottles

Inflation looms for booze industry

12 November, 2021

Central banks are coming under increasing pressure to hike interest rates after inflation soared across the globe.

The pace of consumer price growth in the US is hovering at a 13-year high as inflationary pressures drove up costs of food and beverages, energy and rent. US inflation is now running at a 30-year high. The situation is similar in the UK, where the consumer price index has shot up 3.4%, and several other developed markets around the world.

Meanwhile, the International Monetary Fund warned that oil importing countries in the Middle East will see inflation reach 17%. The situation is particularly dire in counties such as Lebanon and Afghanistan, which are already facing severe economic crises. Global food prices are expected to increase by more than 27% in 2021.

“While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery,” said Gita Gopinath, the IMF’s economic counsellor and director of research.

Bank of England governor Andrew Bailey said it “will have to act” over rising inflation, although the US Federal Reserve still insists inflation will be transitory, and it has not yet committed to increasing interest rates. 

Consumers are growing increasingly accustomed to price rises across the board, especially in energy and food, and they will now have to start paying more for their favourite alcoholic beverages too.

ROCKETING PRICES

Il Corriere Vinicolo, which is run by Italian wine trade body Unione Italiana Vini, has published a report warning that rocketing prices for paper, metal, wood, glass and other commodities will push up the price of Prosecco, Primitivo and Chianti. It said wood prices are up 53%, metals have increased by 44%, packaging papers are up 60% and glass bottle prices have increased by 20%. The cost of transport is also a lot higher due to increased oil prices and the higher salaries demanded by HGV drivers amid a dearth of workers.

“We were forced, for the first time in 20 years, to raise twice in the same year the prices of our products,” said Piero Garbellotto, chief executive at barrel supplier Garbellotto.

Michele Moglia, chief executive of wine capsule producer Enoplastic, added: “If the prices of materials increase it is because there is little availability, and this is the biggest problem. The whole supply chain must realise that at this moment the risk is not so much of paying more for the material, but of not having it at all.”

In the UK, duty on alcohol is typically raised in line with increases in the Retail Price Index (RPI). The RPI is currently at 4.8%, meaning duty is also set to rise by that amount, creating a double whammy for British consumers. It would add an extra £0.46 in tax to the price of a bottle of spirits.

The UK Wine & Spirit Trade Association is calling on the government to freeze alcohol duty. It compared the situation to Spain, where shoppers do not pay duty on wine, sparkling wine, Champagne, sherry or cider.

Miles Beale, chief executive of the WSTA, said: “Comparing the wine and spirit tax regime in the UK to that in Spain puts the UK’s excessively high rate of excise duty firmly in the spotlight.

“UK consumers are already bracing themselves for shortages and price hikes this Christmas. The Chancellor can ease the financial pain for everyone who is hoping to make up for all the missed family gatherings and last year’s cancelled Christmas by not raising alcohol duty.

“Freezing wine and spirit duty at the Budget will also give British businesses a much-needed break, which will be vital for our sector’s road to recovery.”





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