The importance of self-regulation

In a recent Harpers (Sept 6^th)  Miles Beale, the CEO of the WSTA, set out “a series of fresh challenges to the drinks industry following the success of its campaign to prevent the introduction of minimum unit pricing on alcohol”. He urged the industry not to “rest on its laurels” and to be more “innovative and responsive” to the challenges we face. The industry must prepare itself, he added, for a ban on below-cost selling, at the rate of duty plus VAT, which is likely to be introduced by the government within the next year.

The nuances of the wine sector

Now I have no idea how Miles views the UK wine trade in terms of its level of “innovation and response” compared with the other element of his constituency, the spirits producers, but if I was in his shoes I would have two areas of potential concern.

Firstly, the very fragmentation of the wine category means that it is far more difficult than with spirits (or indeed beer and cider) to get the big guys on board and then feel the job is well on the way to being completed. This generally means in my experience that the wine industry can tend to lag behind the other sectors in terms of compliance . In addition, particularly at a time when many wine companies are under real profit pressure, I imagine that being proactive in areas such as “Community Alcohol Partnerships” is fairly low down the list of priorities, and understandably so. Many UK wine companies are not even members of the WSTA not necessarily because they are not supportive of its aims but because it represents an additional cost. Few indeed have the resources, unlike the leading spirit companies, to get really involved in industry wide initiatives.

The second potential issue is that I  wouldn’t be surprised if many in the wine business, particularly outside the major companies, still feel that wine is not really at the core of the problem. Indeed some may believe that wine could almost be described as “healthy alcohol”. The fact that wine is usually drunk with food, and that every so often there is a story in which wine drinking in moderation appears to be good for this or that condition, can add fuel to this particular fire.

This is, in my view, not the reality. Some 10 years ago a few of us founded the Wine Trade Action Group, primarily because we were not happy with how the wine category was being represented to government. We decided to undertake a major piece of research to discover whether or not wine played any role in the binge drinking culture among the 18-25s. If it didn’t, then this would strengthen the argument of some that we should form our own association, free from the “bad” influence of the spirits boys and their alcopops. We agreed to publish this research whatever the result, and the result was very clear: wine played a clear role in binge drinking. The government’s, and indeed the WSTA’s view, that “alcohol is alcohol is alcohol” was proved to be correct.

It is unlikely that  the drinking habits of the young have changed since that time, but to anyone who tends to that view I would say this.

Firstly, at WTAG we simply looked at binge drinking among the 18-25s. I somehow doubt that anyone would question whether wine plays a role in excessive drinking  within older age groups. This may be a less politically sensitive issue, but I would be surprised if the problems arising from it represented any less of a burden on the NHS or society as a whole.

Secondly, there is a move (encouraged by people like myself) for the wine category to grasp the opportunity provided by technological advance in both product and packaging development to build WBBs (wine-based beverage brands), many of which are likely to be aimed at the 18-25 sector. Whenever I exhort people to consider this opportunity I stress the need to ensure brands have Portman Group approval, but there is no question that this move is designed to ensure that the proportion of wine-based alcopops significantly increases.

I therefore believe that wine should stand shoulder to shoulder with spirits to convince the government, along with the beer and cider producers, that the UK alcohol industry can regulate itself and that further legislation, which would restrict the way we sell, promote, package and price wine, will not be necessary.

The need to avoid complacency and be credible

This however will not be easy. The anti-alcohol lobby may have lost the battle over minimum pricing and multibuys, but it will seek to expose every chink in our armour. One such chink, in my view, is the idea implicit in the WSTA’s below-cost selling proposal that the cost of alcohol consists simply of the excise duty and the VAT. Maybe I’m missing something here but I find this bizarre. Has any retailer ever sold wine at below the cost of duty and VAT, other than distressed stock? I very much doubt it.

How can any calculation of cost not take account of the product itself? Given the lack of margin on wine, one could be forgiven for thinking that many of us somehow believe it costs us nothing, but that is an irony too far. Surely one could come up with a nominal amount of, say, £0.25 per bottle?

The danger of not doing so, as Robert Joseph argued so well earlier in the summer (thejosephreport.blogspot.co.uk), is that this calculation to avoid selling below cost is just not credible and will likely be ridiculed when it is launched next year. In that event, we may find we’ve won one battle but are now once again fighting on the defensive. Given all the good work going on at the WSTA and within the drinks industry  more generally to promote responsible drinking then this would be a real shame.