Post-duty point dilution ban

Retailers will see prices of their popular alcohol lines increase after the removal of a tax loophole by the government on 1 April. In 2018’s Budget, the government said it would stop alcohol producers using the process of post-duty point dilution (PDPD). 

Under PDPD, producers only pay tax on the alcoholic portion of certain lines. Once PDPD is removed, producers will be legally obliged to pay tax on the entire product. 

At a trade conference last month, a spokesperson from Accolade Wines confirmed that some of its products will have their prices increased after the tax removal. 

In documents seen by betterRetailing, the supplier said it “has had to make changes to the portfolio of products. Brands that are affected by this duty change are Echo Falls, QC and Cherry B.”

The Wine and Spirit Trade Association (WSTA) said British wine, fruit fusions, flavoured ciders, RTDs and cream-based alcoholic products are at risk. 

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Matt Norbury, licensed trading manager at wholesaler Parfetts, added that brands affected include Silver Bay, Straw Hat, Old Westminster Cream, WKD and VK

He told betterRetailing: “Suppliers have presented their plans to us. Any changes to prices will be passed onto our retailers, who will in turn have to amend their retail shelf prices.”

betterRetailing understands suppliers are yet to disclose information about the scale of increases in meetings with wholesalers, as they want to see how this week’s Budget impacts duty. 

Scottish Wholesale Association chief executive Colin Smith added that one of the trade body’s members had been made aware of the changes and the increased costs to them. “This is yet another cost that will impact wholesale and retail. The consumer will pay higher prices,” he said.

“While this cost increase was known, our members are questioning how, and where, they are supposed to mitigate these further increases.”

The PDPD ban only impacts products made after 1 April, and not lines produced before. 

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DeeBee Wholesale trading director Andy Morrison revealed that some suppliers are stockpiling products to minimise any impact on wholesalers and retailers. 

“We’re telling retailers how the changes will impact them,” he said. “Accolade Wines has kept us updated. It’s a big unknown, and range changes are likely. Some categories might be dropped because of customers trading up.” 

A WSTA spokesperson said the removal of PDPD will have a “substantial negative effect” on the businesses of its members.

The Federation of Wholesale Distributors added it has been working on the issue and has been in discussions with HMRC.

Nisa said it was also aware of the removal of PDPD and “continues to work with suppliers to maintain a compelling proposition for our partners”. 

Booker said it was working with suppliers to minimise any impact on retailers.

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