Cider sector clarifies minimum price issue9th June, 2014 by Gabriel Savage
The National Association of Cider Makers has warned the trade to be alert to differences in how various types of cider are affected by the UK government’s new ban on selling alcoholic drinks below cost.
As laid out in the government’s official guidance, since 28 May 2014 it has been illegal to sell alcoholic beverages below the combined cost of duty and VAT. The move forms part of the Mandatory Code of Practice, which applies to all licensed premises in England and Wales.
Explaining how this applies to the cider category, NACM chairman Paul Bartlett said: “Whilst most cider, including pear cider, falls under the standard cider duty regime, a very small proportion of products are identified as ‘sparkling cider’.”
Sparkling cider, which is liable for a higher duty rate, is classified by the government as any product with either three bars of pressure or packaged in a “mushroom-shaped” stopper that is held in place by a fastening.
“In addition,” continued Bartlett, “‘flavoured ciders’ where fruit juices or flavours are added are regarded as ‘made wine’ for duty purposes and it is the duty rate relative to that category that applies for the calculation of the ‘permitted price’.”
With duty rates varying in accordance with the type of alcohol and often the abv of a particular product, the minimum price of an alcoholic drink is now determined by which of three main categories it falls into.
For both the beer category and a second category which incorporates spirits, spirit-based RTDs, wine and made wine above 22% abv, the total duty is calculated by multiplying the drink’s volume in litres by abv strength and duty rate. However, for the third category, which includes wine, made wine and cider, where the abv does not exceed 22%, the duty rate is based solely on volume in litres multiplied by the duty rate, without the additional factor of abv.
The ruling means that a 440ml can of 4% abv lager must now be sold for a minimum of 40 pence, while the same quantity of 9% abv lager would carry a minimum price of £1.15. A 70cl bottle of 37.5% abv vodka must cost at least £8.89, while a 750ml bottle of 12.5% abv wine needs to be priced at £2.46 or more.
Anyone selling cocktails that feature a combination of alcohol categories is expected to base their minimum pricing calculation on the various types of alcohol contained in the drink.
The new rules extend to voucher discount offers, which are only valid above the minimum price – unless the deal also includes non-alcoholic products, since these are not subject to the legislation. However, anyone offering deals such as meals including a free bottle of wine must ensure that the total bill does not fall below the permitted selling price of the bottle of wine.
For online sales, the legislation applies to any orders dispatched from within England and Wales.
Anyone found to be in breach of the new legislation is liable to 6 months in prison and/or a £20,000 fine, as well as the possibility of their licence coming under review. Police authorities are expected to carry out random checks to ensure that retailers are complying with the pricing laws.