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Bulk wine to ‘benefit’ from duty changes

One leading industry expert tells db how bulk wine could be the one category to actually benefit from next month’s duty changes.

The removal of the duty easement on 1 February is a major cause for concern for many drinks companies. Producers are in the process of figuring out how to accommodate the extra costs, with some wineries db has spoken to saying they may have little choice but to withdraw from the UK market altogether.

However, according to Richard Lloyd, former managing director of UK-based glass manufacturer and bottle filler Encirc Beverages, one category might end up actually benefiting from the changes.

Bulk wine, he says, comes with one key advantage: ABV flexibility within the country of sale.

In other words, the fact that it’s now legal to adjust a wine’s ABV in-market could end up serving the bulk sector incredibly well in the face of rising duty costs.

Booming bulk

One way that brands can reduce the impact of duty costs is of course to lower the alcohol content of their product, given that duty is calculated based on ABV. As db has reported, a number of big brands have already started lowering the alcohol in their drinks. Hardys Stamp Shiraz Cabernet, for example, quietly reduced its ABV from 13.5% to 11.5% last year.

There are numerous viticultural methods winegrowers can use to moderate alcohol levels in the vineyard before grapes are transformed into wine. And still further methods can be deployed in the winery to lower ABV before the wine goes into bottle. But not everyone is aware that ABV does not necessarily have to be lowered at the point of production.

“With the removal of EU laws through the wine reform after Brexit in 2024 it is now legal to adjust the ABV of wine in the UK,” Lloyd stresses to db in an exclusive interview.

“Therefore, wine producers do not have to introduce that particular complexity and cost into their own wineries, which serve many different countries, but can instead simply adjust the wine at the point of bottling in the UK.”

Sophisticated tech

While many wine companies around the world have de-alcoholisation tech installed in their own wineries, using it requires the use of “multiple storage tanks, because each ABV needs its own independent tank,” Lloyd explains.

This inevitably throws up challenges related to space, storage, costs etc. Therefore brands may be missing a trick by not choosing to lower the ABV of their wines in the market of sale.

The beneficiaries are twofold.

Firstly, international producers wanting to sell their wines in the UK but struggling to do so because of exorbitant duty costs can maintain a presence and keep costs down by bottling and lowering ABV in market as needed.

Secondly, bulk wine companies based in the UK can use de-alcoholisation tech to capitalise on the anticipated spike in demand following the lift of the duty easement next month.

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According to Lloyd, sophisticated de-alcoholisation technology is already in place and ready to go at “a couple of independent companies in the UK”, and more bulk operators would be wise to invest in the capabilities as there could soon be a rush from producers wishing to lower ABV in-market.

“As far as I know, there are currently no de-alcoholisation units owned by branded businesses, which is a missed opportunity,” he says.

Practical and precise

If producers do choose to go down the de-alcoholisation route, it doesn’t have to be a case of all or nothing. According to Lloyd, who spent 13 years working for Australian wine giant Accolade, producers have the option to modestly decrease ABV, rather than de-alcoholise completely.

“The great thing about the de-alcoholising technology is that it can be used to trim the ABV of the wine so the duty can be managed by each 0.5% ABV duty increment, which equates to approximately £0.11 duty per 0.5% increase,” he tells db. “Or, if preferred, the wine can be fully de-alcoholised.”

And with the “vast majority” of UK wine on shelves standing between 11.5% and 14.5% ABV, a large portion of the bulk wine sector could reap the benefits of dropping their ABV.

The technology could also help with ABV variations which occur naturally between vintages, helping to ensure a more consistent product from year to year.

The ultimate challenge is the impact that lowering alcohol content has on wine flavour, but “the technology is advancing,” says Lloyd, “and the taste profile impact is reducing all the time.”

He believes that de-alcoholisation tech could be an area well worth investing in, and those UK companies that get the jump on it now will be at the forefront of the movement as the science improves.

Beyond duty

A lean operations expert, Lloyd has spent 20 years working closely with producers to safeguard the quality of their products as they travel from as far afield as Australia, New Zealand, Chile and Argentina, to ensure they reach the end consumer in perfect condition. His in-depth knowledge of the UK supply chain and work towards achieving real change in the industry, from bringing the trade closer to achieving zero-carbon glass to educating the next generation of MWs about the science of bulk wine, gives him a unique perspective on the future of drinks.

Currently pursuing new opportunities to help drinks brands maximise their offering in a changing consumer landscape, Lloyd believes it’s more important than ever to think outside the box.

“With wine sales globally in decline over the last decade the last thing wine companies in the UK needed was a new duty mechanism that is cumbersome from an administration perspective and punitive from a cost position,” he says.

“However, with the new flexibility of wine reform and the ability to adjust ABV and other aspects it is an opportunity to rethink wine.

“Now is not a time for the industry to cling to our old beliefs. Doing so so can lead us to miss out on new ideas and opportunities for growth.”

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