The Wine Society: The industry can’t take ‘much more cost’

The retail industry “can’t take a huge amount more cost”, the CEO of the Wine Society Steve Finlan has warned, ahead of the November budget.

Speaking to the drinks business at a recent tasting, the Wine Society CEO Steve Finlan said that in only a couple of years, selling wine has become “so much harder”, largely on the back of an increase in red tape, National Insurance rises and the costs associated with the new duty regime, EPR and PRN. As a result the Wine Society’s overheads had risen £6million in the last year due.

There is also, he said, nervousness about the upcoming November budget – with what is expected to be a duty rise “at least” in line with RPI (4.8%).

“No business can withstand that easily,” he said.

Even if the government “do their best to protect business, but pass it on to the consumer”, this would still have the same effect.

The budget is also likely to have a more immediate knock-on effect as  a result off being pushed further back than usual to 26 November. This added to the uncertainty facing retailers and would likely result in a slow start to the key Christmas trading period, he said, warning that “I don’t think the industry can take a huge amount more cost.”.

Chilling effect on business

Rather than increasing control and red tape, the government should effect a stimulus for business, because controls are likely to result in retailers cutting costs, ranges, stock, and also limiting recruitment and employment. “And hey presto, the industry all of a sudden, has gone from a really good dynamic prospect with more great wines being produced than ever before, to simply contracting,” he said.

He pointed out that according to HM Treasury excise receipts released in September, the amount raised by alcohol duties had fallen by £0.2 billion, which the government itself noted might to the impact of by the Alcohol Duty Reforms  implemented in August 2023 causing “changes to both producer and trader behaviour”.

“More worrying is that that same OBR forecast said that they would reach over £16 billion of duty by 2028-29 [but] we’re going backwards against that target. So even on their long-term projections, they’re killing themselves as well as the industry,” Finlan added.

Taking the hit

He argued that it was as if this government – and the one before it – “were trying to make doing business deliberately difficult”. However, if they were willing to listen and picked maybe “three CEOs from wine retail”, the industry “could give them ten to 20 very straightforward things to do to simulate growth, whilst at the same time protecting the things that we recognize we’ve got to pay for.”

“It’s not a question of moaning that you’ve got duty or moaning that we’ve got taxes – that’s life – but it’s the way that they’ve gone about it,” Finlan said.

He argued that you don’t need to legislate “the most complex or bureaucratic things, just bung it on to Corporations Act or find some other way of making it easier for businesses, because not only do you have the cost of the scheme, but the cost of administration of the scheme as well, which is people and time, and that makes [businesses] less efficient and raises the cost of doing business.”

He also noted that with the recent cyber attacks on retailers including M&S, the Coop, Selfridges and Harrods, the cost of “keeping ourselves safe” were increasing above the rate of inflation. Protection was “expensive” he noted, but “we do take it very seriously.”

Impact

The Wine Society was already budgeting to make a loss this year having committed to keep prices as cheap as possible for its members – although Finlan added that there were “levers that we can pull to make sure our cash is in good place”, including tighter management of stock.

“We held prices for two years before that and currently, the gap we put our prices up, and gap between us and the competition has narrowed. It’s exactly the same as it was when we were holding prices,” he said. “Competitively, that’s good [for us], but it’s a disaster for the industry that everything’s going up.”

Finlan also pointed out however that the Wine Society was trading well in the difficult market, with volumes up 2% and membership “at record levels” while it also had highest ever net promoter score it had seen, at 83 “which is officially world class”.

“It’s always been very high, but actually we’re doing a really nice job for members, and we’re performing pretty much bang in line with our forecast for the year,  ” Finlan said, “That is a modest one, but we’re up against our 150 last year. So I think we’ll finish the year more or less in the same place, hopefully with a nudge up in volume, which will be fantastic”.

db also spoke to Finlan about the group’s fine wine strategy, and the additions to the range which showed that the Wine Society had “rediscovered its spirit of innovation and exploration“.

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