Where the money goes on a bottle of wine in the UK

I put together a handsome graphic to illustrate what you get for your money with a bottle of wine in the UK in 2012, and the image has been referred to on Twitter and elsewhere regarding the recent (and most welcome) Call Time on Duty campaign.

Here is the updated picture to take into account the current duty and exchange rate. It makes for grim reading.

004245_bottles7

The calculations are taken from a spreadsheet compiled by Robert Joseph for his article Lifting the stone on the UK wine trade in The Joseph Report, August 2012. Robert is a respected industry commentator, the ’Editor at large’ of Wine Business Monthly and he’s one of the partners behind a French wine brand on sale in supermarkets and independent merchants.

The cost price of the wine includes the lot – wine, bottle, stopper and packaging, and any margin for the grower and/or producer.

The margin includes both the distributor’s and retailer’s margin. Think of it as operating margin, not profit, as this includes distribution, marketing, staff and so on.

The selling price is after discounts or promotions.

The figures tally with what we and other producers sell our wine for to the UK retail trade, including supermarkets, independent merchants and online wine clubs.

Here is my spreadsheet, in exactly the same format and with the same formulae as Robert’s.

 

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18 thoughts on “Where the money goes on a bottle of wine in the UK

  1. Graham Tigg

    Not sure why the margin escalates so much in relation to the retail price of the wine. I can understand a little leeway for money being tied up and reduced volume/turnround but £0.71 to £3.47 – ouch.

    1. GavinQuinney

      Fair point, Graham. I'll have to ask Robert. That being said, it's quite common for a wine costing €4 at source (ex-tax) to sell for over £10 in the UK.

  2. AnnoyedWinePro

    It is boring to see false information, if you are not in the off trade wine business, why do you try to educate ppl about it ? Plenty of wines retailed at £4 cost between 1euros to 1,5euros. The majority of retailers are not making 17% margin at £4 … stop inventing numbers if you don't know what you are talking about.

    1. GavinQuinney

      Thanks for the comment, but why the anonymous 'Annoyed Wine Pro'? As you can see, I've taken the calculations from Robert Joseph's figures. He's a respected and knowledgeable commentator in the trade.
      I personally know of numerous sales from wineries and producers to the trade that correspond with these figures. We ourselves sell to the off-trade and these figures tally.
      Can you give us an example of a wine that retails for £4 and costs €1.50? Thanks, Gavin.

      1. AnnoyedWinePro

        RJ is a respected journalist, not wine trade profesional. I can tell you that retailers are not making 17% margin on £4 wine, do you think you can buy those wines at 0,70 euros ex cellars ? :
        – Tesco Vineyards Cotes du Rhone at £3,79
        – McGuigan Merlot at £4 in JS
        – Cellier des Dauphins Cotes du Rhone at £4 -ASDA-
        – French Connection / Piat d'OR / JP Chenet French Varietals at £4 – ASDA-
        and you can find plenty more examples on mysupermarket.com.
        On the majority of the wines retailing at 3,50 t 4,50, the margin for the retailers is around 5% to 8% when not negative.

        1. GavinQuinney

          Thanks. How much do those wines cost? More than a euro?
          Just to reiterate, what wines cost €1.50 at source but retail for £4?
          My experience is more in the selling of €2 to €3.50 range and Robert's figures are pretty close (£7.25 to £9.75 selling price).

          1. GavinQuinney

            I am genuinely interested in what you think the percentages should be,
            AnnoyedWinePro. Happy to redraw the graph with a 'The wine trade responds' post.

          2. AnnoyedWinePro

            Of course more than a euro, how much do you think dry goods cost ? just add the bulk value you can find on any wine website and you have your bottom price, they are all closer to 1,50 euros. They are not trying to make margin but gain footfall, and no one is making margin (producer, brand owner, retailer) at these price points (£3,50 to £4,50) so they are the best value wines for the regular consumers who can't spend £10 everynight. If you or anyone really think one can buy french wine AOP or Varietal IGP for 0,70 euros , @danjago will make you wine buyer manager in a minute. At £4, you can use 5%-10% and at £5 you can use 18%-22% maximum, no one is making 30% at £5 price point neither.

          3. GavinQuinney

            Thanks for the reply, and sorry for not getting back sooner as I was away.

            What would be really useful, as a comparison, would be if you can give me the 2 percentage figures for distributor margin and retailer gross profit margin for each of the price points, in your opinion.

            With many other comparable graphics on this issue, I think Robert's figures have allowed for a similar or even higher base cost of wine, at the cheap end. For example, here http://www.corksout.com/whats-in-your-bottle
            and here http://blog.bibendum-wine.co.uk/posts/news/2012/0

          1. GavinQuinney

            I have it on good authority that one supermarket chain is running at zero margin to break into the wine game. Their figures don't really count for the purposes of this graph.

          2. Phil

            I wish I could sell bottles at 4 pounds, but actually the cost to import wines is already higher than that, unless you are a big company who is not looking to make money with cheap wines but to attract more customers with other products.
            Also, margin will be higher for more expensive wines simply because we usually calculate it in Percentage.
            It is a good graph to show that most of the money for inexpensive wines are going to the taxes.

  3. Christopher Godber

    Lets get back to the point.
    A bottle of Wine in the UK is carrying a very high level of duty and VAT. That is what we need to highlight. We need to stop the escalator rising again.
    On the wider front you get what you pay for and I want Chateau Bauduc to keep producing which will only happen if you make a profit.
    I do not want to drink poor quality wine from Tesco or other supermarkets.