Only a few weeks into the new UK coalition government, the first major ruling on alcohol legislation has been raised. The government is looking at banning below cost alcohol in a bid to reduce alcohol abuse. The UK’s largest retailer Tesco, and others such as Sainsburys have welcomed the ban, such as minimum pricing and alcohol loss leading products. Many alcohol products, especially wine have been used as loss leading products, slashing margins and encouraging consumers into their stores.
The problem with this is that the bigger supermarkets have the economies to scale and clout with suppliers to drag prices down and consumers inadvertently become used to lower quality, and lower priced wine. If wine producers want to compete, they therefore have to slash costs. Generally this involves initially purchasing or growing fruit in high yielding, irrigated low cost vineyards. This has happened prolifically in Australia, and many new world wine producers are in the same boat. The incentives have been further developed by tax incentives.
Smaller, high quality producers are suffering as their premium wines are priced out of the market, and the integrity of wine as a product is being degraded. There will be many small producers, and surely some larger volume wine companies secretly joyous with the UK’s approach to banning low cost alcohol.
Hopefully if the bill is implemented in the UK, wine quality will gradually start to increase as margins come back, and supermarket wine buyers are not under pressure to buy cheap. For Australian small producers it could be a boon, and they might get back to where they were before the volume producers flooded the market. Other factors are helping, such as critics with clout are seeing through the muck and talking up the quality of small Australian producers. It will also surely help old world producers such as France, Italy, and Spain.
So have we come full circle? This initiative should certainly be the start. The UK is one of the biggest importers of wine, and this just might help balance the market, and bring back some sanity to producers, retailers, and consumers alike.