How much should you spend on a bottle of wine?
Duty, VAT and 'in bond' - it's time to get technical.
The cost of a bottle of wine varies massively. You can buy £5 bottles from supermarkets and £100 bottles from independent wine merchants but what proportion of the cost is wine?
Don’t fall asleep all at once but I’m here to talk to you about Duty and VAT and a few other technical details. These pesky taxes are something I deal with on an everyday basis because most of the wines I sell are in bond.
What does ‘in bond’ mean? The term refers to wines that must be stored in a specific warehouse because they have not had Duty and VAT paid on them. Let me rewind a bit. Most wines that are sold in the UK will have started their life in bond. Most imported wines arrive from abroad and will land in a bonded warehouse. They can’t be delivered to any old warehouse, it has to be a special in bond one (LCB and Octavian are two big names). The wines will sit in their bonded state, until they are purchased and plucked out for delivery either by you or a retailer. It is only at the point of delivery, from warehouse to home address, that Duty and VAT are charged. This will be a separate invoice to your original purchase invoice and it always feels a little irritating. What is this extra cost and why am I paying extra when I’ve already bought the wine? The fact is, if you buy an in bond case of wine, and you want to drink it, you have to pay the taxes. At the point of delivery, the wine becomes unbonded, you pay the taxes and it will be on its way to you, ready to drink.
I’m not surprised that you’ve never heard of in bond or even Duty before - there’s no reason why you should have. All wines you buy from shops or online are unbonded, the taxes are included so, what you see is what you get. In short, don’t get too het up about this but it’s useful knowledge to be armed with when choosing how much you should spend on a bottle. It’s also important when it comes to collecting wine, as all your wine will generally be stored in bond.
On 1st August 2023, Duty on wine increased in the UK. The government, who I assume want to promote healthy living, have updated Duty on wine so that wines with lower alcohol levels are subject to lower duty costs. Previously, duty was £2.23 on a bottle of wine of 13% ABV and now it has risen to £2.67. This price excludes VAT, which is added onto the Duty as well as to the price of the wine itself. Weirdly, Duty on sparkling wines has decreased. The increase doesn’t look like much but it does add up and it’s led to everything looking a little more expensive than it was.
This raises the question of how will our drinking habits change? Will we start to avoid full bodied reds that come with naturally higher ABVs in favour of sparkling wines? Will winemakers evolve their winemaking to produce naturally lower ABV wines so their customers avoid being penalised? I’m hoping my favourite producers don’t change how they make wine but only time will tell.
Let’s get back to the cost of a bottle of wine. I’ve created this drawing to visualise every element that goes into a bottle of wine (some of the figures are estimates). I think it’s quite shocking! You can see just how little wine you get when you spend £6. In fact, the elements that don’t even taste of anything cost more than the liquid. Doesn’t seem like a good deal does it? We don’t think about the other costs that go into a bottle but they are real and increasing every year. Glass prices have gone up, shipping is more expensive and Duty has increased. If a bottle retails below £10, there’s very little budget available for a winemaker to spend on the actual wine.
I know there are exceptions at the £6 mark (I’ve heard of some great examples from Aldi) but generally you’re not going to be drinking anything interesting let alone delicious at £6 a bottle. There’s simply not enough money allocated to the wine.
However, the key thing to note is that packaging, logistics and Duty stay the same irrespective of bottle price. This means that you’re getting a lot more wine for your money when you up your spend by a few pounds. Imagine a bottle costing £15, Duty remains the same at £2.67, as would the cost of shipping and packaging so there’s much more budget left for the liquid. The quality of wine increases rapidly with a few extra pounds and I would say a sweet spot is between £15-£25. You don’t have to go wild every time you’re in a wine shop but do remember that a £6 bottle of wine has around 30p’s worth of wine in it. So, don’t be surprised when you’re drinking something that has very little flavour or too much of the wrong flavours. It is absolutely worth spending a bit more because you will taste it in the glass.
Drink better by spending a little extra on your bottle of wine. Sip, savour and make it last!
I’d be surprised if the wine is even as high as £0.70 for some of the larger bulk wine makers. Considering Gallo alone produce about 3% of the world’s annual wine supply, the economies of scale for their lower end stuff should give them far lower production costs. Two buck chuck was/is profitable after all, even if they charge a bit more than two bucks nowadays.