BRITAIN PUTS MORE HURT ON THE WINE INDUSTRY

The UK wine industry has been like a thorn in the side of many wine companies with its exceptionally cheap private label wines, made possible by bulk shipments from Australia. Today, an announcement by the government to implement a 5 pence duty increase per bottle for table wine and 7 pence for sparkling wine came as an unwelcome surprise. The spirits duty, however, was frozen, much to the happiness of the industry.



The new tax will certainly put a strain on wine companies, most notably Constellation which has faced a bit of a struggle at the hands of the British retailers and their low-end pricing pressures. Overall, UK wine represents 20% of Constellation’s branded wine sales. Kaumil Gajrawala of UBS predicts that the UK market will remain “very challenging” over the next year.



In terms of Constellation, Kaumil included the following in a report:



“The following issues keep us on the sideline: 1) UK could still get worse; 2) over-shipment in the US suggests transition issues with acquired brands; and 3) STZ remains over-indexed to the low-end. Very long term, STZ should benefit from its global presence and the mix shift toward high-end wines in the US.”