Marketing

Spirits tax now threatens export market – IDL

Spirits continued to decline in 2013 as on-trade volumes here fell 5.7% and off-trade volumes slipped another 8.1%. Combined with these figures, the excise increase of 15% on spirits last October has had a hugely negative impact on the spirits industry in Ireland, reports IDL Pernod Ricard in its Half-Year Results to 31st December 2013 .

A further deceleration of 9.6% can be seen in H2 of 2013 with the company adding, “More worryingly however is that the real-time effect of this latest increase will only be realised in 2014”.

Ireland has the third highest excise on spirits in the EU with approximately 66% of the cost of a bottle of whiskey going to the Exchequer.

The downstream effects of this tax burden on the consumer are highlighted in the subsequent comments of IDL Chairman and Chief Executive Anna Malmhake who states, “The six-month period to the end of December 2013 was another positive one for Jameson worldwide however in stark contrast, the 35% increase in excise on spirits in a period of 10 months (20% in Dec 2012 and 15% in Oct 2013) has had a severe impact on the Irish market.

“While we recognise the financial constraints that the government is under, the recent series of punitive increases imposed on this vital part of the agri-food industry will have serious consequences, not only for established producers such as Irish Distillers but for new start-up Irish whiskey distilleries, publicans, retailers and all of their employees. A reversal of the October budget increase is essential in order to avoid the erosion of this proud, indigenous industry and to prevent a rapid resumption in cross-border shopping.  At the same time the government is to be applauded for keeping the VAT rate at 9%, a positive step for the hospitality sector which plays a key role in the tourism economy.

“We in Irish Distillers are fully supportive of the government’s commitment to tackling alcohol misuse and continue to play an active role in promoting responsible consumption. However, overall alcohol consumption in Ireland has in fact declined by nearly 20% in the last decade. We urge the government to work with all stakeholders to develop and introduce evidence-based solutions that will address alcohol misuse instead of punishing the majority of consumers who drink responsibly, with relentless tax hikes. As stated previously, we believe the reintroduction of the ban on below cost selling could be an immediately effective policy move in this area.

“Finally we should not be blinded by figures that show Irish food and drink exports reaching almost €10 billion last year. The question we must now ask is how sustainable is this growth without a solid local market in which to support home grown brands such as Jameson and to develop new market entrants.”

Worldwide, Jameson performed strongly for the first six months of Pernod Ricard’s fiscal year with 16% sales growth and 13% volume growth.

The company also provides Nielsen MAT figures showing that the total wine market here declined by 8.6% in 2013 with volume declines of 2.9% in the on-trade and 8.8% in the off-trade.
This, too, combined with an 18% excise increase on wine in the last Budget in October has had a “hugely negative impact on the wine industry in Ireland. A further deceleration of 9.3% can be seen in the six months ending 31st Dec, 2013”.
Again, IDL Pernod Ricard emphasises that the real-time effect of this latest increase will only be fully realised in 2014 figures.
Ireland has the highest levels of excise on wine in the EU with approximately 50% of the cost of an average bottle of wine going to the Exchequer.
Globally, Pernod Ricard’s net sales fell 7% to €4.57 billion with net profits falling 2% to €829 million. Profit & Loss figures for the Irish market are no longer broken out.

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