No hiding place as guest blogger Gary Gubbins of Red Nose Wines gets down to the nitty gritty.....
THE TRUTH – YOU CAN’T HANDLE THE TRUTH
So, here is the truth, or at least my truth. I’ve wanted to write this down for a long time. I am going to tell you exactly how the cost of a bottle of wine breaks down.
I will break it down into 3 price points. A wine that retails under €10 works out like this. Let’s assume I am buying the wine ex-cellar ( which means at the cellar door free of VAT ). If the price is €2, then I need to transport that wine to Ireland which can range in cost depending on how many pallets are moving and from which part of France etc. A good average is 75 cents / bottle.
We are now up to €2.75 and we need to add on the cost of putting the wine into a bonded warehouse. This works out at about 50 cents a bottle. We add on excise duty which is €1.96 / bottle for still wine ( sparkling is double ) and we come to €5.21.
At this point we haven’t put on a margin and if you are an importer you need to add on a decent margin to counter against the cost of holding the wine for a sustained period of time. If you are buying by the case, you can take less margin, but you have to hold large stocks if you are selling it into trade. We will take an average margin of 35% which brings you up to €8 a bottle. When this wine is sold into restaurants this margin would be drastically cut.
Even though you paid the revenue the excise duty of €1.96 they are not satisfied and you must now pay VAT at 21% on top of the €8 bringing your bottle of wine to a shelf price of €9.70. It should be noted that the VAT was on top of the excise duty so in effect the tax you paid was also taxed. So, a bottle of wine that cost €2 at the vineyard door now comes in at €9.70.
That’s a fair price for the wine but it should be noted, if you buy a €12 bottle of wine, you end up paying your vineyard owner €3.24 and I can tell you there is a huge difference in quality for that €1.24. The duty is the same, but you are getting a lot more wine for your price.
If you buy a €17 bottle of wine, the vineyard is getting nearly €6 and you are getting a wine that is 3 times better ( in theory ) but costing you €12 euros less €9.70 euros / bottle x 3 = €29.10 euros.
With a merchant you can trust, the more you spend on a bottle the better value you should receive. That is why my current 15% and 20% sale is the very best I can offer. I am making no money on that and am just trying to clear stock ahead of the new wines coming in.
If you put on proper margins, you should not be able to offer 50% sales. You need to ask how much the original price is for the wine, and is that a fair price for the quality. In saying that, I do think there is a ceiling here and I do not think wines that cost €200 / bottle are 10 times better than a €20 bottle of wine. Once again, it comes back to trust.
On a slightly different note, here is an interesting fact for you. At the recent Tipperary Food Producers Long Table dinner a member of the group spoke of a startling statistic. For every €10 spent with a local merchant, €34 goes back into the local economy, while for every €10 spent in a supermarket, that figure is only €14. For anyone who would like more information and can’t make it into the shop, please feel free to contact me at info@rednosewine.com “Life is much too short to drink bad wine”
