Whisky Magazine Issue 9
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The price of whisky in British shops comes tumbling down at Christmas every year. Five pounds off a bottle of malt is common; £1.50 off a blend.
“Great,” is our reaction to such a situation. Then we might ask ourselves, “If prices can be cut to this extent are we being ripped off the rest of the year?”
The simple answer is that the producers make only a very small margin on such heavily discounted goods. Once tax (excise duty and VAT totals 66 per cent of the retail price), production and packaging have been taken into account, we are talking just £1.70 profit on a blend retailing at £11, and £1.98 on a malt discounted to £13. From this sum both the distributor and the retailer have to get their margins. The latter's is typically around a fifth of the full retail price for malt whisky and the cost of supermarket Christmas promotions is borne by the whisky producers.
Christmas accounts for around 90 per cent of some brands' UK annual sales. Producers have to get their products onto the supermarket shelf at this time of year – and off the shelf, which means advertising, and a further reduction in profit.
The whisky industry hates Christmas discounting. It is commercial suicide. But if the competition is discounting, individual producers have to follow suit, and if they don't discount, the supermarkets won't stock them. The buying power of the big multiples enables them to drive keen bargains at any time of the year, and at Christmas they simply ask the produc...