Diageo’s UK boss today slammed a set of new alcohol duty changes as a tax hike being presented as relief as higher prices hit the Guinness and Johnnie Walker maker’s sales volumes.
From today, alcohol will be taxed based on its strength and alcohol duty, with the exception of draught pints, will be unfrozen. Though the so-called “Brexit Pubs Guarantee” has been cheered by some in the pubs sector, Diageo UK MD Nuno Teles was not impressed.
“I definitely would not celebrate it,” he said. “The idea that it means beer being cheaper is not absolutely true. What we see is a rise in alcohol duty in a way that discriminates against spirits.
“What we see is alcohol duty going up at a time that consumers are looking for relief on prices”
Meanwhile, the British Beer & Pub Association pointed out brewers will pay 10.1% more tax on bottles and cans of beer, so tax will make up 30% of the cost of a 500ml bottle. It says the increase will add an extra £225 million of annual costs across the industry.
Its CEO Emma McClarkin said: “This means over 100 breweries in London, and thousands more across the rest of the country, will be facing further cost increases after a prolonged period of severe inflation."
Simon Lewis, managing director of The Wimbledon Brewery Company said: "Duty will be added to the price of all the beer that we currently produce. Not all our customers will accept an increase like this."
Today Diageo reported a 7% rise in UK revenue, but this was due to higher prices as sales volumes slipped. Its overall profit was up 5% to £4.6 billion as sales increased to £17.1 billion.
Guinness was a particular success though, growing its market share in the UK to make up one in every ten pints pulled in London. Overall Guinness sales were up 16%, which Telles said was the best performance in the drink’s 264-year history.
“Arthur Guinness would be proud,” he said.
Teles also said that the pace of price rises are slowing, but Diageo would still “monitor” inflation and could raise prices further if needed.
Earlier this year, Diageo received planning permission on a new Guinness brewery in Covent Garden. Construction work has now begun at the site.
