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Where Does Your Money Go When You Buy a Bottle of Wine, and How Can It Sell for £3.79?!


It may seem a silly question, but did you know that the more you spend on a bottle of wine the more wine you actually get? That sounds obvious, but the point is, as you spend more the value of the wine itself makes up a greater percentage of the price.

So what are the cost elements in a bottle of wine? As the saying goes, one of the things you can’t avoid in life apart from death is taxes! But in the UK there are two different taxes on a bottle of wine:

  • The first is called excise duty and that’s a fixed cost of (currently) £2.23 per 75cl bottle. So whether the wine costs £5 or £500 it’s still the same tax of £2.23!
  • Then there’s VAT. And here’s the con…VAT is charged on the excise duty, so a tax on a tax!

The other cost elements are the packaging, i.e. the bottle, cork, label, capsule; and shipping from the winery to the UK whether by road or sea. Then there’s the retail mark-up – the guy who sells it has to make some profit! And last but not least the value of the wine itself.

Now look at the chart below to see what I mean:

  • For a £5 bottle, all that is left for the wine is 31 pence.
  • If you spend £7.50, so 50% more, the value of the wine is £1.43, nearly 5 times as much.
  • Go up to £10 and the wine is worth £2.70.
  • And finally, in a £20 bottle the wine is worth a whopping £7.03.
Image courtesy of Bibendum

Last week I saw an advert for a wine selling for £3.79! How on earth is that possible when the excise duty and VAT alone accounts for £2.86? Maybe it’s a ‘loss leader’, or at least they make no retail profit as it’s illegal in the UK to sell alcohol at a loss.  What do we normally spend on a bottle of wine for ‘everyday’ drinking? £10-15. This may sound a lot, and in fact in the UK anything over £10 is classed as ‘ultra-premium’, but we find that this is a ‘sweet spot’ and you can get some really good wines in this price range, particularly from independent retailers. Recommendations to follow!

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