Wine Tax

I write about this particular issue once a year. And every year the blame game expands to more and more players. But this year I think I’ve stumbled on the truth: we’re all to blame.
Here goes. Why is it that two years after Hong Kong abolished its wine tax I’m still paying up to $120 for a glass of wine? I’m disappointed, because this tax cut was sold to the public as a way to help restaurants and bars bring in more happy drinkers and most of all to get Hong Kong in the drinking spirit. But I also took that to mean that regular consumers would also benefit from the tax cut, as in that an $80 glass of wine (with an 80 per cent alcohol tax in 2007) would be reduced to $50 by the time the import duties were abolished in 2008. But instead, I’m paying 50 per cent more per glass in 2010 than before the tax cut. What gives?
I do drink more good wines here in Hong Kong than I do anywhere else in the world. And that’s because the luxury tax cut has acted as a calling card for vineyards and retailers to come our way. Post tax cut, Hong Kong has become the second largest wine market in the world, after New York City (in 2009 wine auctions totaled an estimated US$64 million). This is great for collectors, but when will it trickle down to our glass?
In 2008, when Chief Secretary Henry Tang brought the wine duty from 80 per cent to zero, the going argument against lowering prices by restaurants and bars was that suppliers still had pre-tax cut stock to sell off, and therefore they couldn’t lower their prices just yet. Two years on (and their warehouses now replenished), not only have wine prices not dropped but they’ve gone up in price, not in value.
Restaurant and bar owners claimed that rising real estate prices were the culprit of 2009, resulting in a rise in food and drinks costs. I almost bought that, but then I remembered that most restaurants have multi-year leases at fixed rates or controlled escalations. “The publicans will tell you that it’s all about the rent, but we suspect it’s mainly about greed,” says Dean Aslin of Sauveurs Wines, a local wine distributor.
Years later, suppliers pointed fingers at restaurant and bar owners for demanding wines to be sold cheaper wholesale, but then the owners sold it on menus for incredibly inflated prices. “I know of one popular bar that sells a bottle of our wine that they buy for $50 for $475,” says Aslin. “Typically, an $80 to $90 bottle will sell for a minimum of $70 a glass and $300 per bottle (in restaurants and bars). I know of $20 bottles that are going for $60 per glass.”
“If bars and restaurants see that no one else is lowering their prices, why would they have to?” said Alasdair Nicol, Time Out’s wine writer and owner of Vinspiration, a wine distribution company.

A bar consultant who requested anonymity said: “I can’t get myself to order from (restaurants’) wine menus knowing the original cost of the wine.” He says it pays to pay for corkage. “Customers aren’t dumb, they’ll go to Watson’s Wine Cellar and see that a Cloudy Bay Sauvignon Blanc costs $260 on the shelf and $650 at a restaurant. Why not save the $300 and pay for the $150 corkage?”
Consider this: A bottle of X costs euros5 (roughly $50) to produce. When it lands in our port from the vineyard, it costs around $70 per bottle. The importer tags on another 200-300 per cent on top of that, then the middle men gets their cut adding on 15-20 per cent; the retailer stocks it with a 300 per cent markup; finally that euros5 bottle of wine gets to your favourite restaurant and it now costs $2,880 on the menu. This is a real case study of a bottle of a Krug Grande Cuvée non-vintage Champagne. Truth is we are paying a few hundred times more for transporting wine than the cost of the actual product. Now, here’s the golden lining: since there are no wine duties, anyone can import wines themselves straight from the producers. You can buy that case of Krug on your own (granted not for a discounted wholesaler rate), but even to buy an economy class ticket to fly it in yourself would be worth it.
Ultimately the blame game is on us. Most consumers happily pay whatever the listed price for a glass of wine without a blink. We just don’t care. We don’t question it and rarely do we inquire about the quality of the pour. And if we don’t care, why should they?