Cider exception in UK alcohol duty creates bushel of benefits for overseas companies

Different rates for cider in the current Alcohol Duty system in the UK, designed to protect and support local producers, are currently doing more to pad the profits of major global brands.

While the UK is the world’s largest-consuming cider nation on a per-capita basis - drinking 840 million litres worth $4.37bn in 2023 alone¹ - seven of the UK’s ten top ciders sold in the on-trade, such as pubs and restaurants, are owned by producers outside the UK.

Changes to the UK’s Alcohol Duty system in 2023 resulted in cider being taxed at a lower tax band compared to other products of the same strength. Known as ‘cider exceptionalism’, this measure is intended to support local cider producers, with marketing often presenting idealised imagery of farmers picking apples in British orchards. Yet, with just three of the top ten cider brands sold in the UK’s on-trade being based in this country, Alcohol Change UK argues this measure is not fit for purpose and is calling on the Government to end ‘cider exceptionalism’ and introduce lower tax bands for cider.

Based on this new system, if just these seven international companies sold the same volume of products in the UK on-trade market this year, they would contribute £59m less than if duty was in-line with products of a similar strength. (Download this Excel sheet to see how this is worked out.)

Ash Singleton, Director of Research and Public Affairs at Alcohol Change UK, said:

“Better health is our best path to prosperity. If this is to be a ‘Budget for the NHS’, we need to prevent the problems that are causing pressures on our health system in the first place. The new Government inherits a failed alcohol market, in which international companies can exploit tax incentives designed to protect local producers – incentivising the sale of high-strength cider at pocket money prices. Closing this loophole will be good for the nation’s health and wealth.”

Polling from Alcohol Change UK ahead of the Autumn Budget, shows that the public supports action on alcohol duty. More than half (51%) of UK adults support increasing the level of duty on cider to the same as beer, with only 17% opposed. Additionally, more people support using alcohol duty to encourage companies to produce lower-strength products, with 44% in favour and only 21% opposed.

The table below lists the UK’s top-selling on-trade ciders, based on volume and value, between October 2022-2023². Alcohol Change UK looked at each product’s owner and headquarters and found that the 10 most popular cider brands in the UK are dominated by non-UK-based companies, some of which are massive conglomerates. Just Thatchers and Weston’s are UK-headquartered, with their combined sales accounting for just under a third (29%) of the total sales of the top 10 ciders.

In the 2023 Spring Budget, the Government changed the duty system in the UK, which made duty across different drinks more consistent by taxing based on strength (ABV). Alcohol Change UK supports these changes as linking duty to strength is better for public health.

Following these reforms, the revised rates are as follows:

Source: HMRC (2023). Alcohol Duty: rate changes, as cited in House of Commons Library (2024). Research briefing: The new alcohol duty system.

Recent research suggests that these reforms decreased mean weekly alcohol consumption slightly, estimated to prevent 2,307 deaths and 11,510 hospital admissions over 20 years compared with no policy change. However, the same research also estimated that increasing tax rates for beer and ciders to match other drinks of equivalent strength would reduce consumption by a further 2.5 units per week (–17%) and deaths by approximately 74,465.

Dr Damon Morris, lead study author from the Sheffield Addictions Research Group, University of Sheffield, said:

“The UK reforms to alcohol duty did not raise tax rates overall, making them unlikely to noticeably improve health outcomes. However, our modelling shows that ending cider exceptionalism and taxing cider at the same rate as other alcoholic products of similar strength could achieve far greater public health benefits, while also working to reduce health inequalities.”

Ahead of the Autumn Budget (30 October 2024), Alcohol Change UK is calling for Alcohol Duty to be increased to at least 2% above RPI, and for three additional changes which it argues will complete the Alcohol Duty Reforms commenced in August 2023.

Linking duty to strength is better for public health, and the reforms will remain incomplete until the government:

• Ends cider exceptionalism, as described above, to bring it in line with other products of a similar strength
• Ends “wine easement”. This was intended as a temporary measure and ending it is essential as producers will have no incentive towards lower ABV reformulation until this easement ends.
• Lowers the threshold at which higher tax rates kick in from 8.5% to 6.5%. We have seen reformulation to the 8.5% boundary for strong beers and ciders. But at 8.5% ABV these are still very strong beers. A controversial aspect of the previous administrations partial alcohol duty reform was increasing the definition of strong beers up from 6.5% to 8.5% to match cider, rather than dropping cider down from 8.5% to match beers at 6.5%. This should be reversed, so that the boundary for both is 6.5%, further encouraging reformulation and reducing harm.

Sources

¹ Europe continues to drink lion’s share of cider, led by UK (just-drinks.com)

² What are the best selling brands of 2023? (morningadvertiser.co.uk)