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Monday, 04 April 2022 15:25

Working to combat cost increases

Written by  Philip Gregan
Philip Gregan Philip Gregan

Currently headlines are referencing the re-emergence of inflation, the bogey that plagued the New Zealand and global economies in the 1970s and 1980s.

Since then there have been one or two inflation spike but, all of a sudden, price increases are big new with inflation at levels not seen in the past 30 years.

While our growers and wineries will be impacted by general cost increases like other industries, there are a couple of issues (specific to our industry and related ones) that are a significant focus of New Zealand Winegrowers (NZW) activity: excise which has been long-standing concern, and now the Container Return Scheme.

Excise

Excise has long been a major issue for anyone selling wine in the domestic market, as it is a significant cost for producers and increases each year in line with the rate of inflation. It is an issue that we raise with officials and politicians on an ongoing basis. Now with inflation at a 30 year peak the outlook for the upcoming excise increase is even more daunting.

For the December 2021 calendar year inflation was 5.9%. Apply that rate to the current excise rate of $3.11 for table wine, and you get an excise increase of 18.3 cents per litre, or $1.65 per case (12 x 750ml bottles).

But unfortunately, it could be even worse than that, given inflation is currently increasing, not decreasing. So, imagine if March year end inflation is 7%; the excise increase would be 21.8c per litre, or $1.96 per case - all that on top of the excise rate already being paid.

A 7% increase would lift the total excise on table wine to around $29.94 per case. Fortified wine, of course, is a whole level higher.

We have written to the Government outlining the negative impact this would have on our industry, and requested it not proceed with the indexation. Apart from anything else we believe the increase will have a damaging impact on the hospitality industry which is already struggling with the lingering effects of Covid-19. We think the time is right for individual members to also have their say about the impact this increase will have on them. Have your say in writing to This email address is being protected from spambots. You need JavaScript enabled to view it. 

Container Return Scheme

However, excise is not the only government-imposed cost increase producers are facing. One of particular concern is the Container Return Scheme (CRS) which has the potential to add another 20c per bottle to the retail price of our products. This was revealed on Sunday, 13 March, when the Government announced a consultation on Transforming Recycling - Container Recycling Scheme.

NZW has been heavily involved in consultation on this proposal in recent years, with many related industry partners and packaging companies. In our view, we have prevented a compelling case to exclude bottles from the new CRS (see what we have been up to at nzwine.com/crs).

The process leading to the Government's announcement has been fraught, with a pilot study on a CRS launched in the midst of consultation on waste reform legislation. The proposal is to impose an extra cost on all containers of 20c per container (plus administration costs) and then to pay that back when the product is recycled.

In developing the proposal, the Government has ignored the very positive rates of glass recycling. We agree with the goal of improving recycling, but do not believe a 'back to the old days' scheme like this is the way to go. Some simple steps like separation of waste streams (i.e, ending co-mingling in council refuse collections) would be a much better first step, rather than imposing a new tax.

Submissions on the consultation document close on 4 May. We will be making a detailed submission on the proposal and will circulate this to wineries in advance of the close-off date. For details on the government proposal see environment.govt.nz/assets/publications/Transforming-recycling-consultation-document.pdf

Given the costs to wineries will be significant, we urge members to make a submission on the proposals. How to make a submission is detailed at the government website.

For more information on excise or the CRS, please contact me This email address is being protected from spambots. You need JavaScript enabled to view it. or Sarah Wilson This email address is being protected from spambots. You need JavaScript enabled to view it. 

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