cost of imported wine, another quick rant.

[JamieBahrain]

For the sagacious, was querying who got the rest of the WET?

[Polymer]

Jamie,

I'm only guessing that they're using

WET is 29% of Wholesale or 14.5% of retail with the assumption Wholesale is 50% of retail.

Hey, at least you got some back .

[JamieBahrain]

Yes but inbound tax over 50% and outbound refund under 30%. Quite a discrepancy.

[Sigmamupi]

I always find it helpful in any discussion of wine tax to actually have a look at the applicable legislation (even if you don't agree with the concept of a value based wine tax, for which we can blame Peter Costello and the Winemakers' Federation). As the amount of WET is not normally shown on the retail invoice, the formula is 14.5 per cent of the retail value. This is common through the wine tax legislation, as set out in the extract from the explanatory material for the relevant regulations (please excuse the funny formatting in the copy):

Subdivision Working out amount to be paid

25-2

Regulation Subsection 25-5(2) of the Act provides that the regulations may specify

25-5.03: how amounts of wine tax borne are to be worked out.

Amount This regulation provides that the amount of wine tax borne is to be

worked out as 29% of half the retail price. As the wine tax is levied on

the wholesale sale, unlike the GST the amount of tax borne by the

ultimate purchaser is not precisely identifiable from the retail price.

Applying the wine tax rate of 29% to half the retail price is modelled

on the method used to establish a notional wholesale price in section

9-35 of the Act.

[Polymer]

Yes...but I think the point is they tax you 29% on full retail when you bring it in...they're not taxing you 14.5% of the price you paid.

Granted, they can't know if you paid retail or wholesale and places would scream bloody murder if imports were only taxed 14.5% on wholesale....but, for example, if you come in without a receipt, I've heard they'll use wine-searcher to get the price you paid (which is retail)..

[Michael McNally]

What other forum quotes Taxation legislation, I ask you?

It's all here on Auswine! Thanks Gavin!

Cheers

Michael

[felixp]

Purchased Mouton 2014 EP last week in Honkers @$2200HKD ($355 AUD at today's exchange rate)

Today I looked at two e-mails I received in the past week from Australian wine merchants.... one offered it at $675 and the other $680.

How can the price for an EP wine possibly be almost double, adding all the f'n taxes you like!!!!!

Let's compare apples with apples, Mouton 2014 cost me not much more than the current release of 707.

No wonder people in Australia think French wine is over-priced!!!!

Actually, it's not.... it's just that you are getting ripped off.

[simon1980]

Hi Felix, I thought the same, so worked it out...

Release price: E240 ($336)
Shipping/Insurance/Port landing fees: $5 (let's say $5...it may be a bit less or a bit more, but makes little difference)
Landing Duty: $17
WET: $99
GST: (I will exclude, as its easier to do all numbers ex-GST)
Total: $457

Sell price $675 ($613 ex GST)

This gives the retailer 25% margin (ex GST). I understand the price quoted includes all tax (or so it says on their website). I can't speak for their business model, but I think this is probably about right to make it worthwhile. 25% GP is likely to equate to under 10% NP...they are a business after all (and owned by a business that will expect a profit...)

So my conclusion is that the retailers are presenting a product at a price they are able to source it for, including tax, and make a reasonable margin. Perhaps they should shave that margin a bit to generate business, but I doubt they would suddenly see a surge in volume if they do so (unlike a retailer in HK, which is likely to be doing 10-20 times the volume in a highly competitive and active market). The real problem here...and I agree it is a rip off...is in the tax system.

Oh, and that price you got on Mouton in HK is very sharp - good work. Most places in the UK are about $380 (converted)...so $355 is really good!

Simon

[conformistpete]

Simon you missed the importer and distribution in your calcs. Very few retailers import their own wine.

[simon1980]

Simon you missed the importer and distribution in your calcs. Very few retailers import their own wine.

Yes, you may very well be right...and if that is the case, the margin for the retailer will be significantly smaller! However, the price quoted was from an "arm of a large business" that I think may not have an issue lobbing a few cases of Mouton in one of their many containers...so they probably avoid using an importer.

Simon

[redwhiteandrose]

Yes, but you are assuming they are paying retail prices themselves! If they buy the wine wholesale, the calculations change dramatically.

You have to compare with US prices to get a more realistic reasonable retail price. They have most of the excuses that Australian retailers list:

Shipping costs
Complex markets (each State is a separate entity)
Large country
Taxes (maybe smaller, but still significant)

You can often buy European wine there for less than in the UK, Netherlands, etc

[simon1980]

Yes, but you are assuming they are paying retail prices themselves! If they buy the wine wholesale, the calculations change dramatically.

You have to compare with US prices to get a more realistic reasonable retail price. They have most of the excuses that Australian retailers list:

Shipping costs
Complex markets (each State is a separate entity)
Large country
Taxes (maybe smaller, but still significant)

You can often buy European wine there for less than in the UK, Netherlands, etc

Hi redwhiterose, the calcs I listed are the actual prices, based on the "release" price ex Chateau...not retail prices. The rest of the costs are actuals, from my very limited experience importing a little Champagne (for personal consumption). Also, I'd be surprised if the Aussie guys are getting better than the standard price ex Chateau...but I bet the big brokers are...making them even more uncompetitive.

[felixp]

Simon you missed the importer and distribution in your calcs. Very few retailers import their own wine.

...it is very simple to import your own with the EP system, and most EP retailers import their own, as compared to non-EP release.
...I am unsure Simon1980 figures are correct, I think the importer's margin is calculated in the Import tax.
... showed these EP costs to a merchant here and he just laughed and asked if anybody in Australian was stupid enough to buy any wine at those prices The only people paying those sort of prices on the mainland (where wine tax is worse than Australia) are the billionaires.... heheh, but, of course, China has many, many of those. The pauper multi-millionaires here rely on a night truck and a couple of boxes full of cash outta Hong Kong.

[redwhiteandrose]

Simon,

We're all making lots of assumptions here, but how come FelixP can pay just wholesale + $20? That seems very unlikely to me (ie. I don't believe the 'wholesale' price is correct.)

[JamieBahrain]

Without giving too much away, we have a gentleman in our wine group and he has the best cellar in HKG. Worth many millions of US dollars. As a senior politician, he pretty much changed alcohol tax in HKG from 100% to zero! Expedience aside, it has created a vibrant market for HKG.

Imagine trying to get away with that in Australia? I still find it unbelievable there was little controversy here. Amazing.

[felixp]

Simon,

We're all making lots of assumptions here, but how come FelixP can pay just wholesale + $20? That seems very unlikely to me.....

correct..... that is because 335 is NOT the wholesale price.

[phillisc]

Felix, thanks for keeping the heat up on this. I don't buy international stuff all that often, but yes Australians are really taken advantage of.

Similar to the many posts I have written about the large corporation here in Australia, but get the message from a few here that is very unfair to suggest big wineries in Oz are NOT ripping us of!!!!!

I have just come back from 5 weeks in the US, Canada and the UK...fantastic trip by the way and business people so generous and gracious with their time.

Wine prices in general, (apart from the DF at airports...they just hope for a dill with bottomless pockets to pay $US800 for a HoG) were so much cheaper, even after converting the Australian dollar ( US 72 c). I went into so many little shops, even specialist retailers to have a look and we are taking it up the arse here.

Oh to live in HK..if nothing else for the food and the wine.

Cheers
Craig

[felixp]

yep, and now that i am a Chinese resident, crossing the border is no longer the hassle. And with an Aussie and Chinese driving license, I can just drive right on thru if I feel so inclined, although a private car is a lot better given the 0.00% blood alcohol in China

You hit the nail on the head, not only the wine, but the food in Honkers is just screamingly good. I have one son who is a chef, and it seems the food destination for all Melbourne chefs is indeed a week in HK.
And if you buy in HK, don't be afraid to get chatty with the store or e-tailer manager and politely ask for a discount, after all, you are in the bargaining capital of the world!!!!!

[JamieBahrain]

But of course, Caveat Emptor!

The cheapest and safest way to buy is through Europe. I don't buy locally I worry about fakes and storage.

There is no shame in this part of the world.


http://www.thedrinksbusiness.com/2015/0 ... in-taiwan/

[phillisc]

But of course, Caveat Emptor!

The cheapest and safest way to buy is through Europe. I don't buy locally I worry about fakes and storage.

There is no shame in this part of the world.


http://www.thedrinksbusiness.com/2015/0 ... in-taiwan/

Ahh Jamie,
as a wise man once said...
there is more than one way to take one up the...

Cheers
Craig

[simon1980]

Simon,

We're all making lots of assumptions here, but how come FelixP can pay just wholesale + $20? That seems very unlikely to me.....

correct..... that is because 335 is NOT the wholesale price.

The only assumptions I am making are:

* The wholesale price. I am using a number that is openly quoted in the market (http://www.decanter.com/bordeaux-2014/e ... arm-praise). I just converted E240 ex Chateau to AUD335. However, I concede that a "big" merchant will be able to negotiate a better price on volume, which is what I'd expect to be happening with big HK merchants. I'd also highly doubt that an Australian importer has much volume to negotiate the E240 price down. I may be wrong. Felix if you know the ex Chateau price is different to that quoted, can you let us know what it is?
* $5 to get it to Aus. (which doesn't really matter, as t's such a small amount considering the overall cost)

The rest of it is actual figures based on what the taxes to import to Australia are. And the retailer will take their margin after tax is paid, ex GST.

I'm only going on about this as I believe it's the tax system that's flawed, not necessarily the retailers who are making a fortune (in this case - I agree there are other examples where the costs are far too high). As I said I doubt many of the retailers will be making more than 10% NP...a figure hope we would agree is far from excessive.

Simon

[redwhiteandrose]

Simon,

Great discussion. I'm sure HK sells lots of big money wine, but remember Australia has 4 times the population of HK and so isn't exactly a small market.

PS Is Hong Kong a good/cheap place to live?

[felixp]

Hi Simon,
the term "wholesale" price is very misleading, in fact incorrect, when it comes to EP Bordeaux. Indeed, a "wholesale EP price in the UK certainly does not mean it is the cheapest price available.

Chateaux sell their wines to negotiants, who then in turn sell the wine to wholesalers, importers and sometimes directly to merchants. Therefore, the "wholesale" price in the UK is simply what a certain wholesaler has advertised what he is going to sell his wine for, after his expenses, taxes and profit margin. In many instances, this "wholesale" price in the UK will be less competitive than a large-volume direct importer (of which, yes, HK has several, and the UK plenty more) So, the wholesaler can sell to restaurants, and other merchants if they could not secure an allocation, which was common in 2009, less so in 2010, and certainly won't be the case in 2014.
In addition, many, and I mean many, large direct importers have much greater access to first tranche pricing than most "wholesalers", again HK enjoys this in even the greatest years, but in 2014 most fish should have been able to get a nibble at first tranche.

The trick to EP purchasing is knowing what you want before prices are released, and acting very, very quickly when the prices are released. This was virtually impossible 15 years ago, but if you have particular favourite chateaux, by the time the prices are released you already know what the wine is like due to an infinite variety of sources on the internet. I have two great examples of this:
1. 2012 Conseillante. As members of this site know, probably my favourite Bordeaux chateau. I jumped on EP in HK an hour after my merchant released prices, and got it for $65AUD per bottle (the price of Pennies 407, but that is another story) Sure enough, it moved upwards very quickly when blogs all over the web described how good it is, and two weeks later, it was $85AUD EP IN HK. I laugh now, as the price over the past two weeks has skyrocketed here to $150 bottle!!! (thanks to RPJ and several other critics finally realising how great this wine is)
2. 2014 Mouton. I needed the best wine for a birth year, and plenty of blogs seemed to agree that this is the one that will make 21 years old with ease. So,I jumped on it within 30 minutes of release in HK, at 2200HKD a bottle. The same vendor now advertises it at 2450HKD a bottle, simply because their first, and probably second, allocations sold out so quickly.

I will repeat this for the umpteenth time, the vast majority of Australian wine producers pay exactly the same taxes as the imported stuff, although I note you have put an import tax there, of which I am unaware.

[felixp]

Simon,

Great discussion. I'm sure HK sells lots of big money wine, but remember Australia has 4 times the population of HK and so isn't exactly a small market.

PS Is Hong Kong a good/cheap place to live?

...great place to live, but it aint cheap!!!!!!

[redwhiteandrose]

Felix,

That's what I thought. At least the wine is cheap, though......