Ask the Collective
The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
What margins and commitments do major UK retailers expect from drinks suppliers?
Retailer margins vary significantly by channel and retailer type. **Off-trade (retail) margins** typically range from 25–40%, though some premium retailers push higher and occasional outliers demand 70%. **Premium supermarkets** (Waitrose, Sainsbury's) calculate margin as NOG (Net on Gross, including VAT), targeting 20–25%; **value supermarkets** (Tesco, Asda) use POR (Profit on Return, ex-VAT), targeting 27–32%. Margins are often blended between on-promotion and off-promotion prices, and the retailer will guide expected basket mix. **Premium independent retailers** like Daylesford may expect margins around 55%. **On-trade (pub) margins** are much higher: independent pubs typically seek 60–75% gross profit (calculated on per-serve pricing, e.g. 10 serves × 6 margin = 60% vs. purchase price). Pubs standard gross profit is 70–72%. **Harrods** specifically targets gross profit of 42–45% and expects back margin of around £1m annually; spirits buyers are nick.fleming@harrods.com and wines buyers are siobhan.irons@harrods.com. A key note: Harrods' vodka and gin sales are weak (c. £3k/week) compared to whisky, Bordeaux and burgundy (£100k+/week), and baijiu and tequila significantly outsell gin and vodka—listing there is a lighthouse for brand and export positioning rather than volume. Members caution that some retailers (e.g. Whole Foods) may not suit alcohol due to margin constraints, and retailers like Cress may demand unsustainably high margins relative to volume opportunity.
What is the timing and magnitude of the expected alcohol duty increase?
As of the discussions captured, the UK alcohol duty landscape was uncertain but members were tracking several potential scenarios. **Anticipated increases:** - A **14.2% increase** was being discussed as a likely figure - Duty per pure litre was cited at **£32.82** (for duty-paid customers) - Per-case duty was calculated at **£45.27**, or **£7.54 per bottle** - The increase was expected to follow **September RPI inflation at 12.6%** (per the Autumn Statement 2022 policy costings) **Timing:** - Members believed the increase would take effect on **1st February 2023** (though some noted uncertainty) - One member flagged that **January NGS (National Guaranteed Shelves?) costs would also increase**, making end-of-December stock clearance particularly attractive - **Page 71 of the Autumn Statement 2022 Policy Costings** was cited as the source document; **Page 63** noted a delay to the reform implementation date to August, which *might* affect the timing - Importantly, **HMT later confirmed to the WSTA that no uprating decision had been made in the Autumn Statement itself**—the decision was still pending, with the Alcohol Duty Review to continue as planned **Strategic responses members discussed:** - Members recommended **moving stock out of bond ahead of the increase** to avoid paying higher duty - Clearing bonded stock the day *before* the duty increase took effect, then raising prices on duty day, was flagged as a tactic - Some considered **taking a loan to move bulk stock pre-Christmas** if the increase was confirmed and the February timeline held - **WSTA membership** was highlighted as valuable for tracking official announcements - Members noted the complexity of **price-marked packs post-duty increase** as a headache to manage **Caveats:** - The February 2023 date was stated with explicit uncertainty ("I think it's February 2023 but might be wrong") - One member noted that **only once they could recall duty being dropped** historically, so increases were the norm - Whether to pass the full increase to customers or absorb some into margin was debated; in the current cost-of-living climate, **most members favoured passing on the increase in full**, as other costs were rising too and any absorption would "just get lost" - Cash reserves were flagged as a constraint for those planning to pre-clear bonded stock
What gross profit margins should drinks brands target when selling through different channels (direct, on-trade, wholesale)?
Typical gross profit margins vary significantly by channel. Brands selling direct (DTC) should target **50–60% gross profit**, while those working through distributors typically see **40–50% gross profit**. **Channel-specific considerations:** - **On-trade (pubs/bars)** — Margins often vary by product within a single listing. Spirit margins may be lower while mixers carry higher margins; the key is ensuring the overall blend works financially. This flexibility can be a useful negotiation tool when pitching new listings, particularly for products that aren't rock-bottom cheap. - **Wholesalers** — Often targeted on average GP across their book rather than individual product margins. Wholesale AMs are typically measured on overall profit vs. turnover, so they may accept lower margins on some products if the basket GP is strong enough. - **Contracted supply** — Route-to-market teams won't sign off prices below a certain margin *unless* they have 100% contracted supply locked in for a fixed period (e.g. multi-year agreements). For larger volumes ("chunky bits of business"), the focus shifts entirely to overall basket GP rather than individual product pricing. **Caveat:** Members emphasised that small per-unit margin gains (e.g. 25p per case, or £0.01 per serve) compound only at significant scale, so don't over-negotiate small margins on high-volume accounts.
Should we charge a single nationwide delivery price or use regional pricing and multiple warehouses?
Members recommend a **single price across the UK**, factoring in a reasonable average delivery cost and absorbing regional variation rather than managing multiple warehouses or regional price tiers. This keeps pricing simple for customers and avoids the complexity of managing distributed inventory or complex tiered pricing schemes.