Cost of Living: One for wine drinkers.

From the Herald Article: More New Zealand wines, cheaper overseas:

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10858442

“Yesterday, the Herald revealed a bottle of Oyster Bay Sauvignon Blanc could be bought in Maryland in the United States for $14.30 – nearly half what it cost at one Countdown supermarket here.”

Poor suckers in Maryland. In Northern Clalifornia, Oyster Bay can be purchased for NZD $11.85 ,or a dollar cheaper if bought in bulk:

  

The usual suspects are all here:

  Nobilo = $10.67 and again a dollar cheaper if bought in bulk. Villa Maria = $15.41, bulk price is $13.88

And the high flyers:
Babich = $17.79; Starborough, $15.41

There are interesting implications in the Wine Index debate. The Herald implies that supermarkets are rorting customers.

“Consumer NZ chief executive Sue Chetwin said wine prices had fallen over recent years due to a market glut, “but nevertheless, you are still paying quite a lot for some wine”. She suspected supermarkets had far bigger profit margins than most shoppers thought.
But a Countdown spokesman told the Herald the shelf price reflected what it paid for the product and the costs of running the business.
New Zealand Winegrowers chief Philip Gregan said there was a “huge variation” between countries when it came to tax and distribution costs. Often retailers, not wineries, were to blame for higher prices.”

 The price disparity between the cost of the same wine between the states of California is easy to explain. I happen to live ten miles away from the distribution center of the Safeway supermarket chain in Pleasanton California. I took these photos in our local Safeway. Some of the US $2.45 price disparity is presumably due to transport costs from California to Maryland. Then there is excise tax to consider

Sin Tax:
Excise Tax, otherwise known as “Sin Tax is an inland tax on the production of certain goods, usually luxuries like¬† tobacco and alcohol. It’s a blunt lever to control the negative effects of over-consumption. The producer pays the tax directly to the government, then tries to recoup it from the customer. However the producer can’t rachet up prices too much because it is a competitive market (many producers and drinkers don’t stop drinking they just switch to cheaper grog. It’s slightly reminiscent of prohibition and indeed when initially first introduced in the U.S. it was repealed immediately. It was re-introduced and is now such an addictive sources of revenue for government that it is firmly entrenched in most states.¬†

From Stuff in 2012: http://www.stuff.co.nz/business/farming/7133878/Excise-tax-call-ignored

“The tax currently sits at $2.72 per litre, which combined with GST and fuel costs, has hard hit the wine industry which is a $1.1 billion annual export earner.”

So here is part of the explanation. Wine produced for export is not subject to excise tax. It is subject to a tax on entry into the states. vis U.S. customs and border protection. I suspect this is less prohibitive than Nz’s on excise tax but am still researching this.

And the simple answer may be the most accurate. New Zealand’s market for wine is just a lot smaller than in the U.S.¬† We pay higher prices for basics such as milk and wine because our domestic market is tiny and taxes impact on the retail price of the local shelf.

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