Tuesday, 10 January 2012

Price of Angostura Bitters set to skyrocket?


The oversized label apparently happened
by accident with a faulty batch. When
no one corrected the mistake in the next
 batch the bottling plant ended up using
the dodgy batch, and it quickly became
iconic.

A lawyer friend of mine (yes, it is technically possible) asked my opinion back in August for a document he was preparing to challenge a proposal to lift the exemption from excise duty on Angosura Bitters. Angostura is actually 44.7% ABV, so it technically a booze, but since 1970 it has been exempt from UK duty—according to a press release from HM Revenue & Customs, this measure was introduced to help the economy of Trinidad, where it is made. HMRC now feel that that help is no longer needed.

My chum’s argument, however, was that the reason Angostura is not taxed in the UK “and most other countries” is that it is used to add flavour rather than as an alcoholic drink in its own right, and that the alcohol present is simply a preservative. Since it is used in such small quantities, he estimates that a 200ml bottle will contain over a 100 doses and, even in a domestic context, will be used in drinks for at least a dozen people—and obviously far more in bars. Since some 240,000 bottles of Angostura are imported into the UK each year, the tax change will affect an estimated 3 million people here.

HMRC estimates that the lifting of tax relief will raise the price of a 200ml bottle in the UK by £2–3, which is 35–50%, and as a result will cut UK sales by half. It’s worth noting that the turnover of the manufacturer, the House of Angostura (there’s an idea for a theme park ride), represents 3% of Trinidad and Tobago’s entire non-petrochemical manufacturing GDP.

Like many traditional bitters and liqueurs, Angostura started life as a medicine, invented by German ex-pat Johann Siegert in 1824. Siegert had gone to Venezuela to help Simon Bolivar fight the rule of the Spanish throne and Bolivar appointed him Surgeon-General to the military hospital in the town of Angostura. He created the bitters from herbs and roots* to treat fevers and stomach disorders afflicting the troops, and the tincture also became popular with seasick mariners. By 1850 demand outstripped supply and Siegert resigned his commission to focus on the bitters. After the doctor’s death the torch was carried on by his son, Carlos, a bon vivant and dandy who exhibited the product in London—where it was a hit with gin—Paris, Vienna, Philadelphia and Australia. Fearing the political instability of Venezuela, Carlos and his brothers moved the business to Trinidad, where it had remained, attracting various royal warrants and even a visit by the Queen in 1985.

Of course nowadays there is a huge number of new bitters on the market, many focusing on one particular flavour, such as orange, grapefruit, rhubarb, pepper or chocolate. It’s worth noting that none of these rivals gets the same tax relief—just Angostura. But when there was a shortage of Angostura in 2009 there was a panic among the bar community: clearly nothing else could quite take Angostura’s place. This may be, to one degree or another, a matter of history and culture—most normal people have heard of Angostura but are almost certainly unaware of any other bitters. Yet there is more to it than that: there really is something of the magic formula to Angostura. If I myself were on a desert island and, for some reason, were only allowed one type of bitters, it would undoubtedly by this one.

That iconic, if wordy, label. Click to enlarge

My friend’s argument was that a 50% loss in UK sales would actually mean a net loss to the Treasury, partly because the gain in excise duty would be offset by the lost VAT, reasoning that because of Angostura’s uniqueness there would be no alternative product purchased in its stead. I think that for most consumers this is probably true, given that, as mentioned above, they are probably not aware of any other bitters, and are unlikely to come across them in their normal shopping environment. Moreover (and here’s where the argument gets a little more speculative), he contends that the majority of Angostura goes into Pink Gins: he may have a point here, when you consider the hinterland of drinkers of a certain generation, compared to the relatively small community of cocktail-heads.

“It is important to remember that the Pink Gin occupies a unique position amongst alcoholic drinks,” he argues,” being the only way that the vast majority of drinkers will drink a very short, almost neat, gin.**  This is in contrast to other major spirits, such as whisky and vodka, where drinking neat, or with just ice or a small splash of mixer, is much more common.

A pink gin yesterday
“In addition, the drinking of Pink Gins is a particular social action, particularly amongst those who are its regular devotees, for which there is no direct substitute.” He estimates that 20% of Pink Gin sales will be entirely lost, rather than the drinker switching to something else.

So a slump in Angostura sales will lead directly to a slump in gin sales, he reasons, meaning more lost revenue for HMRC. Moreover he believes that those Pink Gin drinkers who do switch rather than abstain will most likely move to premium vodkas made outside the UK, rather than gin made here, leading to yet more lost tax. He also contends that 18 UK jobs will be lost on the manufacturing side and 79 in the bar sector. Overall he reckons the Treasury will be down by some £2.8 million.

His plan was to submit his proposal anonymously under the banner of the Pink Gin Alliance, which tells you something about the degree of tongue-in-cheekery going on here. In any case, the government have evidently not been swayed by his argument, and the lifting of tax relief on Angostura Bitters will come into force in April 2013. Better start stockpiling now.

* The story goes that only about five people in the world know the formula. Some years ago when the writing on the piece of paper locked in a New York vault began to fade, the only other copy was exhumed and the recipe copied on to another sheet, which was then cut into quarters, each quarter sealed and dispatched separately by plane to New York. Who knows if any of this is true but it’s a good story.
** In fact recipes vary. Some people shake gin and Angostura with ice and serve in a Martini glass. My father-in-law likes his half-and-half with water. But the Pink Gin is undoubtedly historically significant, being the signature drink of the Royal Navy, allegedly because the gin was drunk to make the bitters (taken medicinally) more palatable.

8 comments:

  1. I once asked for some Angostura Bitters with my gin and tonic in a bar and was told "sorry, we only have John Smiths".

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  2. I enjoyed reading this. I must, however, point out (in case there are some that don’t know ) that Angostura Bitters (AB) is standard in several other drinks . . the Manhattan and the Champagne Cocktail to name just two . . so your estimate of the loss is may well be understated.
    Or is it? Perhaps we're not looking at this correctly. HMRC are clearly reckoning that sales will not suffer - they are thinking that for all these years lovers of AB were an untapped source of revenue. They are confident that such a price hike will hardly cause a stir . . and they are probably right. AB is worth it and lovers will not shy away. There is, after all, only one AB . . . worth much more that we realise.
    A pity that it will be the HMRC that benefits most and not the company in Trinidad that makes it.

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  3. Of course there are many cocktails that include Angostura and I, like you, do not think that there is a simple substitute. But I was interested to see that my lawyer friend was arguing that the vast bulk of Angostura Bitters consumed in this country went into Pink Gins. I hadn't thought about it this way before—but in terms of bulk he may well be right…

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  4. The only sub I have found is the Van Wees Angostura Bitters, in some cocktails it works even better.
    After the scare a few years back I've ended up with a lifetime supply, mostly thanks to gifts!

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  5. I asked for lemon lime bitters in a pub and they'd never heard of Angostura. There was a bottle on the shelf that was so old that the label was yellowed from nicotine and unreadable but from the shape of the bottle we guessed it was Angostura. Obviously not much demand there.

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  6. David, I'm amazed that Van Wees can get away with calling it that!

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  7. There is actually no vat being charged on Angostura bitters so there will be no loss of VAT.
    janny

    http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000118&propertyType=document#P314_17347

    3.7.3 Drinks which are not beverages
    There are a number of types of drinks which do not fall within the above definition of a beverage. These (and the mixes etc for making them) can be zero-rated. They are:

    ■plain soya or rice milk (unflavoured and unsweetened);
    ■coconut milk;
    ■meal replacement drinks for slimmers or invalids;
    ■unfermented fruit juice intended specifically for sacramental purposes (see paragraph 4.7); and
    ■Angostura Bitters.

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  8. Bulkwineandspirits.com is a portal to promote trade relations between professionals and bulk wine, alcohol derivatives, and encourage business transactions between them. bulk alcohol

    ReplyDelete