July 2017

Gin and whose tonic?

Published on: 24 Jul 2017

Drinking a lot of gin may not be good for you but it looks as though it is good for the tax authorities.

There’s been a change in the drinking habits of people in the UK.

Gin is suddenly very fashionable, especially the flavoured gin made by smaller distilleries. Last year 40 new gin distilleries opened up in the UK bringing the total distilleries crafting gin to 273.

This has made the tax man very happy. The reason he is happy is that there is a very high rate of VAT and Duty on hard spirits such as Gin compared to less alcoholic drinks such as beer and cider. VAT and Duty on a bottle of Gin accounts for more than 75% of the cost of that bottle and with designer gins such as Death’s Door gin retailing at £55 then that’s a pretty good return for the tax authorities.

This increase in demand for gin has resulted in duty receipts from spirit sales overtaking duty receipt from beer sales last year for the first time.

In 2016 the tax authorities collected over £11 billion from alcohol sales which is an equivalent amount to what a 2p increase in income tax would create.

So, they you go, the next time you wake up in the morning with a hang over from drinking too much gin at least you’ll know that the money you spent has proved a tonic for the government and helped increase their tax receipts.

What was Roger Federer wearing?

Published on: 17 Jul 2017

Roger Federer became arguably the greatest ever male tennis player when he won a record 8th Wimbledon title by beating Marin Cilic but did you see what he was wearing?

Now, I’m not talking about his shoes, shorts or top but rather something less associated with the sport of tennis.

Sponsorship is big business for the top sports stars and as far as Mr Federer goes he’s doing pretty well when it comes to sponsorship. Forbes named him as the world’s highest paid tennis player last year when his prize winnings and sponsorship deals earned him over £50 million.

Winning Wimbledon was a good opportunity for Federer to add to his earnings (the prize money for winning Wimbledon was £2.2 million this year) but it was also a good opportunity for the sponsors to be associated with such a successful person (and of course hope that people will buy more of their products!)

Federer has a number of sponsors ranging from Nike to Credit Suisse but back to what he was wearing though and did you notice the watch that he wasn’t wearing during the match but was wearing when he was presented with the trophy?

Another of his sponsors is the Swiss Watch Manufacturer Rolex and after Federer won the match he quickly put his £6,000 Rolex Oyster Perpetual Datejust II onto his wrist before the presentation.

The end result was no doubt a very happy Rolex company whose watch was on the front pages of all the newspapers.

Some great publicity for the company.

Will we see this trend for tennis players putting designer watches on before they are presented with a trophy expand to other sports?

Will we see the captain of the winning team at next year’s football World Cup wearing a watch when he lifts the trophy??

The battery is going on my phone…

Published on: 12 Jul 2017

Do you have a phone?

My guess is that most of you own a mobile phone.

Now, if you look at your phone is it a Vertu branded phone?

Probably not.

Most of you will own a Samsung, Apple or Nokia. Some of these phones aren’t cheap – the latest top of the range Apple iPhone for example retails at over £900.

But if you’re holding a Vertu branded phone then the chances are that it cost a lot more than the top of the range iPhone.

Some of the Vertu range of phones were on sale for £40,000 a few years ago. That’s a lot of money for a phone. It was a luxury brand aimed at ultra-high net worth individuals who would be willing to spend more than the cost of a new Porsche Cayman sports car on a phone.

Perhaps surprisingly it did rather well a few years ago. In 2007, it generated £150 million of sales.

Perhaps unsurprisingly though, there weren’t that many individuals with “more money than sense” who were willing to pay that amount of money for a phone. The company has had a rough ride over recent years as it’s hard to justify paying £40,000 for a phone that has been criticised in a number of areas. The Financial Times were quoted for example as saying the Vertu phones were “technologically modest”.

After originally being set up by Nokia in the 1990s with the strategic aim of building a niche market of hand made luxury phones it was sold to a Hong Kong hedge fund manager for €45 million in 2015.

In March of this year it was then sold to a Turkish businessman for €1 (he agreed to take on the company’s debt of €13 million as part of the deal).

Unfortunately though things have got worse and the company has recently gone into receivership after running out of money to pay staff and suppliers.

An interesting case study which appears to prove that being expensive by itself isn’t sufficient to make a differentiation strategy successful.

The ExP Group