Since the hike in liquor excise duties announced in Budget 2014 less than a week ago, imbibers across the spectrum have been voicing their disappointment and fears.

These include Penelope Wong, 32, a regular at craft cocktail bars who said she was unnerved about possibly paying “a few dollars more than the S$30 I am already forking out for my favourite glass of vodka martini”. And many coffee shop regulars have already decried the 50 to 60 cents increase per bottle of beer as unacceptable.

Interestingly, that coffee shop beer hike is beyond the amount consumers would have to bear even if the additional duty was fully passed on to them. Based on the Ministry of Finance’s (MOF) assessment, even if the additional duty is fully passed on to consumers, the price of a typical can of beer (323 ml) should increase by about 20 cents, while a typical bottle of beer (663ml) should increase by only about 40 cents at coffee shops.

But such places are also where consumers will generally fill the pinch more, explained Howard Lo, owner of Tanuki Raw and Standing Sushi Bar, who is slated to open a tasting room and cocktail bar, The Secret Mermaid, on March 3.

“It depends on where the folks are drinking. I think at the hawker centres and budget drinking places, the customers will feel that increase more and that may affect their decision to have one more beer. But at the high-end cocktail bars, patrons are already paying well above S$20 for a drink, so I imagine they won’t notice it as much,” Lo said.

BY THE GLASS

What is more important, perhaps, is the fact that the tax is a duty on alcohol, proportionate to the amount of alcohol in the drink.

As such, the excise rate for a bottle of chardonnay with 12.5 per cent alcohol per litre has gone up from S$70-per-litre-alcohol to S$88 at the current rate. This would equate to a 6.7 per cent increase, or, S$1.81 rise in price for the 750ml bottle of white wine.

Even so, same wine retailers have opted to absorb the duty increase for now. Taberna is one such outlet, saying it would do so until March 20. After that, the “average” S$30 bottle of wine from the merchant will cost about a dollar more.

At Wine Culture, the wines that will be affected by the hike in duties are those priced between S$20 and S$80, said its Executive Director Renny Heng. “The price increase will be at about S$2 per bottle. As for wine by the glass, there will be a slight increase, especially in the lower-price categories.”

Speaking of drinks by the glass, pricing already varies quite a bit across a myriad of categories. Lo, who also co-owns import company Liberty Spirits Asia, said: “Since every importer is getting hit with the increase, everyone buying from that importer knows exactly how much the duty has gone up by, so an importer can’t unjustly raise prices even more than the additional levy as it would be obvious that it is trying to take advantage of the situation — versus a restaurant (or bar) which can raise prices as it’s not as transparent to an individual consumer.”

Richard Sim, owner of nine-year-old CU, a bar on Ann Siang Road, explained that selling drinks at the same price would incur a loss in profit. His modest set-up which has maintained its price points for the last three years, carries a range of spirits including a few upmarket labels.

“Drinks in Singapore are already so expensive,” he asserted, adding that he has decided to absorb the price increase despite the dip in profit in the hopes of keeping his regular clientele.

It is a strategy that Lo considered to be a gamble.

“The fact is that the price will go up for the proprietor. If they want to keep drinks at the same price and absorb it, then they lose margin selling the same amount of drinks,” he explained. “Whether people might feel like they’re getting a better deal if the prices haven’t changed — while other bars have (increased their prices) — then maybe that will bring in more customers.”

“Ultimately, by the time it gets to the consumer, it’s not going to be such a drastic price difference as to make someone drink less,” he added. “If I’m craving a drink — or three — and I’ve been paying S$10 each, is the extra S$1 for each drink really going to deter me? Probably not — especially after the first drink.”

FEELING THE REAL IMPACT

The strong initial reactions to the rise in liquor excise duties may be somewhat premature, because even suppliers are still considering how they might want to balance their profit margins.

“We have yet to receive pricing updates from all our wine suppliers. We are waiting to receive a full report before making any final decisions,” said Ng Khee Siong, General Manager of Amara Singapore. “Despite the increases, we are considering maintaining some of our popular promotions such as our Wednesday Ladies’ Night at Element On Tras Street, where cocktails or champagne are sold at S$2.98 each — a gesture we believe our customers will welcome.”

Others like minted upscale cocktail bar L’Aiglon on Neil Road have already begun adjusting to the change. But like the big boys in the market, there is a bigger profit margin to work with.

Prices by his suppliers, said owner Pierre-Emmanuel Plassart, have already risen by S$2 to S$7 a bottle, depending on the brand. “I’m going to try to keep the prices as attractive as I had intended them to be, but it will be tough not to increase prices slightly,” Plassart shared. “At L’Aiglon we use premium spirits in our cocktails, so to maintain the same alcohol pours and quality of the drinks, my average prices will have to go up slightly.”

Plassart said his current price range of S$18 to S$22 would most likely increase to S$18 to S$24 come April. “Most suppliers already put into effect the new prices. Some other suppliers are giving us a month to see the real impact,” he said.

This impact, added Plassart, would come from those purchasing wine and spirits by the bottle. “Prices are up S$5 on average for bottles wholesale. To keep the same margin, I’ll definitely have to increase the price per bottle,” he said.

By and large, Plassart said champagne prices here ought to remain the same — S$150 for a Billecart-Salmon Brut Rose, S$250 for the Ruinart Blanc de Blanc and S$390 for a Krug Grande Cuvee. Although the same can’t be said for spirits such as gin and vodka. “On the super-premium and ultra-luxury brands, I don’t apply the same margin. You can’t do an increase of four or five times on a bottle that is already very costly, so my margin will be much slimmer, and the impact for the customer on those types of bottles will be less.”

Others in the food and beverage industry will also have to be vigilant and creative.

“Basically, this came as a major blow to the F&B industry, as it is already so hard for businesses to run due to severe manpower shortage as well as high rental costs,” said Cynthia Chua, CEO and founder of Spa Esprit Group, which boasts House, Bochinche and Tippling Club among its varied F&B ventures. “This definitely puts major stress on an already stressful and challenging industry.

“At the moment, we will not be raising the prices for alcohol, as we are trying to prevent the increase being passed to the consumers,” she added. “But we will need to monitor the situation and make adjustments if need be.”