Why does some gin cost so much?
You only need to have a look at the shelves in your local off-licence, supermarket, or wine merchant to see that there is a huge difference between the cheapest and most expensive gins out there. We want to explain where that cost comes from, so you have a better understanding of where your money is going.
We’re going to explain why cheap gin is cheap, and may not be worth it, and why some gins are expensive, but definitely worth it.
After all, the more you know, the better the decision you can make!
The gin – from 40p to £5+
This may be a surprise, but for some brands, the actual gin in the bottle is one of the smallest costs. There are many factors that can influence how much the gin costs, although the two main factors are production and ingredient costs. To explain properly we’ll have to give a very brief overview on how gin is made.
All gin sold in the UK must be made from neutral grain spirit, this is alcohol which has been distilled up to at least 96% pure alcohol. At this point all flavour of the raw ingredient has been stripped out, although they are still detectable by people who are experience at spirit tasting. Reaching this level of purity is difficult and needs lots of space and expensive equipment, meaning that it is out of reach for lots of craft distillers. On the other hand, the bigger distilleries can produce hundreds, if not thousands of litres of neutral grain spirit every day.
In the real world what this means is that many smaller producers buy in their base spirit from large distilleries, which can be up to £2 per litre not including any taxes (which we’ll get onto later…) depending on demand.
Considering that the cost of producing neutral grain spirit once a distillery is operating is literally pennies, that puts the smaller producers at a distinct disadvantage.
Once you have then then the next step is to make the gin! There are several decisions for a producer here, from which botanicals to use to how best to extract their flavours. The cheapest route is to simply add some juniper oil, artificial flavourings, and water, although this doesn’t generally give a well-rounded enjoyable gin. This is called “cold-compounded gin” by those in the trade.
At the other end of the scale, distillers can use rare (black truffles), expensive (saffron), or plain odd (wood ants?!) botanicals and extract their flavours through further distillation. The cost of the botanical can have a huge impact on the price of the gin. For example, saffron can cost several thousand pounds per kilo, or yuzu, a Japanese fruit which is best when shipped from Japan.
Other than cold-compounded gins, then the neutral grain spirit needs to be redistilled to make sure the spirit is colourless and with no bits floating in it. This can add another cost depending on the style of still and infusion used. A simple still will do the job just fine, but there are ways to have greater control over extracting flavours.
The distillery who produces Hospitality Gin, Cooper King Distillery, use vacuum stills to extract flavours from the botanicals. These use some pretty cool science to give the distillers more control over which flavours are extracted and allow them to use delicate botanicals, such as lavender, which would be destroyed by traditional distillation methods. The cost of this added control is that they are considerably more expensive to buy and run and so tend to operate on a significantly smaller scale.
So, a simple cold-compounded gin may only cost as little as 40p of the cost, while a vacuum distilled gin using expensive botanicals and made using high-quality neutral grain spirit could be several pounds.
The bottle – from 20p to £5
Economies of scale come into play again here. Larger orders almost always result in a cheaper unit price, so the same bottle can be much cheaper when you’re buying hundreds of thousands of them rather than hundreds!
On top of that there’s a big gap between the cheapest bottles at less than 50p, which you’ll usually see supermarket value brands in, and more intricate bottles which can be a few pounds per unit. For bespoke made bottles, a mould needs to be made which can cost thousands.
Sealing the bottle also adds a cost, a screw cap can be less than pennies bought in bulk, whilst a wooden cork could be 70p. Similar to the cap choice, a simple label could be nearly nothing, while fancier labels with foiling, embossing, cut-outs, etc. can end up at nearly £1 a piece.
The tax… - at least £10
The bottom line is that a standard 700ml bottle of 40% ABV (alcohol by volume) gin, or any other spirit for that matter, is liable for £7.74 of alcohol duty, which producers then have to pay tax on taking it up to £9.29. A tax on a tax! This is based on the amount of alcohol in the bottle so the stronger the spirit, the higher the tax on it.
On top of that, the price you pay when you buy includes VAT at 20%. This isn’t as reducing the price by 20%, to find the price excluding VAT you actually have to divide by 1.2. For every £10 you spend, £1.67 goes to HMRC.
So for a 500ml bottle of Hospitality Gin at 42% ABV at £34.95, the tax man is taking nearly £13. That's over a third!
For a value brand gin at 37.5% ABV costing £10 to buy, that is £1.67 of VAT and £8.71 of duty taking you up to £10.38. 38 pence more than the price you paid in the first place…
The retailer's markup
Before we get into this, we just want to say that if you want to support a brand, especially small independent brands, then the best way to do that is to buy directly from them. Some shops, especially the larger chains, demand such low prices that the brand may only make pennies on a bottle in exchange for the visibility of being on their shelves.
In fact, that’s all we really need to say here. The reason that big supermarket chains can list gins cheaper than elsewhere is that that they can demand lower prices from the brand and make their profits on other products.
So, in conclusion
At the bottom end of the range, a bottle of gin may cost 50p to make and incur £10 of tax. The top is open ended but using reasonable figures a premium well-made small batch gin could cost upwards of £10 to produce and include £16 in tax. And that’s not including paying for any marketing, salaries, or delivery!
So as you can see, there’s a lot of factors that influence how much a gin costs to produce, from as much as £10 to as little as 50p per bottle. Tax also makes up a large part of the cost, regardless of how much the production costs.
Hopefully now you have a better understanding of where your money is going when you buy a bottle of gin!