Cost and Risk Analysis of Exporting Alcohol (Spirits) from Canada to Ireland
Cost Analysis
Nova Scotia Spirit Company is looking into expanding its market by exporting the products to Ireland, which has been identified as the most potential market in Europe. In venturing into trading of the alcohols in Ireland, the company is going to incur several costs and risks. The firm has to manage the cost involved in venturing into the Irish market for the success of the business.
Ireland has implemented a comprehensive environment for corporate tax. Nova Scotia Spirit Company will incur costs in Customs Duty, Excise Duty, and Value-added tax. It charges import duty for companies beyond the European Union. The company will pay for VAT where the value for the goods will be used in the calculation of the VAT. Ireland charges a standard VAT of 23%. The company will rely on the TARIC website to compute the customs duties for each export. The customs duty applied in Ireland is in line with the International Harmonized System of classification of products. The duty for the goods is between 5% and 8%. The company will have to pay extra excise duty in addition to the customs duty due to the exportation of alcohol products. The excise duty chargeable will be dependent on the volume of the sales.
Gin is highly trending in the Irish alcohol market. Nova Scotia should focus on the promotion and advertisement of their brand to offer competition to the other producers. Due to the many restrictions in the advertisement of alcohol products, the company is likely to incur huge costs in the advertisement of the products. There should be huge investments allotted for the promotion of the products in Ireland.
Risks Analysis
The cost of alcohol in Ireland is very low. Alcohol is affordable for everyday users. Men can drink alcohol for as €8.49 while ladies can only take liquor for €5.49. The low costs are a risk to the company as they will incur many expenses in exporting the goods which will increase the cost of goods ratio to the sales. Other companies may beat Nova Scotia spirit though price leadership as the consumers will most likely prefer cheaper alcohol if the quality is the same. The major alcoholic products by the company such as gin and vodka are sold very cheaply in the Irish market posing a significant risk in the competition (Alcoholic Beverages in Ireland, 2003). Also, due to the many alcohol producers in Ireland, Nova Scotia is likely to face considerable competition in the alcoholic market.
Graph 1: Prices of alcohol products in Ireland
Ireland has several regulations regarding the importation of alcoholic drinks (Ewart, 2008). Nova Scotia Spirit Company has a duty of complying with the rules which poses a high risk as the company is not well braised with them. The Integrated Tariff applied across the European Union (EU) to imports outside the EU. The regulations outline the requirements for licensing, the VAT rates, and additional charges.
The consumption of alcoholic drinks especially among the youth has of late been on the fall due to the numerous regulations regarding its use (The Canadian Trade Commissioner Service, 2018). The fall is attributed to the strict rules regarding the advertisement of alcoholic drinks in Ireland. According to the regulations, an alcoholic ad may not in any way feature persons under the age of 25 years or appeal to the young people. The rules may result in low alcoholic drinks in Ireland.
References
Alcoholic Beverages in Ireland (2003). Journal of the Institute of Brewing, 109(1), 87.
Ewart, R. H. (2008). Quarantine and Import Regulations as they Affect. International Zoo
Yearbook, 3(1), 318-320.
The Canadian Trade Commissioner Service. (2018). Ireland- Market Overview.
http://www.tradecommissioner.gc.ca/ireland-irlande/market-facts-faits-sur-le-marche/0001119.aspx?lang=eng
