Budget 2018 to increase cross-border trade?

A weakening of consumer confidence during the second half of 2016 following the Brexit referendum, coupled with a drop in the value of Sterling, fuelled a rise in cross-border shopping, particularly in the run-up to Christmas and meant RoI off-sales were not as robust as in the previous year, according to market research provider Euromonitor which added that overall volume sales of beer here recorded a slight decline in 2016 as a result.

Consumers were also more health-conscious, choosing to reduce their consumption and/or opt for lower calorie offerings.

Beer prices in Ireland remain among the highest in Europe due to the high levels of VAT and excise duty. An increase in excise did not occur in the 2017 Budget as it would have sparked an increase in cross-border shopping following the Brexit referendum and the subsequent drop in value of Sterling, claims Euromonitor.

But while craft beers continued to perform well private label sales declined sharply last year as consumers traded up to higher quality products, away from economy brands.

“However,” stated Euromonitor, “an interesting trend is developing within the category, with some retailers seeking craft brewers to produce their private label ranges. Lidl launched its Crafty Brewing Co private label in late 2014, offering a range of domestic and imported products. However the company announced in July 2016 that it was adding several new craft cider brands to its range including several Irish brands such as O’Hara’s and McGargles”.

Euromonitor predicts that total beer volume sales will remain fairly flat, reaching 431 million litres by 2021. A modest CAGR of 1% is anticipated for the off-trade, while a marginal CAGR decline is predicted for the on-trade.

There are several threats to the category’s growth, with the most obvious being the uncertainty surrounding Brexit.

When Britain finally leaves the European Union, this could have a negative impact on the Irish economy due to its recovery being highly export-driven, particularly in the long term.

“In the short term, in the off-trade retailers will have to face the challenges of currency fluctuation and the instability of Sterling, enticing consumers across the border. Ireland’s excise duty is also another challenge that the industry faces as it’s currently one of the highest in the EU.”

Average unit price is predicted to record only a modest rise over the forecast period. Despite beer prices here already being some of the highest in the EU, the government could impose hikes on excise duty and introduce Minimum Unit Pricing in the coming years. However Brexit and currency fluctuations mean that this is unlikely as it would drive consumers over the border to purchase beer at cheaper prices, states Euromonitor.





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