UK market returns to modest growth
A combination of factors including duty cuts and lower inflation has seen UK price inflation slow considerably, particularly in the off-trade. While this matches what’s happening with overall inflation, alcohol inflation this time last year was around double CPI inflation at 4% due to the lingering effects of the Alcohol Duty Escalator.
The overall picture is positive but the market remains fragile with many categories continuing to face tough trading conditions, reports the WSTA, adding that the wine market remains in overall decline with volumes falling by over 2% in the year. Wine volumes have not shown overall growth since 2010 and in that time the market has declined by nearly 15%.
“It’s welcome news that consumers are benefitting from lower taxes and the impact of lower inflation,” commented the WSTA’s Chief Executive Miles Beale, “It’s clear that the retailers and producers are passing these on.
“While this is a positive development, the market remains fragile and a recovery unsure – with volume growth very low. The levels of taxation for the wine and spirit trade remain high in absolute terms. As we see the benefits of lower food and fuel prices beginning to recede there is a real prospect that the market could tip back into decline.”
He continued, “The wine market in particular continues to fare less well with further volume decline for wine in both on- and off-trade. This highlights the concern over the Government’s decision not to include wine in the 2% alcohol duty cut for all other products. Although the freeze on wine duty was an improvement the WSTA will continue to make the case to government for equal support for the wine industry and the 270,000 jobs in the UK that it already supports.”
Key highlights of the WSTA report include:
- Volume and value in the off-trade grew by 2% showing that prices remain broadly the same as this time last year;
- Beer (3%) and spirits (3%) as well as sparkling wine (28%) and Champagne (2%) led the growth in volume, while still wine (-2%), fortified wine (-5%) and cider (-1%) all declined
- Volumes declined in the on-trade by 2% and value increased by 2%
- Beer (-2%), wine (-3%) and spirits (-3%) led the decline with only cider (1%), sparkling wine (20%) and fortified wines (5%) showing any growth
- Sparkling wine continues to be the standout category with growth of 20% in the on-trade and 28% in the off-trade, with volumes increasing by around 29% in five years
- Spirits in the off-trade showed strong growth in the past three months with a 6% volume increase; this includes the period following the 2% spirits duty cut.
Total volumes (000s HL) on- and off-trade combined Q2:
Volume decline 2010-2015 = 10.8%