Marketing

UK price increases slow with Budget easing

New research from the UK’s Wine and Spirit Trade Association has shown price increases in the off-trade slowing significantly since the Government there scrapped the alcohol duty escalator, cut beer duty and froze duty on spirits in last year’s Budget.

The research, which includes a full year of data since then, found that the average cost of beer had fallen by 1% in the off-trade after two successive beer duty cuts.

Wine and spirits, which received an inflationary duty rise and a freeze respectively, both grew by just 2% – less than half the annual growth rate seen in the previous two years (and the lowest increases since the WSTA market report began five years ago).

With taxes accounting for nearly 80% of a bottle of spirits and 60% of a bottle of wine the (now-abandoned) Alcohol Duty Escalator meant that alcohol prices were higher than other food prices.

The latest price survey shows that the lower duty rates have been passed onto consumers. The most recent Budget cut duty by 2% for beer, spirits and cider while it froze wine duty.

“It’s welcome news for consumers that the Government’s decision to scrap the Alcohol Duty Escalator and take the first steps towards rebalancing the duty regime is being passed on,” said the WSTA’s Chief Executive Miles Beale, “The rates of price increase in the off-trade are the lowest we’ve seen for some years.

“Whereas average prices for wine and spirits have been increasing by about 4% or 5% every year due to the Escalator, what’s surprising is how quickly its abolition has fed through to help prices grow much more slowly.”

The results mean that the 2015 Budget measures announced by the UK Government recently should see price increases slowing further.

 

In other key highlights:

 

  1. Sparkling wine sales continue to rise exponentially with a 26% volume increase in the off-trade and 16% in the on-trade, outstripping Champagne which saw a small decline of 1% in the off-trade and a 5% increase in the on-trade
  1. Wine continues to face a tough trading environment with still wine volumes down 3% in the off-trade and 2% in the on-trade, making this the fifth straight year of declines across the trade. Total wine volumes are down 14% in the off-trade and 10.5% in the on-trade since 2011
  1. Spirits volumes climbed slightly in the off-trade thanks to growth in both gin and vodka while volumes declined by 4% in the on-trade with declines of 6% and 5% for vodka and whisky respectively. Gin bucked the trend with an 8% increase and Tequila saw a 17% rise
  1. Volume sales in the on-trade continue to decline but the 2% fall was the lowest annual fall in five years and overall values were up 2%, the first rise since 2013, showing signs that the market may be stabilising

 

“While it’s welcome that the volumes are holding steady in shops and supermarkets and the decline in the on-trade is slowing, it’s still an incredibly tough trading environment for most businesses,” commented Miles Beale, “While sparkling wine continues to be the standout category with some impressive growth, still wine is still seeing a marked decline and highlights how the Government, having left it out of the duty cuts last week, needs to go further to support the industry.”

 

 

 

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