Weathering the storm

This summer’s washout has affected the drinks industry both practically and metaphorically, but there are occasional bright patches, according to Spiros Malandrakis, senior alcoholic drinks analyst at Euromonitor International.

An array of images could fittingly summarise the state of the UK alcoholic drinks market in 2012. Rain-soaked plastic bunting reflected in the muddy water of a widening pothole would be one. The vision of an overcrowded train carriage swiftly passing by a fading Olympics poster could also do the job.

Perhaps Andy Murray’s tearful portrait following his defeat in the Wimbledon final would suffice. But beyond sensationalist metaphors, this year’s Jubilee-induced optimism and feverish Olympic aspirations are failing to turn the tide for the troubled domestic alcoholic drinks industry.

HERE COMES THE RAIN

Macroeconomic indicators make the weather appear positively Mediterranean in comparison. The UK economy officially slipped back into recession in April 2012 and it is expected to mostly flatline for the year. Unemployment is at a near 20-year peak, with youth joblessness the highest since records began in 1992. Household final consumption expenditure fell by 1.7% in real terms in 2011 and is expected to decline by a further 1.5% in 2012.

Business investment has weakened appreciably, house prices continue to slide and consumer confidence has plummeted. And this is just with regard to top line socio-economic undercurrents.

The neo-prohibitionist rhetoric that has been creeping into the public sphere over the last couple of years appears to be gaining traction. The government’s punitive tax escalator regime continues to squeeze the drinks industry’s margins hard as its laissez-faire promises give way to a more interventionist approach.

Scotland is ignoring the EU competition authorities’ protestations to proceed with the legal measures that will pave the way for minimum pricing. From a lowering of the drink-driving limit to the abolition of multipack deals, government agencies and health advocacy organisations seem to be mounting a full-frontal attack. If only the industry did not also have to face its own shortcomings and inherent maturity issues.

According to Euromonitor International, total alcoholic drinks volumes are set to drop by 1% in 2012, an improvement on 2011’s dismal 3% decline, but definitely not a figure prompting many in the trade to break out the Champagne.

And while Champagne sales themselves are set for a relative rebound with less than 2% total volume growth tipped for 2012, a cheery attitude is in short supply.

Overall, beer is set to suffer over a 2% total volume drop, still light grape wine will see further acceleration of its chronic decline, the brandy and Cognac category is expected to remain trapped in its downward spiral, while spirits can at best hope for an anaemic 1% total volume gain for the year.

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