The only way is up for the UK drinks trade

In what was an Olympic year for Britain, how did the UK drinks trade fare in 2012?

Champagne-Bottle-PoppingPerhaps the most significant milestone occurred at the end of the year, when the average price of a 75cl bottle of wine in the UK off-trade inevitably broke through the £5 barrier to £5.03 – a figure that is expected to rise to £5.10 by the end of this year. According to Accolade Wines’ 2012 WineNation UK report, 60% of the £5.03 cost now goes to the Exchequer.

Interestingly, since 2002, 80% of the rise in wine prices has been due to tax increases. Excise duty currently stands at £1.90 per 75cl bottle of still wine; a figure that has risen by 60% in the past nine years, with the rate standing at £1.19 in 2003. Whack on to that VAT at 20% and it’s no wonder the average price of a bottle of wine has tipped over the £5 mark. The industry shelled out a staggering £16 billion in wine tax last year, equivalent to £316 per adult living in the UK, and yet there is still a vast amount of wine on sale for under £5 a bottle, illustrating the willingness of the supermarkets to operate at a loss to generate sales; a practice the UK government is keen to stamp out.

Sparkling and fortified wines had an even tougher time of it, with excise rates currently fixed at £2.43 for a 75cl bottle of sparkling wine and £2.53 for a 75cl bottle of fortified wine. Spirits fared the worst of all in the excise lottery, with a 70cl bottle above 37.5% abv carrying a £7.04 excise cost. And all of these costs are before customs duty is even taken into account for wines and spirits imported into the UK from outside the EU.

STILL DRINKING
Despite price increases, Brits displayed an unquenchable thirst in 2012, splashing out £40.7 billion on alcoholic drinks last year, with annual consumption figures currently standing at 27.9 litres of wine per person and 106 litres of beer. As it stands, the drinks trade is helping to keep 650,000 people in employment in the areas of drinks production and retailing, expanding to 1.1 million in the wider drinks industry. In terms of wine consumption per country, the UK is currently in sixth place behind China at number one, the US at number two, and France, Italy and Germany in third, fourth and fifth place respectively. As far as spirits consumption goes, we’re way down the list in 14th place, with China, Russia and India taking gold, silver and bronze. Our thirst for Australian wine showed no sign of waning in 2012, with Australia leading the UK wine imports at 25m cases, and Italy, France, the US and Spain following close behind.

The off-trade experienced both highs and lows in 2012, with Nielsen reporting that volume sales were down 6.1% on 2011, while value sales were flat. Bucking the trend, spirits performed comparatively well over the Christmas period, up 1.7% in value, but down 3.5% in volume, putting the category ahead of total drinks sales. Meanwhile, beer, cider and RTDs had a tougher time of it over Christmas, with year-on-year volume sales down 8.5%, 7.2% and 16.4% respectively. “While the off- trade had a tough year in 2012, there were some pockets of strong growth, notably for sparkling wine, British wine and golden rum,” says Helen Stares of Nielsen, adding, “Wines over £7 a bottle also performed well, with volume growth up 19% on a year ago, showing that even during a recession, premium products can beat the market.” This positive trend for trading up hints that consumers might finally be catching on to the benefits of upping their bottle spend, which may be the result of a developing “treat” culture, where consumers increase their bottle spend on wines to enjoy at home with friends, justifying the extra few pounds on the savings made through not going out. Though this development wasn’t to the detriment of the on-trade, as consumers also upped their drinks spend for their “big night out”, treating themselves to premium wine and spirits on the occasions they did decide to dine out.

One Response to “The only way is up for the UK drinks trade”

  1. Glugger says:

    These duty rates quoted are pre-Budget …

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