Wine sales set to drop by 10%

08 March, 2013

Wine sales are set to plunge by 10% over the next three years due to duty hikes and the pound’s continued weakness, a leading supplier has warned.

The latest Nielsen figures show wine volumes have dropped 2.7% to 8.9 million 9-litre cases (52 weeks to December 29, 2012) and Steve Barton, director at Brand Phoenix, predicts more consumers will be driven out of the market by hikes which have seen the average bottle price rise 25p to £4.98 over the same period.

Barton estimates a further 9 million 9-litre cases-worth of sales will disappear over the next 36 months as a result of the continued duty escalator, which will see another 32p slapped on a bottle of wine by 2015, taking the price to £5.30 before VAT and other cost increases.

Barton said the stark figures showed the UK trade was entering “the dawn of a new era” where suppliers had to readjust their models and prepare for tougher times ahead as inflation grows and the pound remains significantly weaker than the currencies of the major wine trading nations.

He said: “In the past 12 months, the wine market has lost nearly 2.5 million cases – that’s the equivalent of the sales of both Germany and Portugal combined.

“In 2013 we are in a different era to that of 2010 – you simply cannot compare the state of the trade now to what it was then. This is a new reality and the trade has to wake up.

“Everyone says not to be negative about

the UK when, in fact, suppliers such as us and Pernod Ricard are still investing in the UK and in our brands.

“We are proving our support to the UK, but you have to be realistic and find new ways to trade. The most progressive players have moved their production models to bottle in Europe to allow for cost-effective trading while exploring new categories, such as low-alcohol.”

And, as industry bodies announced plans to step-up efforts to convince the Chancellor to overturn the duty escalator in this month’s Budget, he said the trade should accept that ineffective lobbying and a failure to present a unified response meant it had already lost the battle.

He added: “There is more chance of George Osborne joining the wine trade than dropping the escalator. Given the duty real- ity, we have to conclude that, as an industry and through the Wine & Spirit Trade Association, we have been unsuccessful in our bid to counter the government’s duty agenda.

“It is probably the result of the fractious nature of the supply base that has prevented us putting together a unified and compelling case.

“Three years ago, some people in the trade were actually supportive of duty increases because they said it would push up the price of wine. Now that’s happened, look at the disaster the industry is experiencing.”

Mentzendorff managing director Andrew Hawes said there were opportunities for suppliers prepared to adapt to the changing climate.

He said: “The Bank of England seems determined for us to have a weak currency, production costs are rising and there has been short production around the world. But it’s in times like this people can adjust and make money.

“We should have a more glass-half-full attitude.”

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