Drinks retailers suffer summer sales slump
The drinks retailing trade has suffered a sluggish start to the summer as BWS value sales decreased 4.2% year-on-year (Nielsen, 12 weeks to July 13, 2019).
Last year the UK basked in a prolonged spell of glorious weather and England’s run to the World Cup semi-finals gave the trade a boost.
It has not been quite so hot this time around and the cricket World Cup failed to capture the drinking public’s imagination to quite the same extent.
In the 12 weeks to July 13, value sales are down 4.2% and volumes dropped by 9.5%.
Cider has been hit the hardest so far this summer, with sales declining by 19.1% in both value and volume. Beer sales are down 8.9% in value and 10.1% in volume.
RTDs continue to flourish and they were up 6.2% in value, driven by premixed cans. Spirits also remained in modest growth thanks to the ongoing strength of flavoured gin, but sparkling wine declined and still wine was down 3.7% in volume and 0.4% in value.
It was always going to be difficult for retailers to match the superb sales they enjoyed last year, but the performance is reflected in wider retail industry data.
The Confederation of British Industry said retail sales across the country dropped for a third month running in July, marking the longest period for sliding sales since 2011.
The British Retail Consortium said the like-for-like performance in June and July this year is the worst on record. “The combination of slow real wage growth and Brexit uncertainty has left consumer spending languishing with the 12-month average total sales falling to a new low of just 0.5%,” said chief executive Helen Dickinson.
However, a heatwave in the week to July 27, 2019, did push beer sales up by 4.9% year-on-year over that seven-day period, ending a long spell of consecutive sales declines, so retailers will be praying for more sunshine.
The no and low-alcohol category could help drinks retailers remain profitable in the years ahead, but Nielsen analyst Gemma Cooper warned against relying too heavily on this small sector of the market.
“While these products are growing, up £22.4 million in the last year, the total no/low category is only worth £116.6 million, making up just 0.7% of the value for the whole of the BWS market,” she said. “Given that limiting alcohol consumption is falling down the list of top shopper concerns, coupled with the fact that the total no/low offering drives less than 1%, does such a small part [of the market] warrant so much support?”
DRN polled hundreds of drinks retailers this week to gauge confidence levels, and found that 27% have enjoyed stronger sales so far this year than in 2018, while 35% have found sales to be generally flat and 38% said they have been worse.
Henderson Wines in Edinburgh said responsible drinking has hit sales, Charlotte Dean at Wined Up Here in Surrey said sales are down 10% and Corks & Cases in Yorkshire said: “We have a lot of people looking and admiring the wines, but everyone is cautious of spending money due to the uncertainty.”
The spectre of a no-deal Brexit is growing larger by the day and that has spooked many in the industry. Seventy per cent of retailers feel it would either be bad or very bad for business, while just 7% think it could be positive and the rest said it would have no impact.
Two-thirds of the readers we surveyed believe the off-trade will struggle to grow value sales in the year ahead, while just a third are feeling confident.
“There’s a large culmination of factors working against the industry that are going to make times tough,” said one Majestic store manager. “Certainly not unachievable, but harder than in other circumstances.”
Martin Chapman at Peter Osborne Fine Wines said: “We’ll be endeavouring to maintain growth, but the current government’s strategy of a no deal Brexit is likely to put this country into recession and the obvious downturn in sales.”
Simon Taylor at Stone, Sun & Vine in Winchester added: “A hard Brexit means we are all screwed in the short term.”
However, some operators within the independent trade are feeling confident enough to increase their estates. Jeroboams and Vagabond are ploughing ahead with expansion plans, while Lea & Sandeman is opening a new store and The Good Wine Shop is set to launch a third site.
David Porter, operations and buying manager at Lea & Sandeman, told DRN: “The last store we opened was our Chiswick branch 10 years ago, so we are really excited about this. All of our shops have been growing steadily year-on-year so we are really confident it will be a success.”
The Good Wine Shop is opening a new site in Richmond, London, and Ben Craighead, store manager at its Kew branch, said: “It is a very affluent area, which we think The Good Wine Shop will be very suited to. It is an area suited to fine wine purchases and mid to premium ranges.”
The Good Wine Shop has had a good 12 months with both shops growing sales exponentially, he said. “We are 13% up in terms of revenue. We are in a healthy place. It is in its 10th year and the business is still growing.
“We are up in sales this July compared to last year. For July 2019 our margins are up 13% compared to July 2018. In general footfall is up, by about 4% each year.”
Steve McCann, trading manager at Costcutter, said: “The forecast for 2020 is better than 2019 but this is heavily reliant on having a trade agreement with EU. A no deal Brexit would be bad for business the proposed date for leaving without a Deal would be catastrophic.”
Hugh Sturges, chief executive at Jeroboams, said: “We are still looking to expand the business and our intention is still to get to the region of 12 in London, and we are still on nine at the moment.
“Our most recent additions to the portfolio are 15 months old and then also the Prohibition store, which we acquired in October last year and relaunched in April this year, so those are still a bit fresh.
“We have looked at a couple of ex-Oddbins stores and we were very keen on the Richmond store, but another tenant beat us to it. That is the only one so far that has suited our demographic.
“But the truth of the matter is given everything that’s going on politically, and with the currency as well, we probably will wait until we get through October. After October if everything is fine we will continue looking.
“Business is good at Jeroboams. Retail is up and footfall is also up. People are spending more. The account side is up more than walk-in sales, but business in general is going really well. It’s not easy but we are moving in a positive direction.”