Wine and spirit sector feels the pinch as duty escalator bites

Total alcohol sales continue to fall according to the latest Wine and Spirit Trade Association market report, which shows the duty escalator continuing to impact negatively on the sector.
The quarterly report shows that volume sales in the off trade were down 3% for the year and 3% in the last 12 weeks, while on trade sales were down 3% for the year and 2% in the last 12 weeks.
For wine, volume sales in both the off and on trade were down 1% in the short term, while spirit sales for the year were down 2% in the off trade and flat in the on trade.
Although the report suggests the whole sector is feeling the pinch, there are encouraging signs that suggest consumers are seeking out better quality of wine.

Sales of wine over £7 continue to grow while all price bands over £5 have shown double-digit growth over the twelve weeks to May 2013. Additionally, the amount spent on alcohol to drink at home (£33 per month) has increased 10% from May 2012, as consumers lean towards entertaining at home rather than spending on nights out.

Spanish and Argentinean wines experienced encouraging levels of growth, although Italy, previously the “star performer”, is in double-digit decline this quarter, meaning that only New Zealand wine exhibits a worse state of affairs.
Despite the fall in volume growth, total alcohol prices were up by 2% in the off trade and 4% in the on trade for the year. This was largely down to the duty escalator which increased duty on wines and spirits by a further 5.3% in this year’s Budget.
The WSTA Market Report draws on data and analysis from Nielsen, CGA Strategy and the Wilson Drinks Report and it once again indicated that sparkling wine was the only major category to show positive volume growth, in both the short and long term, up 10% for the year and 7% for the last 12 weeks.
Commenting on the report Miles Beale, Chief Executive of the WSTA said: “While there are a small number of categories in the wine and spirit sector with modest volume growth, the overwhelming picture is one of decreased sales and increased duty rates, with consumers inevitably having to foot the bill.

“Since the introduction of the alcohol duty escalator in 2008, duty on wine has increased by 50% and spirits by 44%, putting the sector under significant pressure.”

Some of the key findings the report highlights are:

*In the latest 12 weeks, off trade sales of wine declined by 3% in volume, whilst spirits remained steady with no rise or fall in volume sales.

*Champagne was down 2% in the off trade but remains the best performer in wine in the on trade with growth of 9% over the quarter.

*On trade sales of Liqueurs were up 18% in volume in the last quarter and 7% in the twelve months to March 2013.

*In the off trade, only the cheaper end of the wine market continues to show significant declines in volume.

*All price bands over £5 have shown double-digit growth over the twelve weeks to May 2013.

*Inflation is down 2.4% in April 2013, whilst GDP has grown for 2 out of the last 3 quarters and is expected to keep growing.

Written by: Ben Moss

Ben Moss 


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