In some ways the wine and spirit industry isn’t in a dissimilar place to last year, with a few areas of growth underneath some static topline numbers. In other ways it feels like it is on the cusp of change – undoubtedly a sign of the times - as external forces start to show in data. Here a three numbers to represent wine and spirits in 2017.

29% - the number of people have drink gin ‘nowadays’, making it the most popular spirit amongst British drinkers. This is according to our most recent work with YouGov, the popularity of the spirit of the moment is finally being reflected in the polls with an 8% increase from 2016. With total sales growth of 18% by volume and 21% by value over the last 12 months to September – and perhaps more pertinently, a respective 44% and 85% increase since 2013 - the only surprise to come of this polling is that it didn’t happen sooner.

Looking back over the past five years of market report data, there’s a noticeable increase in growth percentages, which have culminated in this quarter’s lofty numbers such as a 34% increase in off trade value sales in the last three months. This is unprecedented for any category of gin’s size. Add to this consistent growth in exports and we have a growing and global industry that is sure to pass £2bn by 2020, you heard it here first… probably.

 
 

 

 

 

Question asked: Which, if any, of the following types of alcoholic drink do you ever drink nowadays? (Please select all that apply)

 

2016

2017

chg

Whisky/ Whiskey

21%

25%

+5

Gin

21%

29%

+8

Vodka

26%

23%

-3

Rum

17%

18%

+1

Cream liqueur

16%

17%

+1

Non-cream liqueur

7%

7%

0

YouGov, 4th-5th December 2017 (lists only spirits

 
 

 

 

 

89% - the increase of sparkling wine yearly volume sales (on and off trade) since 2013. More impressive than that, value sales for the industry have trebled (+206%) in that time to £1.3bn in yearly sales and, if you add Champagne, the sparkling wine industry in the UK is now worth more than £2bn in 2017. Such is the meteoric rise of sparkling wine over the last five years there has always been as suspicion that it is a bubble waiting to burst, no pun intended.

It’s safe to say there is no bursting of any bubbles here but there are signs that sales growth maintain rude health but are not quite as lofty as they once were: growth for total industry volume sales of sparkling wine were about 15% in 2015, 10% in 2016 and it’s looking like mid-single digits for this year. Value sales are also not what they were, but they are starting outpace volume sales, which, inflation notwithstanding, hasn’t always been the case. This points towards the category slowly but surely stabilising at a new and higher level. Premiumisation klaxon alert: inflation withstanding however, anyone jumping to suggest consumers are trading up should think again, but more on that in a moment.

Reports of lower yields from the slopes of Northern Italy, inflation and all the complications that come with Brexit, volumes of sparkling wine are one to watch in 2018.

3.1% - the current rate of CPI inflation and the reason behind my new favourite thing; the afore-mentioned premiumisation klaxon. Between January 2015 and May 2016 the CPI rate of inflation fluctuated between 0.3% and -0.1% but since the Summer 2016, it has been steadily rising and now stands above 3%. This presents a problem for a common theme for the wine and spirit industry over the last few years: premiumisation. With such low inflation in 2015 and 2016, it is easy to understand why people were talking about it; value sales outpace volume sales with no inflation surely equals consumers trading up to premium products.

Probably. But now we have 3.1% CPI inflation (4% RPI!) and is forecast to remain at around 2% each year until 2023 (inevitably, RPI is higher at around 3%), so caution is required. It could be that inflation accounts for three quarters of that increase, leaving a 0.9% left for what is consumers trading up, but this disregards other upward pressures on UK businesses, not to mention duty increases earlier in the year, meaning this is surely a lesson in false positives.

 
 

 

 

 

CPI inflation rate since 2000

ONS [https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/d7g7/mm23], 2017

 
 

 

 

 

So, 2017 is a mix of the same old story – gin and sparkling wine – and a new twist – inflation – but both should be instructive for 2018. The latter is not easy to predict, but it does now mean we need to think differently about premiumisation. Gin has much headroom and momentum going in to 2018, which is exciting, and sparkling wine faces many pressures but its growth over the last few years has it well-placed to weather them.

A very Merry Christmas to you all.

 

@optawine