The Grapevine

The WSTA's views, distilled.

The changing world has its price - Q2 2017 Market Report

The UK alcohol industry has always managed to weather political storms. Currency fluctuations and duty increases are part and parcel of most business models in an industry that is so trade-orientated. However, Brexit is the x factor we currently face; an unprecedented geopolitical event that, for better or worse, will affect the wine industry for years to come. In particular, the devaluation of the pound after the referendum meant that import costs increased which in turn meant that prices rose. We are beginning to see evidence of this.

Average prices per litre will be a key indicator as we look for evidence of a ‘Brexit effect’ on the alcohol

market. This is a good time to look, as the majority of the data will not be affected by duty rises but will give us an indication of inflation brought about by Brexit. The yearly average price for a bottle of still wine bought in the off trade now stands at £5.46, a 1% increase on last year. From Q1 2015 to Q1 2017, the yearly average price rose just 5p, an increase of less than 1%. Compare this to the quarterly sales as we see the average price per litre has risen 3% since the previous quarter to £5.57, an increase of 17p.

Sparkling wine (excluding Champagne) has experienced a similar trend to still wine, but is all the more remarkable as a generally more expensive product; between 2015 and 2017, the average yearly price rose by just 2p, an increase of 0.3%, but in the last quarter alone the average quarterly price has risen 3%, an increase of 20p. All this said, sparkling wine is still in positive yearly growth which is cause for celebration, but it will be interesting to see next quarter what happens to actual sales growth and if sparkling wine is ‘Brexit proof’.

It’s not all doom and gloom for the wine sector. Chilean, New Zealand and Argentinian wine are all on the up.  If you’ve been keeping an eye on what we’ve been doing since the referendum you will know that we have been looking at how to secure current trade flows in a post Brexit-UK. Chile has a comprehensive trade arrangement with EU on wine and we’ll be campaigning for the same or similar arrangements with other countries post-Brexit, particularly with Australia and New Zealand.

Spirits have been going through a period of premiumisation in recent quarters, so we have always expected increases in average prices but we must now be careful. As with wine, yearly average prices of spirits in the off trade show little sign of inflation – in fact some have declined slightly – but in the quarterly sales there are some similar themes. Overall yearly average price of spirits is static, compared to quarterly, where it has risen by 3% and this trend is present when broken down by spirit type. Gin is the only possible exception, because there is some more long term average price increases in yearly sales. Again, as with sparkling wine, we must wait to see if gin is Brexit proof and consumer demand wins over political pressures.

The WSTA quarterly Market Report has always been a useful tool to get a holistic view of the market and identifying overall trends. The WSTA have often used this data to promote our member’s interested within government and media; getting English sparkling wine served in British embassies abroad and promoting gin as the next big thing. But now more than ever data is vital as a key informer of what effects our changing world is having on our market. Never has there been a more important time to have this data to hand.

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