Sales of sparkling wine in the UK has slowed in the past year, increasing just 5 per cent to 35.8 million gallons in 2017, from 34 million gallons in 2016. This is the smallest increase recorded since 2011.
Brexit and the drop in the value of Sterling has increased the purchasing cost of sparkling wine from countries such as Italy and France, forcing retailers to increase the cost to consumer, thereby reducing demand for the product.
A spokesperson for the report says: “A 5 per cent increase in sales is not at all bad but that comes after several years of double digit growth. Unless the industry can revitalise its image this year we may now be reaching ‘peak Prosecco’.”
“It is hard for a luxury product to make the leap into the mass market without losing its reputation for exclusivity.”
“A lot of English wine producers are now vying to capture the space left, as Prosecco moves to the mainstream.”
In separate findings, the UK On-trade Trends 2018 Report*, published by specialist wine marketing, strategy and research group, Wine Intelligence, which provides an overview of the consumption behaviour and attitude towards wine in the on-trade amongst UK regular wine drinkers, we see a similar pattern across the food and drink retail sector. Highlights include:
1. The UK restaurant sector is experiencing commercial crisis – Restaurants are reassessing their business model due to a “perfect storm” of deteriorating commercial conditions, driven by increasing costs and competition from food delivery services such as Deliveroo.
2. The uncertainty of Brexit is impacting both staff and imported inputs – Price and currency instability for key imported food ingredients and imported beverages is impacting margin and ability to plan input costs.
3. Delivery services and pop-ups are offering less risk and more appeal for investors – Investors are becoming less certain of returns in the restaurant space, although more specialist / niche concepts are seeing some success with low-overhead “kitchen + delivery” services attracting investment capital.
4. Meal-at-home kits are offering another alternative to eating out – Increased awareness of, and subscriptions to, meal-at-home cook kits such as Hello Fresh are creating additional competition to casual eating out occasions.
5. Wine is receiving less attention as other drinks. This is theme across both the consumer and trade markets – Profit margins opportunity is strong for cocktails and spirits in particular, against a backdrop of price increases for imported wine.
6. Consumers are still looking for quality in on-trade wine – and are willing to pay for it – Consumers are seeking demonstrably higher quality wine, across all price points, where quality in this context is often interpreted as “better than I could get in a supermarket / off-licence.”
7. Smaller serve sizes are increasing in appeal – Restaurants are offering a wider range of wines by the glass to encourage experimentation and support sales of the higher priced wine with consumers spending relatively more, but for smaller serve sizes.
8. There is a growing interest in alternative wines albeit from a small base – Increased demand for organic, vegetarian and vegan food, driving demand amongst drinks.
With Brexit approaching and the many significant challenges and changes happening across the retail sector, businesses should take a SWAT team approach to transformation by bringing in a smaller, external team who will work alongside management to help them make bold, brave decisions which may well go against the grain of how things have always been done in the past. One that will challenge existing ideas and capitalise on the raft of new opportunities presented by changing consumer patterns.
At Beavis Morgan, our business specialists are committed to providing entrepreneurial retailers with an understanding of the key issues driving the retail sector. We will work with you to identify your requirements and then design and implement a system that will provide all the information you need, within a cost effective and efficient framework.
Being able to understand and evaluate your business through real-time information on actual performance is critical and could mean the difference between survival and business failure. Find out more about how we can assist. Contact Steve Govey or your usual Beavis Morgan Partner.
* The UK On-trade Trends 2018 Report draws on data collected from our October 2017 wave of Vinitrac® (the world’s largest ongoing omnibus survey on wine consumer attitudes and behaviours), trade and consumer interviews, secondary sources and market experience, this 62-page report offers a detailed analysis of how the on-trade market is performing.