Off-trade to recover but on-trade set to struggle

The UK off-trade wine market is set to recover slowly over the next 12 months but the on-trade will remain in the doldrums, today’s Wine and Spirit Trade Association annual conference was told.

Delegates at the conference in London were also told that online retailing is set to become the most exciting sales channel this year, according to predictions from Wine Intelligence.

Consumer confidence may be slowly returning, but wider economic issues are holding confidence back from a full recovery, said Richard Halstead, chief operating officer at Wine Intelligence.

He claimed that the wine category in the UK was never in danger of suffering serious decline during the global recession due to the fact that “there is a serious love affair” between the UK and wine, with nearly 70% of UK alcohol drinkers regularly drinking wine.

Halstead did warn, however, that perceptions of value are radically different in the on- and off-trades. According to Wine Intelligence data, 71% of consumers believe wine bought in the off-trade represents good value for money, while only 20% of on-trade consumers feel the same.

“This is not surprising considering the average price for a bottle of wine in a bar or restaurant is between £10-£15, while in the off-trade they can get the same bottle for £5,” he said.

Opportunities exist in online retailing now that 75% of internet users have got broadband, he said.

“Broadband changes the way people shop,” said Halstead. “This is a very exciting, fast-growing category that savvy retailers will look to cash in on.”

Jon Collins, chief executive of CGA Strategy, told the conference that the complexion of the on-trade market in Britain has shifted, with the continued growth of rosé surprising many who thought it would be a short-term fad.

“Had it not been for rosé, it is questionable whether the wine category would have continued to outperform the total alcohol market,” he said.

The on-trade wine market has enjoyed 2% volume growth year on year, primarily driven by the performance of rosé, which saw volumes increase by 4%. However, the RTD category is plummeting, suffering a 15.4% decline in volumes over the past year, primarily at the expense of chilled wines and packaged cider.

Meanwhile, Stewart Blunt of Nielsen outlined how the balance of power in the UK wine market has shifted away from the traditional favourites.

“The popularity of rosé has helped push the US up to second place in the UK market, behind Australia but above France,” he said.

“Italy is just a whisker behind France and will soon overtake it, while Chile’s strengthening of its lead over Spain highlights how the complexion of the UK market is shifting.

“France and Germany are suffering due to a lack of big brands in the marketplace. Without recognisable brands, they don’t carry the same weight and impact as wines from the New World.”

Alan Lodge, 16.09.2009