What lies ahead for the UK drinks industry?

Ahead of this year’s London Wine Fair, db asked some of the leading lights of the industry to gaze into a crystal ball to see what lies ahead for the UK drinks industry in these uncertain times…

Copyright: Anthony Upton 2016©

The UK market has seen tremendous change and consolidation in the past few years and is now facing a triple whammy of exchange-rate fluctuations, Brexit uncertainty, and duty increases. But what do industry experts and insiders think lies ahead in the next 12 months, how can the industry weather these challenges and maximise the opportunities they present?  And has it affected how producers and suppliers are approaching the UK market at this year’s fair? Db asked for their thoughts…

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Andrew Bewes, managing director, Hallgarten Druitt & Novum wines

“The wine industry is fairly adept at coping with, and adapting to, change and adverse trading conditions. For sure, the current situation is more extreme and, commercially, the combination of a relatively large increase in duty (and the prospect of a second budget this year), and the reality of a new ‘norm’ for Sterling at around 82% of its value in January 2016 (and the prospect of continued ‘Brexit’ uncertainly for at least 24 months) has undoubtedly put extreme pressure on key price points in both the on and the off trade; this can only serve to force even more consumers out of the wine market, a trend that is already evident at entry level in all sectors, and this is undoubtedly a threat to our industry.

“The trend towards consolidation of restaurant wine lists (shorter lists with fewer suppliers) on the one hand, and supplier consolidation on the other is, however, both a threat and an opportunity for the industry.  There will and always have been some restaurant operators which want or need the ease of one stop shopping and for them the trend towards composite supply is not an issue.

“However, for those seeking specialist partners – whether it be for meat, fish, spirits or wine – there will always be room and opportunity for those of us able to offer a true specialism.  At Hallgarten, we made the conscious and considered decision last year not only to remain a ‘wine only’ supplier, but to further invest in the services and team we offer to our customers. In short, the current situation has necessitated us, as a business, to step up to the plate and to work even more closely with our customers to navigate through the challenges.

“In the past, currency fluctuations or duty rises have led to retail prices rising – the more extreme changes of the past few months have meant that we have had to be far more creative, often reworking complete lists to ensure that customer price points can be maintained, even if the wine at that price point has had to change.

“The next 12 months will see this trend continue; there will be more creativity, such as selecting wines from emerging regions or of ‘alternative’ grape varieties, more front-of-house training, more use of innovative and creative wine-list construction to give the consumer the confidence to spend that extra £5.”

“Hallgarten will be exhibiting once again at the London Wine Fair and despite the challenging trading environment it will be very much ‘business as usual’ for us as we endeavour to showcase the remarkable range of wines and services that we offer to our customers.

“Change is in the air and despite the challenges that this brings to us all, change will always herald opportunity.  The first quarter of 2017 has been very buoyant for us with substantially more new business opening up than in any of the preceding five years.  The market indications are that more businesses than ever are currently considering a change of wine supplier and for us the LWF allows an opportunity to reach out to a wide audience across all sectors.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Jon White, head of marketing, Armit Wines

“The wine industry must continue to work together to lobby government for answers and action that will protect our markets. Clearly, we face a challenge to the very way we do business, with many of the primary regions that we purchase our products from in Europe, and we must find a way to ensure that our relationships and ability to conduct business with key partners – many of which have been developed and invested in over many years – will not be jeopardised. It is going to be the

businesses that are able to be flexible, innovative, decisive and quick thinking that will prosper. These businesses will be the most likely to maximise any favourable opportunities that present themselves, and prosper in the changing environment in which we find ourselves.”

“We are focusing on showcasing the breadth of our portfolio [at this year’s show], for though we are understandably associated with Italy we have a very diverse range of wines. The challenges facing us means we need to show strength in all viable price categories without sacrificing quality.  Talking to our customers and understanding how we can add value to their business without devaluing our brands will be fundamental in the year to come and the LWF provides the ideal platform to hold these conversations with both existing and potential customers. We also want to inject a sense of fun and promote engagement with our customers, remind people why we love to work in this industry which is why we have put together a schedule of events for the duration of the show.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Terry Pennington, commercial export director East Region, Santa Rita Estates.

“In a high tax market – with a combined excise duty and VAT of around £3.40 in every bottle, along with a negative shift in exchange rates and increasing corporate consolidation, the UK market is certainly facing some challenges.

“At 8% Chile has a small share of the market, producers are being forced to reappraise their price positioning within this market, to look at different styles and to reaffirm their credentials for example the SRE WiSe replanting project in the Alto Maipo region. We at Santa Rita Estates will continue to take a long term view of the market by not reacting immediately to price increases and remaining consistent throughout change.

“The UK remains an important export market for Santa Rita Estates, however other markets are increasingly growing in significance specifically in terms of the volume sold at higher prices than those achieved in the UK.

“With Concha Y Toro commanding a 50% share of the Chilean market in the UK, the industry also needs an alternative Chilean brand.  Continued investment in our both Brand Chile and our own brands through partnerships such as Arsenal Football Club and the National Gallery  all contribute towards achieving this objective.

“As a company we recognise the importance wine brands play in the UK market and the requirement for visibility in a very competitive market. Our investment at the show continues, with the Santa Rita brand sponsoring the Club Elite area at LWF, along with the lanyards holding visitor badges. Santa Rita 120 winemaker Oscar Salas will be showcasing the revitalised 120 brands on the stand of our new distributor, PLB.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Anita Jackson, director, Wines of Chile

“On consolidation, I don’t think we’ve seen the last of this, I think it will squeeze the trade into large and small importers/distributors and those in the middle will be the ones that struggle, similar to what is happening to the supermarkets.

“Regarding currency fluctuations, the weak pound is drastically affecting margins for  wineries, and marketing budgets have been reduced. But the UK is still a very important market for Chile, and Wines of Chile will always look to ways of gaining new opportunities on limited budgets. It is interesting to see that the euro has rallied against the dollar following the recent announcement about a UK general election. I suspect if we get a strong government elected this will help the pound, and any negotiations going forward.

“I believe Chile has and will maintain a strong position within the UK wine trade and unlikely to be subject to any trade tariffs once Brexit has concluded, in fact this offers Chile more export opportunities on other products such as honey, olive oil, that are currently restricted by the EU, which will raise awareness of Chilean products in the UK.

“Prices of wine will increase, but across the board not by any particular country, and maybe we will have more realistic pricing but any marketing and promotional budgets will remain tight.

“Yes, we have had to change to the market, but we feel we still need to be part of LWF and I know we will have a busy stand, be asked loads of questions about Chile as well as gain leads to new projects and business. The current environment  – the weak pound is drastically impacting on margins for the wineries as most invoice in Sterling, marketing budgets have been reduced, however the UK is still a very important market for Chile, and Wines of Chile will always look to ways of gaining new opportunities on limited budgets.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Laura Jewell MW, UK director, Wine Australia

“It’s business as normal for Wine Australia – in fact, we’re scaling up events, trying new approaches and new partnerships. We recently launched a new website and the Somms of the World programme alongside the World’s 50 Best Restaurants.

“Wine Australia is already working with the WSTA and the World Wine Trade Group (WWTG), while the Australian government’s Department of Foreign Affairs and Trade is talking with businesses in the UK and the WSTA to secure Australian wine’s future post-Brexit. If the Australian wine industry can continue to show its friendship to the UK as it negotiates the waters ahead, then the future of Australian wine in the UK could be even brighter than in its past.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Michèle Haddon, managing director, Sopexa UK

“It is clear that the next two years will be a challenge for the UK wine industry. We have seen exchange-rate fluctuations and duty increases before, and the industry manages to find a way through, but the complication and, moreover, the uncertainty of the tariff situation post-Brexit is probably the biggest cause for concern. Some industry experts are predicting significant changes in the wines we will see on shelf in the UK should higher tariffs be imposed on imports from EU countries, particularly at the entry-level and mid-price sectors, with opportunities appearing for non-EU wine-producing countries offering keenly-priced wines.

“But one thing is clear – the UK remains an important and influential market for all wines; the trends and tastes here affect buying patterns and perceptions across the world. So, while it is possible that volumes of EU wines may decline in the short term, the majority of EU producers will continue to invest in and communicate in this market to protect and maintain their profile in an increasingly competitive environment, perhaps using it as a shop window for global sales.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Richard Cochrane, managing director Felix Solis UK

“The UK’s current and historical central role on the global wine stage is at risk, subject to the outcome of the Brexit negotiations. Equally Spain, as the largest wine exporting country, faces a serious Brexit challenge.

“However the UK remains the largest market for Spain’s key bottled wine exports, including Rioja, with a 12% share of Spain’s total exports, which is worth EUROS 335 million to Spain.

“Importantly, the UK also provides a key shop window for the global reputation of Spain’s best wines. Brexit places all of this at risk, which is why a tariff free environment is pivotal to the future success of trade in both countries.

“The ”triple whammy’ of adverse exchange rates, rising duty and global tightening in supply has already started to reach the consumer with rising wine inflation and declining sales across the wine category. Assuming the general election does not result in a change in Westminster, it is likely that the recent worsening duty regime will continue for the next five years. This will be hugely damaging to industry and requires a fresh appraisal of the current excise model to better mate the current conflicting needs. Smarter excise models already exist for beer, and wine would do well to learn from these.”

“Failure to secure a good Brexit for both the UK and Europe will take a generation to remedy and risks much for the UK and Spanish industries.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Alexandre Balland, UK & Northern Europe export marketing manager, Côtes du Rhône

“With the exchange-rate fluctuations and the tax increase, the price rise might have more of an effect on the premium wine category as buyers turn to lower-cost alternatives. The market and brands will look to offer a more personalised approach to their consumers to encourage loyalty. We think that convenience retailing will increasingly gain importance.”

“[The trading environment]  hasn’t caused us to change our approach as we have always aimed to create long term partnerships with customers and consumers. We are still strengthening these while building new ones with both the on- and off-trade.

“We have been absent [from the LWF] for the past eight years, but the UK remains the Rhône’s first export market by volume and we wanted to display our confidence and commitment. Despite recent economic and geo-political developments, we continue to invest and support the UK. And we are launching a new, fresh image for the Rhône, which is in line with our UK strategy of premiumisation and we wanted to take this opportunity to display it to the trade.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Paolo Lasagni, managing director, Bosco Viticultori

“Changes are always an opportunity: in such a fluctuating environment, the more proactive you are, the maximum you can achieve. Of course, a well positioned brand is less exposed to these changes. It will be very interesting to see whether customers likes will change or not; in the first case, it will be very important to perceive the change immediately, in order to address it properly and gain a competitive advantage in terms of timing.

“Is this causing us to change our approach to the UK market, and to the LWF? It is just a more proactive approach, trying to be always ready to a daily changing context; flexibility and quality will be more and more they success factors.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Robin Copestick, managing director, Copestick Murray

Robin Copestick, co-founder and director of Copestick Murray

“Copestick Murray is ambitious and we are looking to grow quickly to be one of the UK’s leading drinks suppliers.

“It is a time to be positive and brave. We need to work closely with our customers to bring products to the market that excite and inspire consumers to keep the category interesting and relevant.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.

Antonio Alvarez, Export Area Manager, Marqués de Cáceres

“We are entering into a period of uncertainty for all trade between the UK and the EU; this is the major concern. Once we are clear about the new scenario we will adjust. At this point we are working as usual. We trust that, in the end, common sense will prevail.”

“Is this causing us to change our approach to the UK market, and to the LWF? Yes, we have to work closer with our importers to defend our brand values and the LWF offers an excellent  opportunity to meet with all of them at the same time.”

For a run-down of what is in store at this year’s London Wine Fair, check out our guide in the May issue of the magazine, or click here.