Alcohol drives fall in consumer inflation

Alcohol is the main driver behind another fall in consumer inflation, with prices of wine and beer falling for three consecutive months to October 2015, according to the Wilson Drinks Report.

The Office for National Statistics announced that overall annual inflation, as measured by the Consumer Prices Index (“CPI”), was down 0.1% for the month of October 2015, well below the Bank of England’s 2% target and also below the rise in average pay (+2.5% for Jul-Sep 2015).

The biggest fall in inflation within the alcohol was in wine, where prices fell 5% compared to October 2014. It follows a rise in prices at the end of last year, which saw inflation on wine rise by 3.4%, which meant British wine drinkers did not feel the benefits of a then 0.5% drop in inflation.

Annual consumer inflation : Aug – Oct 2015. Source : ONS 17 Nov 2015, WDR analysis

“The pressure exerted by the discounters is being felt across all categories within beers, wines and spirits”, said Tim Wilson, managing director of WDR. “Wine in particular shows a big fall compared to last year, and this time there is no change in wine duty to impact the results as wine duty was unchanged in the March 2015 Budget. Perhaps British drinkers can look forward to some good celebrations at Christmas with average incomes rising significantly faster than consumer inflation.”

In comparison, the cost of spirits dropped by 4.6% while beer prices fell by 3.1%.

“Interestingly, the drop in BWS inflation comes on the same day that the latest Kantar data shows that Aldi and Lidl now account for 10% of total grocery sales”, added Wilson. “We are expecting further gains from the discounters when Aldi launch their online wine service next year.”

Discount retailers Aldi and Lidl now own a 10% combined share of the British grocery market, double their share of only three years ago, according to Kantar Worldpanel.