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Drinks trade fears new year hangover

Published:  16 December, 2011

The season's deep discounting and the accelerated fall in wine volumes in the last weeks of the year will have a lingering hangover effect on the trade in 2012.

That's the opinion of sector leaders and analysts, who foresee volumes falling by up to 5% and up to one million wine drinkers leaving the category by the end of the year.

Lulie Halstead, chief executive of Wine Intelligence, predicted the slight decrease in wine volumes in 2012 would accelerate after March's duty increase "renders the sub-£4 market uneconomic for both producers and retailers". She added: "We see volumes dropping by around 2%-3% year on year, and by 4%-5% if there is a more severe economic downturn in the UK."

It's more bad news as she predicted the number of UK wine drinkers will fall by between 500,000 and one million to 27.5 million as "low-involved" drinkers exit the category in favour of sweeter drinks.

The WSTA's Gavin Partington echoed the gloomy picture, saying: "It's hard to see much cause for optimism against a backdrop of falling wine sales and gloomy economic predictions.

"Consumer confidence is taking a knock yet the coming Budget is set to force up prices further. There are some glimmers of hope - sales of sparkling wine, for example, are showing volume and value growth - but they are few and far between."

Over at off-trade analysts Nielsen, Gavin Humphreys said: "I still expect the off-trade to hold up somewhat better than the on-trade and value will be the order of the day. I would expect a modest decline in the off-trade in Q1 but I do envisage this improving as we run into the spring and summer when the excitement for the key events of 2012 starts to ramp up."

On the brighter side, Wine Intelligence's Halstead predicted significant growth in the £8 to £12 off-trade category. She highlighted Spain, New Zealand, Australia and Chile as doing particularly well, and forecast growth for online wine sales and less expensive sparkling wines.

Jon Collins, chief executive of on-trade analysts CGA Strategy, said although 2012 would bring "tough economic conditions, more regulation and a new alcohol strategy ... it will also bring a greater number of opportunities than usual". He identified an Easter weekend bonanza and a "stand-out" month in June "thanks to royalty and Rooney".

But he said operators would have to work hard "to generate any boost to business from the Olympics", while October's changes to the Police Reform and Social Responsibility Act could prove challenging.

North of the border things are looking particularly glum. Jack Cummins, partner at Glasgow's Hill Brown Licensing, said: "Alcohol sales are falling in the wake of restrictions on promotions. The Scottish government is pressing on with minimum pricing and a supermarket tax. The trade will be under pressure like never before."