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Alcohol confirmed the UK’s leading FMCG category worth £16 billion

Published:  05 April, 2018

Innovation in the drinks sector and a reduction in the amount of trade promotions has seen alcohol retain its place as the top selling FMCG category, according to new research.

Despite moderation trends, rising inflation and a general uncertainty in the market, the alcohol industry continued to outsell rival FMCG categories last year, worth £16.1 billion to the UK economy.

IRI’s Top Categories 2017 report revealed that BWS posted 4.4% growth last year compared to 2016, putting it above Ambient Food, (£660 million), Chilled & Fresh Food (£13.5 billion), and Drinks and Personal Care taking fourth and fifth places, worth £8 billion and £6.1 billion respectively.

The data, which looked at the UK and five other European countries France, Germany, Italy, Spain and the Netherlands, also found while alcohol sales grew strongly across the board, worth a total €62 billion (+2.6% YOY), alcohol sales in the UK grew more than in any other country.

Beer was the leading growth sub-category in terms of value growth in five of the six countries measured, with premiumisation, especially craft beers, helping to gain shelf space within key retailers.

Again, this growth was especially prevalent in the UK (+6% YOY).

Sparkling wine was the fastest-moving sub-category in the UK with 10% growth, while spirits saw 5% growth.

Gin however was the star performer in 2017, achieving a double-digit upswing in the UK up 24% on 2016.

“Reduced levels of trade promotions, coupled with shallower price cuts, have played a part in bolstering topline macro category performances in the UK, alcohol included,” said Olly Abotorabi, senior regional insights manager at IRI.

“It’s no surprise that we’ve seen strong growth in this category, and particularly in beer, where brands are moving towards premiumisation, delivering innovation via new flavours, and offering beers and ciders with crafty credentials.

“In spirits, gin is also proving popular, driven by a growing number of small and niche batch distillers, celebrity culture and enhanced in-store exposure via displays during key seasonal events. But price increases have hit home with UK consumers who are being much more selective in what they buy and where they shop.”

Within booming alcohol sales is the march of healthy drinking trends, with consumers turning to lighter ABV choices and low calorie mixers.

This can also be seen in the wider drinks category and the IRI data, where sales of bottled mineral water beat colas for the first time.

This is interesting timing considering the UK's "sugar tax" which comes into effect tomorrow (April 6).

According to Martin Hook, MD of R&D and business consultancy firm Ayming UK, drinks companies have been in a “scramble” to reduce sugar content of their products since then chancellor George Osborne announced the introduction of the tax in 2016.

"The fact that some people are currently paying £60 for a bottle of original Lucozade proves just how hard consumers can be to please. It's definitely been a long and thorny ‘trial and error’ period for drinks companies.

“All drinks manufacturers have been busy researching new innovative ways to replace sugar with alternatives, all of which has incurred a burdensome R&D cost - which companies need to strike the right balance between reducing new tax costs and avoiding a consumer backlash,” he said.