Survival of the fittest

Published: 03 October, 2008

With the global economy on the brink of collapse and the credit crunch tightening its pincers on every sector of the UK consumer base, what does the future hold for the wine industry?

With the global economy on the brink of collapse and the credit crunch tightening its pincers on every sector of the UK consumer base, what does the future hold for the wine industry?

At no point over the last 10 years has the wine world experienced such a crisis. "There is deflation in cost of goods," Sir Terry Leahy says, "which is good for the consumer."

Not so in the case of wine.

The domino effect began following the last budget. Negotiations between retailer and supplier to manage the duty increase resulted in a mixed reaction in terms of impact on retails, but Asda's now well-established and impactful three-for-£10 campaign increased the pressure throughout the retail industry, with competitors reviewing promotional strategy.

Next up was exchange-rate devaluation, with the euro reaching record highs, forcing suppliers and importers across both off- and on-trade to increase prices. The storm continued, with fuel costs, grape prices, and the cost of dry goods adding to the industry's burden.

Then came the credit crunch. Suppliers need to put costs up to protect their already beleaguered margins. No, say the retailers. No, say the consumers, who have no inclination, and in many cases no spare cash, to trade up in the current climate. The consumer has come to expect a decent glass of wine at bargain prices and will be looking for ever better deals as the recession takes a stronger grip.

The facts speak for themselves. Research indicates that there are 250,000 fewer regular wine buyers than in January. Supermarkets are tightening ranges and focusing on value ranges. Discounters such as Aldi and Lidl are showing the fastest growth within the category.

At recent trade tastings I looked around the host of exhibitors and wondered how many might not survive the year, or indeed be forced to review their strategies radically. How many suppliers will be prepared, or indeed can afford, to dig deep and invest margin to work with their customers and look at the medium- and long-term to see out the current problems?

The phrase "survival of the fittest" has never rung truer.

Angela Mount, ex-Somerfield wine buyer, is wine consultant to a number of companies including Great Western and Origin Wine