UK Wine Market Overview 2013 The UK market continues to follow the trend of recent years whereby wine volume sales continue to fall (down 2% annually) while value continues to rise year on year, up 1% (Nielsen to 03.13). Wines priced under 5 are continuing to fall (down 10% in volume annually) while the over 7 bracket is experiencing double digit growth (up 15% in volume). Average prices have increased by 0.20 in the last year which has made wine less affordable for a significant proportion of the UK population hence the drop in volume to a certain section of the market wine is an inaccessible luxury. However, the growth in the over 7 bracket is good news for the premium end of the market. It shows that even in recessionary times people are trading up when it comes to choosing a wine. Rather than going out, consumers are staying in and spending a bit more on wine to enjoy at home. This has resulted in supermarkets and independent specialists pushing the more premium wines as it is in their interest to make the most of this trend. Meanwhile, retailers are under pressure to get customers engaging with more premium wines. Interestingly, across the off-trade red wine has overtaken lager in being UK consumers beverage of choice with 21% choosing a glass of red wine (Wilson Drinks Report 02.13), demonstrating that, despite the rise in prices, consumers are receptive to the emphasis that retailers are putting on wine sales. This is an incredibly exciting time for Germany. The shift in focus from mass market to premium opens up the playing field for quality, niche wines. Consumers are becoming more discerning in their choice of wine and German wine is perfectly placed to make the most of this trend. It offers the opportunity to develop the image of German wine as a niche, premium product in the UK market. OFF TRADE OVERVIEW Nielsen data (MAT w/e 02.02.13) shows that wine sales are down 2% in volume but up 1% in value with the average price of a bottle of wine increasing to 5.03. Wines priced under 5 a bottle are continuing to fall (down 10% in volume annually), with those products over 7 a bottle all exhibiting double-digit growth (up 15% in volume). Supermarkets continue to be the most important route to market in the UK, accounting for over 80% of off-trade wine sales with their own-label ranges Tesco, Sainsbury s, Marks and Spencer Asda, Morrisons, The Co-op and Waitrose claiming a 20% share of the market. A number of supermarkets still offer meal deals but the price of these has risen in the past year with many including a main meal for two plus a bottle of wine and dessert for 10-20. Independent merchants continue to struggle with the increase of supermarket express stores on the high street however the larger specialists including Majestic and Laithwaites are enjoying significant success with Majestic reporting a 3.9% increase in pre-tax profits to 9.2 million for the six months to October 2012, driven by online sales growth, a strengthened customer base and a shift towards on-trade sales..
GERMANY S MARKET SHARE Germany saw a fall in value (-7%) and volume (-12%) over the last 12 months. These figures can be mainly attributed to a fall in sales priced 4 and below, a price point at which Germany has been dominant historically. Germany has 2.2% of the total off trade wine market (volume) and 1.8% (value) - Nielsen MAT 29 December 2012. The average price for a 75cl bottle of German wine in the UK off-trade has risen by 7% - it currently stands at 4.20 (up from 3.90 in 2012). MULTIPLE GROCERS Tesco continues to hold the position of number one supermarket in UK with 3,146 (up from 2,979 last year) around the UK under various fascias Tesco Homeplus, Tesco Superstore, Tesco One Stop, Tesco Metro, Tesco Express and Tesco Extra. Tesco also has a strong internet presence through tesco.com with Tesco Wine by the Case currently showing 21 German wines, out of 1,424. The German wine buyer is Graham Nash, and the buying manager is Ben Newmarch. Asda was named Britain s Lowest Priced Supermarket at the Grocer Gold Awards for the 15th year running in 2012. Asda now has 510 stores in four different formats: Asda Supercentres, Asda Superstores, Asda Supermarkets, Asda Living (all of Asda s non-food ranges). Asda is focused on a low-cost culture, continuing their pledge to refund the difference on any products that shoppers find for less money in other retailers. They currently have a selection of 68 wines in their own Asda Wine Selection. The team is led by Philippa Carr MW and the current buyer for Germany is Nick Brown. Sainsbury s is currently the third largest supermarket in the UK after Tesco and Asda. It has opened more stores in the last year, bringing the national total up to 1,063 (from 924) last year. Sainsbury s stores currently sell a formidable portfolio of wine with three own label ranges at different price points House, Winemaker Selection and Taste the Difference. The BWS category manager is Andy Phelps who is new to the BWS industry. Morrisons currently has 468 stores (up from 455 last year) across the country with an increasing presence in the 2
south. Online, the store has launched the Morrisons Cellar, offering a huge selection of 1,028 wines, including 26 German. The site also features small articles on wine countries, including Germany. Claire Greenwood is the German wine buyer. The Co-operative Group (Co-op) has over 3,000 food stores and supermarkets around the UK. Edward Robinson remains the German buyer and is hugely supportive of German wines. The Co-operative website offers tasting advice as well as specific information about wine in different countries, including Germany. Waitrose currently has 300 stores (up from 270 last year) across the UK, including 10 recently introduced Little Waitrose convenience stores. Waitrose has a strong online presence with its Waitrose Wine Direct website. Cat Lomax is now the German buyer, while Pierpaolo Petrassi MW is the category manager. Marks & Spencer has been named Wine Supermarket of the Year by Decanter in 2012. M&S currently has more than 700 stores around UK separated into department stores and Simply Food stores, specializing in food & drink. Marks and Spencer offers an exclusive range of over 900 wines, of which 221 are exclusively available on line. At entry level, they offer M&S' 'House Wine' range, while at the other end of the price scale, they offer over 60 lines in their fine wine (above 15) range. The wine buyer for Germany is Yves Fourcade, and Andrew Bird is the head of trading, drinks and grocery. Uniquely in drink s retailing, the M&S wine range is 100% own-label. It has an excellent range of German wines. Weekly % share of grocery market spend and value sales % change MULTIPLE WINE SPECIALISTS Oddbins Still with 35 stores across the UK, Oddbins is due to receive an image overhaul in the coming year. Managing director Ayo Akintola has said the new Oddbins would be more in tune with customers needs, more relevant to 2013, and offer significant changes to the range. It has not yet been detailed what these changes will be. 3
Majestic Wine Warehouses In 2012, Majestic Wine won Innovation in Multichannel Marketing by Innovation Awards for their successfully integrated in-store and online shopping experience. WINE RETAIL SITES The Wine Society Founded in 1874, The Wine Society s members pay a one-off lifetime share in the company and have access to wine from around the globe at a fair price. The website also hosts a calendar of tastings and events happening around the UK. Direct Wines The world s largest mail order wine merchant, Direct Wines operates under the retail brands of Laithwaites and Sunday Times Wine Club. They also own the acclaimed wine merchant Averys, as well as Virgin Wines and Warehouse Wines within the UK. Additional retail brand include Wall Street Journal Wine Club and The Australian Wine Club internationally. Laithwaites Wine now delivers wine to over 700,000 customers. There is a new German buyer called Christine Weingut who is a huge supporter of German wines and is looking to expand the range. Sunday Times Wine Club Supplied by Direct Wines, customers can purchase individual cases of wine on this site or sign up for a flexible wine plan whereby a case of wine is regularly reserved for them. Naked Wines This online specialist offers a selection of wines from 38 independent winemakers who are sponsored by the 100,000 wine consumers who purchase from the site. They operate an angels scheme where wine drinkers can put aside some money each month to go towards wine purchases, get 25% off each order and a free premium bottle every month. The company has recently been awarded Best Company 2013 by Best Companies. Virgin Wines An offshoot of Richard Branson s Virgin Corporation, this online retailer is now owned by Direct Wines and prides itself on supplying wines from small, undiscovered winemakers. The website also has detailed information on wine countries and a dedicated How To section, offering customers the opportunity to learn more about wine etiquette, including sections on how to pair wine with food, and how to serve wine. ON TRADE OVERVIEW According to the WSTA report for the first quarter of 2013, the average monthly spend on going out has declined from 43 in November 2012 to 41. As a result, restaurants are still struggling to maintain competitive which many signing up to Top Table and offering various promotional deals such as 50% off and 3 courses for 22.50. In terms of wine purchasing in the on-trade, Argentina is the strongest performing country in the wine category (+10% in volume annually). New Zealand and USA wines are still growing in volume, with France also starting to report growth this quarter. All other countries, including Germany, continue to follow the negative volume trends set by the whole category. Wines of Germany continues to be an important and valued resource of tastings and information for the top end on trade in the UK. The Sommelier Spring Class attracts a number of sommeliers and they continue to hold German Riesling and increasingly, Spätburgunder, as a key component of their wine lists. 4
UK ECONOMY OVERVIEW UK Population (in millions) The estimated resident population of the UK currently stands at just over 62.5 million based on stats from 2011 (stats for 2012 not yet released). Inflation rate As of March 2013, the current UK rate of inflation is 2.8%, down from 3.02 per cent in 2012. Transport, housing, water, electricity, gas and other fuels were the most significant drivers behind the decrease in annual inflation. Exchange rate: 1 / 1.18 *Source: www.oanda.com (correct data for 20/05/2013) Alcohol sales share: *Source: WSTA quarter 1 2013 5
UK WINE MARKET FACTS AND FIGURES 1. UK Excise duties: Still wine not exceeding 15% ABV (100 litres) 266.72 (75cl) 2.00 +VAT @20% *Source: Wine & Spirit Trade Association (25 March 2013) 2. Light wines - countries share of market by volumes % *Source: Nielsen (MAT w/e 29.12.12) 6
3. Light wines by volume thousands of 9L cases *Source: Nielsen (MAT w/e 29.12.12) 4. Sales volumes by wine colour *Source: Nielsen (MAT w/e 02.02.13) 7
5. German wine sales by price bracket *Source: Nielsen (MAT w/e 29.12.12) 6. Average price per 75cl by country Average price per bottle in UK is 5.03 (11/01/13) 8