Bibendum Insights
UK Market & Consumer Report
SPRING 2014
Welcome to
Bibendum Insights:
UK Market & Consumer Report
Spring 2014
Every successful business needs a strong understanding of
the market it operates in and the latest consumer trends. To
create this quarterly report, our Market Insights team collates
information from the very best data sources available – from the
latest industry statistics to Bibendum’s own sales data and the
results of our unique Taste Test survey.
The idea behind it is to help you get an overview of the UK
market in 2014 and the trends that will be shaping what people
eat and drink this year.
We hope you find it useful. If you would like more in-depth
information about consumers in your area contact us to receive
one of our free Bibendum Insights Regional Reports.
Contents
Part 1
The UK and Wine Consumers
Part 2
South America Vintage Update
The Economic State of the Nation
Part 1
The UK & Wine Consumers
UK Wine Stats Off Trade
UK Wine Stats On Trade
The Market under the Microscope
The On Trade Value Drop
The Economic State of the Nation
Recovery SUSTAINS
MOMENTUM
BUSINESS CONFIDENCE
GOING UP AND UP
CONSUMER SPENDING GROWTH
HITS 14 MONTH LOW
The UK economy grew by 0.9 per cent in the three
months ending in March 2014, according to the
National Institute for Economic & Social Research.
Future growth seems probable (but unlikely to be
spectacular) with the Office for Budget Responsibility
forecast for quarters 2-4 at 0.7%.
The ICAEW/Grant Thornton Business Confidence
Monitor Index keeps climbing. In Q1 2014, the index
stood at the highest level since the measure began.
This was a 17% increase on Q4 2013 and it was also the
sixth consecutive quarter of rising confidence.
Barclaycard reported that in March 2014 UK consumer
spending increased by just 1.1 per cent year on year, below
the rate of inflation for the first time in six months.
House Prices sTill
Increasing
British £ Strength
on show
House prices were 7.3% higher in April 2014 than they
were a year ago, according to Rightmove, meaning the
average home costs £262,594.
Good news for imports as the sterling reached US$1.67
in April 2014, its highest level in nearly three years.
The rise is concentrated in London, where asking
prices are up by 15.9% on a year ago and up 41.8% since
October 2007.
The pound has risen slowly but steadily against
other key currencies for wine imports too,
including the euro, Australian and New Zealand
dollars and the rand.
This is partly an effect of sluggish wage growth (particularly
relative to rising bills). However, a slowdown in spending
growth is not unexpected given the rate at which it has
picked up in the last year or so.
UNEMPLOYMENT KEEPS
EDGING DOWN
Unemployment marginally decreased again in March
to 7.2%, or 2.3 million people out of work. This ought to
provide a welcome marginal boost to the on trade.
Source: ONS
UK Wine Stats: Off Trade
VOLUME REMAINS ON THE SLIDE
The latest annual figures (to the start of February 2014) show that the off trade remains down in volume (-2%) and up in value (+2%). The volume drop is marginally
more pronounced in the last quarter (-3%). This means that wine is losing out to
other categories: Overall alcohol volume is flat for the year, helped by stable beer
volumes and a rise in cider consumption.
SPARKLING STILL GROWING
Sparkling wine remains the off trade’s biggest success story, with volume up 8% and
value up 15% for the year. Quarterly figures show slightly smaller volume gains and
slightly greater value rises, suggesting prices may be creeping up. However, the
slight deviation in quarterly numbers appears to be a marginal fluctuation rather than
evidence of flattening growth when viewed in the context of past quarters.
CHAMPAGNE SLOWLY IMPROVING
Champagne’s annual performance is not too dissimilar to still wine (volume -2%,
value +1%), although there are encouraging signs. The current MAT comparative still
includes the effects of the Diamond Jubilee and London 2012 and quarterly figures
have shown signs of improvement since last summer. In fact, volumes have been
steady in the last 12 weeks. However, recent figures showing Champagne exports to
the UK down 5.1% suggest that we shouldn’t get carried away just yet.
Sources: Nielsen, Champagne Bureau, Wilson Drinks Report
OFF TRADE BY COUNTRY:
& then there were Two
South Africa and Argentina are storming ahead
with volume growth of +15% and +20% respectively.
It’s probably no coincidence that they are also the
countries with the lowest price rises per bottle
(at around +2%). Argentina looks well placed for
continued growth with volume up +29% and value
up +38% in the last 12 weeks.
Australia is next-best with volumes flat for the
year and value up +4%. Though quarterly volumes
have dipped -2%, it seems reasonable to assume
Oz can hold its position at the top of the market.
France, USA, Chile and Spain have all seen annual
volume declines of between -3% and -5%. Value is
down -2% in France but all other countries are up
+1%. Spain has seen huge volume decline in the
quarter (-16%) as last year’s growth tails off.
The biggest volume declines are in Italy (-11%),
New Zealand (-19%) and Germany (-12%).
However, while quarterly figures suggest there is
little chance of an imminent change in fortunes
for Italy or Germany, NZ volumes are flat for
the last 12 weeks despite prices rising 8%. This
suggests that the effects of restricted supply have
been felt and that the off trade market for Kiwi
wine is returning to a new equilibrium.
UK Wine Stats: On Trade
VOLUME RELATIVELY GOOD,
VALUE DEFINITELY DOWN
After last quarter’s news of plummeting values, unfortunately we appear to be looking at more of the
same. Though volume movement looks relatively favourable for still wine versus total alcohol, -2%
versus -6%, wine value has dropped sharply (-13%). In the context of such a big value fall, it is clear
that volume is being propped up by deep price cuts. The situation does appear to be easing though,
with volume flat and value down only 8% in the 12 weeks to 25th January. Are CGA’s stated value
drops a fair assessment of the market? Read more on the next page.
IN THE REST OF THE MARKET… THE WINNERS…
Spirits are still making headway with a +2% total volume rise with malt whisky (+20%) and liqueurs
(+10%) leading the way. This overall volume rise looks all the more impressive in the context of falls
for vodka (-1%), blended whisky (-7%) and rum (-2%). Sparkling wine continues to grow massively
(value rose 47% in the last 12 weeks!) and Champagne is doing ok, with volumes up 2% despite an
equal but opposite fall in value (-2%), though this ought to be tempered by poor export stats. We
believe this rise to be attributable to the increased number of cocktails available in the trade. Expect
to see sparkling-based mixed drinks in a wider variety of bars over summer.
… AND THE LOSERS
Beer is still having a tough time in the on trade, with volumes down 7%. Cider/perry, once the
darling of the market, is down too, though only -1% (-4% in the last quarter). RTDs remain in decline
(-23% in volume and value) and despite some operators succeeding with fortified wine, the overall
market has shrunk (-10% volume, -6% value).
Sources: CGA, Champagne Bureau
ON TRADE BY COUNTRY
The top performer in the on trade at the moment is
France. Volumes are up 10% year on year and value
has only fallen -1% (up +4% for the quarter).
Whilst all of the top 10 countries are down in value,
New Zealand (-37%) and Germany (-31%) have
seen steep volume drops too, of -20% and -22%
respectively. However, their drops do appear to be
levelling off slightly in the most recent quarter.
Australia, the USA, Chile and Argentina aren’t
struggling as much; however, volumes are still
down around -10% and values are down about -20%.
While the latest quarter suggests things are slightly
improving for Australia and the USA, Argentina had
a much tougher 12 weeks with volumes down -19%
and value down -20%. This may be a consequence
of Argentina’s price per bottle remaining steady in a
downward market.
Spain is seeing a big shift in its on trade positioning.
Average bottle prices have moved sharply
downward as volume is up +8% but value is down
-8%. One year ago the average Spanish bottle sold
for £23.00. The figure is now £19.68.
THE MARKET UNDER THE MICROSCOPE:
HAS THE ON TRADE REALLY LOST 13% VALUE?
The last few market updates from CGA have brought
steadily worrying headlines for value sales in the on trade.
The first we saw of this was a -14% drop in value in the quarter
from May-July 2013. Subsequent quarters have been no
better with value down -19% from Aug to Oct and -8% from
Nov to Jan.
The graph of value sales by quarter shows that values failed
to pick up in the spring and summer of 2013 after falling from
their Christmas 2012 peak. However, we can see that the
Christmas boost to sales Q4 2013 was much greater than the
same period in 2012, meaning the value gap has narrowed.
We will watch closely to see if this continues when data is
released for the first quarter of 2014.
Having looked at the data and combined it with our
understanding of other trends, we think that it is fair to say
that the value drop is a little overstated and probably reflects
some corrections to data that was overinflated in the past.
However, there are four key factors that are driving value
downwards: namely promotions, bottle price, the rise of other
drinks and by the glass sales falling. These shouldn’t be
ignored and are detailed in the next two pages.
Sources: Wilson Drinks Report, YouGov, Mintel, Wine Intelligence
Corrections to the data:
Despite the importance of the factors outlined on the next page, it is also reasonable to
assume that there are some corrections being made in the data. However, while the on
trade the wine market remains challenging overall, things aren’t as bad as they seem.
Some countries were showing very high bottle prices a year ago and a number were
showing price rises and volume growth simultaneously. Whilst this isn’t impossible
it does seem that the strength of the post-recession market was overstated. Most
importantly, we hope that our understanding of market trends shows that there are
ways to win with wine if your offering is tailored to the demands of your customers and
communicated to them effectively.
WHAT THE ON TRADE VALUE DROP
TELLS US ABOUT THE MARKET
Wine is the most promotable beverage in the mid/
value market:
A lot of pubs are advertising the low price of their house wine or offering “buy
2 glasses, get the bottle free” to drive footfall. These outlets succeed in driving
volume but the effects on value will ripple through the rest of the market.
However, winning customers on price is not comparable to sustaining their
interest with a high quality experience: Any copycat offers ought to be carefully
considered as part of a broader marketing plan. Otherwise we may be stripping
value out of the wine category.
Some of the mid-high value market is being lost to
craft beer and cocktails:
Craft beer and cocktails are undeniably having “a moment”. They’ve been
marketed well and communicate their quality to the consumer effectively.
They also fit the aesthetic and consumer mission of the new wave of fast casual
restaurants. They offer an experience whether through keg serve or mixology
that can’t be had for a cheaper price in the off trade. However, there are good
operators bucking the trend…. How? By putting as much effort into inspiring
customers with wine as others put into beer or spirits. Whether through short
lists like at Burger and Lobster, or a list that changes regularly like 10 cases,
the operators who have embraced new ways of building excitement about their
wines have seen most success. While the rise of cocktails and craft bee may be
hitting value sales, it isn’t evidence of a terminal decline for wine.
WHAT THE ON TRADE VALUE DROP
TELLS US ABOUT THE MARKET
The data shows that by the glass sales
are decreasing:
This is partly because there are more attractive alternatives for those wanting a
single drink and because promotions are driving bottle sales. However, there’s
also evidence to suggest that drinkers increasingly feel that wine ought to be
shared from a bottle and will choose something else if they are the only person
drinking wanting to drink it. This may also be amplified by the (anecdotal) postrecession trend of going to out to drink less but being slightly less inclined to
worry about spend on those occasions. Given the difference in margin, if volume
moves from glass to bottle, value will decline. However, this isn’t true across the
board. Several operators with engaging wine offers are actually seeing “by the
glass” sales soar.
Bottle price movement – one time big names
becoming ubiquitous?
The biggest drops in value have occurred in countries that once were star
performers with very high average bottle prices. Spain alone has seen a price
drop of almost £3.50 per bottle in the last year. This is an overall value loss
of about £50m. In the past, Spain’s high bottle price had been attributed to
consumers’ willingness to pay a premium for Rioja. However, as cheaper Rioja
look-a-likes and more generic Spanish wines have grown in the off trade, it
seems reasonable to assume that they have become more prevalent and more
popular in the on trade too. Similarly, Kiwi wines have lost almost £4.25 per
bottle, reflecting increased competition to offer NZ Sauvignon at low prices to
drive footfall and reflect offers in the off trade.
UK TRADE INSPIRATION
SANGRIA TIME
TECHNOLOGY TO SERVE
HAVE MORE OF WHAT YOU WANT
Recent Mintel research highlighted the popularity
of sweeter, fruity drinks with Millenials in Spain and
the US. Dining trend barometer, New York, has seen
specialist Sangria serves become more popular.
Bars such as Maharlika and Pampano Botaneria in
the city are getting in on the act of Sangria 46 with
their own house blends of wine and fruit to improve
their offering. Expect to see more high quality
creative Sangria being poured over here
this summer.
Since Enomatic machines shook up the “by the
glass” means of selling, a new player has entered
the fray. Coravin has already found favour in top
London wine bar 28-50 with owner Xavier Rousset
MS and has increased the number of top end wines
he can sell by the glass. It’s helping to forge a
new identity of “by the glass” wine by turning the
traditional model on its head. New technology at
the point of serve can be an important element of a
compelling wine offer - and help you be one of the
operators bucking the decline in by the glass sales.
Whatever Brewdog do, the trade is sure to take
notice. Their new beer shop, Bottledog, is the
latest in a growing list of shops including Camden
Town Brewery and The Sampler where beer can
be purchased in refillable containers or, growlers.
The freedom of choice this offers taps into the
wider trend of being able to customise their retail
experience. It’s something we’re expecting to see
more of as customers become used to this kind
of service.
Part 2
SOUTH AMERICA
VINTAGE UPDATE
Chile
Argentina
Brazil
Uruguay
Vintage update 2014 - SOUTH AMERICA
CHILE
Vintage outlook
•2014 – Yields are 20% down on previous year overall.
•Frosts affected many regions and yields of Sauvignon Blanc (-30%) & Chardonnay
(-50%) particularly affected.
economy
•Strong national economy over the last 5 years with little debt and unemployment.
•Cost of labour is increasing, leading to some imported labour from Peru & Bolivia.
•Economy has slowed recently due to falling copper prices.
Price movement
•Prices likely to rise – increases expected due to frosts and resulting small
crops, particularly for white varieties Chardonnay and Sauvignon Blanc. Some
of the increases are being mitigated by the reasonable inventories of previous
2013 vintage.
Vintage update 2014 - SOUTH AMERICA
ARGENTINA
Vintage outlook
•2014 is an unusually wet and cool vintage with significant rainfall around vintage.
•Predicted 27% down on volume on last year.
•Careful selection will result in good quality but small crop.
economy
•In state of crisis with inflation running at 40% having significant effect on cost of dry
goods, wages etc.
•However, the Peso has lost 30% of its value vs US dollar since early February which
is offsetting inflation to some degree.
•Weak currency is helping wine tourism.
Price movement
•Things are really too volatile to say, but the currency swing versus. inflation is
actually keeping things stable for now.
•Expect some small increases if currency starts to rebound and prices increase due to
small vintage and the government buying bulk wine back to increase pricing.
Vintage update 2014 - SOUTH AMERICA
Brazil
Vintage outlook
•Fantastic quality overall. In the South a very hot spring and summer meant
reduced crop overall.
•Cooler conditions and a bit of rain towards end of summer has given the wines great
freshness and kept alcohol levels in check.
• Miguel Almeida, winemaker at Miolo “2014 was a year for premium wines with
good freshness and fruitiness without high alcohol levels for red and white wines”
economy
•Continued strong economy.
•Interest building in lead up to World Cup and Olympics.
Price Movement
•Stable – Generic body looking to take advantage of increased visibility during the
World Cup then Olympics. High quality products will become more widespread.
Vintage update 2014 - SOUTH AMERICA
URUGUAY
Vintage outlook
•Overall difficult vintage with cool temperatures and lots of rain.
•Pure and fresh Albarino.
•Tannat has benefitted from long, slow ripening period. Softer, more juicy styles have
been made.
•Lots of innovation in white wine production using international varieties like
Sauvignon Blanc, Pinot Grigio and Viognier.
economy
•Stable, wealthy, well-organised and well-run country.
Price movement
•Stable – still a very niche small market.
452
Bibendum’s approach to market insights is based around three main factors:
understanding the tastes of UK consumers, profiling consumer demographics
and understanding on and off trade venues across the country. We then bring all
three together to build up a detailed picture of the UK market at both a national
and local level. To find out more about Market Insights and how it can help your
business, contact us www.bibendum-wine.co.uk/contact us
135
307
228
176
219
173
229
192
287
Copyright
Information contained in Bibendum Insights reports is confidential and for use only by clients of Bibendum Wine
Ltd. All copyright in these publications is reserved. No part of this report may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise)
without prior permission from the copyright owners.
© 2014 Bibendum Wine Limited
Liability
469
Whilst every effort has been made to ensure that information contained in this report is accurate and that
opinions expressed are sound, Bibendum Wine Ltd cannot be made liable for any errors, omissions or
incorrect information or for any loss or consequential losses arising as a result of decisions taken based on the
contents of this report.