“creating the trade professional”
WSET® Level 4 Diploma in
Wines and Spirits
Unit 1: The Global Business of
Alcoholic Beverages
STUDY GUIDE
Part 2: Chapters 5 – 10
August 2012
www.WSETglobal.com
Contents
Chapter 5: UK LOCAL MARKET FOR ALCOHOLIC BEVERAGES
Overview
Excise Duties
Cross Border shopping
Exchange Rates :
Consumption Patterns
The UK Market for RTDs
The UK Market for Beer
The UK Market for Spirits
The UK Market for Wine:
Still Light Wine
Sparkling Wine
Off-Trade versus the On-Trade
Off-Trade
Brands and Packaging
On-Trade
1-33
1
4
7
8
10
13
13
15
17
19
21
25
26
31
33
Chapter 6: UK LOCAL MARKET – Business Structure
The Intermediary Companies (B2B)
Companies at Points of Sale to Consumer (B2C)
Mergers and Acquisitions
37-44
38
42
43
Chapter 7: UK LOCAL MARKET – Supply Chain and Distribution
45-46
Chapter 8: UK LOCAL MARKET – Legal Issues
47-71
Chapter 9: UK LOCAL MARKET – Marketing and the Consumer
72-80
Chapter 10: UK LOCAL MARKET – Government and Self Regulation
81-89
Appendices
1.
90-93
90
2.
3.
UK Local: Supermarket Own Label Wines – Ranges and
Trends
UK Local: The Calais Market and its Recent Demise
UK Local: The Responsibility Deal
1
92
94
Chapter 5
UK LOCAL MARKET FOR ALCOHOLIC BEVERAGES
Note: students studying in countries other than the UK should refer to their Approved Programme Provider
(APP) for local market data, relevant to their place of study.)
Overview
The market for alcoholic beverages is essentially that for beers, wines and spirits.
The alcohol industry is a very important part of UK life and the economy. According to the Wine and
Spirit Trade Association (WSTA) Budget Submission 2012, the alcoholic drinks industries support two
million jobs.
The industries contribute about 2 per cent of the UK’s total output and contribute around £16 billion
in duty and VAT. In duty alone, the alcohol industries paid £9.7 billion in duty during 2011, up from
£8.4 bn in 2008 (WSTA budget submission 2012).
WSTA (Budget Report 2012) report that since the duty escalator was introduced in 2008, UK customs
clearances of wine have declined by 9% and spirits by 6%.
WSTA (Budget Report 2012) reports that total alcohol consumption has dropped by 11% since 2004,
when a notable decline in UK consumption began. In 2004 per capita consumption of pure alcohol
was 9.5 litres. In 2010 it had fallen to 8.4 litres.
Despite falling consumption, the amount spent on alcohol has been increasing gently, after a drop in
2008. It was in March 2008 that the duty escalator was introduced (2% above inflation), and 2008 was
official recession year in the UK.
Total value of UK alcoholic drinks market
Year
£ billion
2006
46.8943
2007
46.9779
2008
45.7386
2009
45.7869
2010
46.508
2011
47.5773
Source: Euromonitor International
Building in volumes consumed to the total alcohol spend data, Euromonitor International show
consumption of pure alcohol has been declining since 2006.
Billion
litres actual
1997
1998
1999
2000
2001
2002
7.726
7.538
7.645
7.552
7.793
7.989
Million
litres pure
alcohol
£ billion
547.8
539.4
549.9
549.7
568.8
585.8
37.450
37.957
39.484
40.154
42.033
43.406
2
%
change
- spend
1.4%
4.0%
1.7%
4.7%
3.3%
%
change
- pure
alcohol
-1.5%
1.9%
0.0%
3.5%
3.0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
8.090
596.9
44.805
8.031
599.1
45.527
7.944
601.4
46.379
7.884
601.8
46.894
7.765
599.3
46.978
7.618
593.5
45.739
7.382
584.0
45.787
7.268
578.1
46.508
7.080
569.1
47.577
Source: Euromonitor International
3.2%
1.6%
1.9%
1.1%
0.2%
-2.6%
0.1%
1.6%
2.3%
1.9%
0.4%
0.4%
0.1%
-0.4%
-1.0%
-1.6%
-1.0%
-1.6%
The ‘billion litres’ column shows declining ‘litres drunk’ since 2003. But because a litre of wine, beer
and spirits have very different alcohol percentages, this is not a true comparison. When the ‘litres
drunk’ data are converted to litres of pure alcohol drunk, it is only since 2006 that the UK has seen
declining consumption of units of alcohol (after three almost static years from 2004-2006). These
differences illustrate changing consumption patterns among the quantities of beer, wine and spirits
consumed.
That since the recession year of 2008, we have spent more on alcohol despite declining consumption
must relate to the duty escalator.
Digging into total spend by category – this time by value - shows the strong growth of wine over the
past decade.
Total alcohol spend, by drinks category, (£ millions)
Beer,
Total
cider,
RTDs
Spirits
Wine
Alcohol
perry
2000
40,154.0
21,554.8
1,341.6
8,711.7
8,545.9
2001
42,032.6
22,161.2
1,665.6
8,904.7
9,301.1
2002
43,405.5
22,625.2
1,700.2
9,075.2 10,004.9
2003
44,804.7
23,350.9
1,543.5
9,198.6 10,711.7
2004
45,527.2
23,386.6
1,419.9
9,386.5 11,334.2
2005
46,379.4
23,561.4
1,190.9
9,602.1 12,025.0
2006
46,894.3
23,965.5
1,000.0
9,746.5 12,182.3
2007
46,977.9
23,642.8
869.5 10,006.6 12,459.0
2008
45,738.6
22,155.1
803.2 10,243.8 12,536.5
2009
45,786.9
21,655.4
796.4 10,372.5 12,962.6
2010
46,508.0
21,753.4
883.8 10,602.4 13,268.4
2011
47,577.3
21,871.2
916.2 10,921.8 13,868.1
% share
100.0%
53.7%
3.3%
21.7%
21.3%
2000
% share
100.0%
46.8%
1.9%
22.8%
28.5%
2010
Source: Euromonitor International
In a total alcohol market that has grown nearly 20% in size, wine has increased its share of that bigger
market by more than 7 percentage points. Actual increase in spend on wine over that time frame was
more than 60 per cent.
RTDs, though a small category, showed a marked decline since 2002, when excise duty on the
category was hiked up (see RTDs below).
3
The UK is a mature market for alcohol beverages. The financial crisis since 2008 has resulted in quite
a shake-up of businesses. Companies throughout the supply chain disappeared during 2009 and 2010.
Notable examples include shipper and logistics company Anglo Overseas, First Quench (brand
fascias of Threshers, Wine Rack, Haddows, Bottoms Up), with the closure of 1200 stores and 6500 job
losses, plus HwCg Ltd, Paragon Vintners, Hayman Barwell Jones, Premium Bars and Restaurants,
Pubs ‘n’ Bars, and London Town, which operates 350 pubs. Cobra Beer was snapped out of
administration by Molson Coors. Geronimo Inns, Stokes Fine Wines, Great Western Wines, Scottish
wholesaler Bellevue and Channel Islands’ supermarket chain Sandpiper have all been subsumed into
other organisations.
The trend continued in 2011, with Novus Leisure buying Balls Brothers, WM Morton buying
Inverarity Vaults to become Scotland’s largest independent drinks supplier, Greene King buying
Capital Pub Co., Sogrape buying wine agency Stevens Garnier, Crewe wholesaler Rodney Densem
buying wholesaler Telford Wines, and in the first part of 2012, Spirited Wines bought the Nicolas off
licence chain. The ongoing global financial crisis is making times tough for the drinks industries.
The pub business has been particularly hard-hit. Two thousand pubs closed their doors during 2009
at a rate of 40 per week with an estimated loss of 30,000 jobs across the drinks sectors. During 2010,
pubs continued to close at a rate of 25 a week, with 13 000 jobs lost, according to the British Beer and
Pub Association (BBPA). Global wine businesses such as Constellation, Foster’s and Gallo have
restructured and, in the case of Constellation, sold its UK and Australia assets, including moving jobs
and money out of the UK. There have been rumours that Diageo might move its headquarters from
the UK.
A tough economic climate is only one pressure on the UK market. As a mature market for alcoholic
drinks, the use of promotional mechanics to drive sales is well established, which means that margins
are all too often shrinking.
In November 2010, financial services provider Rabobank reported that ‘for a bottle of wine that retails
at £4/bottle in the UK market, the share returned to the supplier after accounting for excise duty, VAT
and the retailer share, fell from £1.14/bottle in 2002 to £0.61/bottle in 2010 – a 46 per cent decline over
the course of eight years just from the increase in excise duties’. In 2002 the excise duty on a bottle of
wine was £1.16. By December 2010 excise duty was £1.69. And by March 2012, excise duty increased
to £1.90, a 64 per cent increase over the rate in 2002.
As a nation we spend less on alcohol and tobacco than on communication. ONS data published in
November 2011 showed that spending on alcohol and tobacco was, on average, £11.80 per week in
2010, accounting for 2.5% of total household weekly spend. We spend £13.00 a week on
communication. Spend on alcohol and tobacco in 2009 was at a similar level.
Notes: Euromonitor International definitions:
 Wine includes, still light wine, sparkling wine, fortified wine, aromatised wines, non-grape wine.
 Figures for 2011 are a forecast based on incomplete full year data.
Notes on other definitions:
Total sparkling wine: Champagne and sparkling wine
Sparkling wine: sparkling wine other than Champagne
Champagne: Champagne!
Excise Duties
The UK has one of the highest excise duty regimes in Europe. Wine duties remain second placed in
the European Union after the March 2012 UK budget.
4
Wine duty rates
Wine - excise duty rates (€ per 75cl), January 2012
€2.50
€2.00
€1.50
€1.00
€0.50
Fi
nl
an
d
U
K
Ire
l
Sw an d
ed
D en
en
m
a
Es rk
N
et ton
he i a
rl a
nd
La s
Li tv ia
th
ua
n
Be i a
lg
iu
Po m
la
Fr nd
an
Bu ce
C l ga
ze ria
ch
G Re
er p
m
a
G ny
re
ec
e
Sp
ai
n
Ita
ly
Lu Cyp
x e ru
m s
bo
H urg
un
ga
ry
M
al
Au ta
st
Po ria
rtu
R ga
om l
a
Sl n ia
ov
en
Sl ia
ov
ak
ia
€0.00
Source:
http://ec.europa.eu/taxation_customs/resources/documents/taxation/excise_duties/alcoholic_beverages/rates/exci
se_duties-part_i_alcohol_en.pdf [Accessed Mar 27, 2012]
Spirit duty rates
Source:
http://ec.europa.eu/taxation_customs/resources/documents/taxation/excise_duties/alcoholic_beverages/rates/exci
se_duties-part_i_alcohol_en.pdf [Accessed Mar 27, 2012]
At January 2012, the UK had the fourth highest spirit duty rate in the EU, behind Sweden, Finland
and Ireland.
In 2008, the government increased duty by 9 per cent and introduced a ‘tax escalator’ for drinks, to be
2 per cent above the rate of inflation for the next four years. Due to end in 2013, this escalator was
extended to 2015 in the March 2010 budget.
5
In November 2008, a further 8 per cent duty increase was introduced for wine (4 per cent for spirits),
designed to offset the temporary reduction in VAT from 17.5 per cent to 15 per cent. However, this
remained in place when VAT returned to 17.5 per cent in January 2010.
For the first and, so far only, time in 2009, the five main drinks lobbying bodies came together to put a
united pre-budget report before the government. This was strengthened with the creation of a task
force of leading industry figures who petitioned government and communicated issues to the media.
But they did not succeed in either (a) obtaining a freeze on alcohol duty in the April 2009 budget, or
(b) causing the tax escalator to be abandoned.
In 2010, the lobbying organisations reverted to individual budget submissions.
The four tax rises on alcohol in 2008 and 2009 did not increase Treasury receipts from spirits. The
Scotch Whisky Association reported that Treasury revenue from spirits fell by £49 million in 2009.
Beer sales were down £650 million in 2009, with the duty and VAT element falling by £31 million.
Prior to the March 2012 budget, UK tax accounted for three quarters of the average price of a bottle of
spirits, and half the average price of a bottle of wine.
Prior to the 2011 and 2012 budgets, the WSTA lobbied for the government to scrap the duty escalator,
but to no effect. Both budgets retained the ‘inflation plus 2 per cent’ tax escalator, increasing duties by
7 per cent in 2011 and 5% in 2012.
UK excise duties
Beverage category
Excise duty
Per hl cost
LOW ALCOHOL beverages, wine and
made-wines, between 1.2% and 4%.
Excludes spirit-based drinks
£78.07
LOW ALCOHOL beverages, wine and
made-wines, between 4% and 5.5%.
Excluding spirit-based drinks
£107.36
STILL and made wines (and fortified) 5.5%
to 15%
SPARKLING wines
8.5% to 15%
SPARKLING wines
5.5% to 8.5%
£1.90per 750 mL
bottle
£2.43 per 750 mL
bottle
£1.84 per 750 mL
bottle
Still and made wines and FORTIFIED, etc.
15% to 22%
SPIRITS and spirit based RTDs. Wine and
made wine exceeding 22% abv
£26.81 for every 1% of strength per 100 litres
BEER £19.51 for every 1% of strength per 100
litres
£2.53 per 750 mL
bottle
£253.39
£22.81 / 9 L
case
£245.32
£29.21 / 9 L
case
£22.08 / 9 L
case
£337.82
£30.40 / 9 L
case
£324.56
£0.41 per 275 mL
bottle @ 5.5% abv
£0.44 per pint at
4%
CIDER & PERRY up to 7.5%
£0.21 per pint
£37.68
Source: WSTA www.wsta.co.uk/excise-duty-rates.html [Accessed March 27, 2012]
NB: duties accurate from March 26, 2012
NB: VAT is payable on duty at the current rate of 20 per cent.
The March 2012 budget means that since the escalator was introduced in 2008, the cumulative tax
increases represent 45% on wine and 40% on spirits.
6
Work commissioned from Oxford Economics by the WSTA in 2009 reported that the introduction of
the duty escalator in 2008 and the subsequent duty increases were projected to reduce employment in
the industry by up to 80 000 jobs. The WSTA cited 30 000 job losses in 2009 alone.
Such a high cost of doing business in the UK is forcing brand owners and producers to consider
whether it is worth the price to work in the UK. It has already been suggested that Diageo could
move its headquarters outside of the UK. Global companies such as Accolade Wines (exConstellation’s UK and Australia business), Gallo and Treasury Wine Estates (ex-Foster’s) have
restructured, which has involved moving jobs and investment out of the UK.
When the high duties are combined with the huge buying power of the supermarkets, which both
squeezes margins and narrows the number of channels to market, this becomes a challenging
decision. Once, the UK was considered THE market to be in for producers as it provided a ‘window
on the wine world’. This is no longer the position today.
Other Price Pressures
It is not just excise duty, VAT and currency fluctuations (see below) that challenge the market,
especially during the global financial crisis. Additional pressures on prices during both 2008 and 2009
included the continued high prices of energy. Fuel prices reached a (then) peak in July 2008 at £1.20 a
litre for unleaded petrol, and have not come back to the levels seen in 2007. A litre of unleaded petrol
reached a new peak in 2011 of around £1.35, which caused such concern that in his March 2011
budget, the Chancellor reduced fuel duty by 1p, and postponed a proposed 5p increase in fuel tax, in
order to offer some respite. In the first part of 2012, another new peak petrol price was reached of
£1.40 per litre. But in the 2012 budget, a planned fuel duty increase of 3p/ litre is scheduled to go
ahead on August 1, 2012.
Increased dry goods and packaging costs have also contributed to higher costs.
Cross Border Shopping
Wherever borders exist, with differential price structures on either side, cross border trade will occur.
For alcoholic beverages, within the EU, this can be both legal trade, as in beverages bought for
personal consumption, and illegal trade, where goods are bought in one (low duty country), and sold,
illegally, in a different, high duty country.
For the UK, legal cross border shopping is largely the Calais market (see Appendix 2). In 2005, the UK
‘market share’ for wine represented by cross-border shopping was estimated to be around 7 per cent.
This was down from 15 per cent at the highest point during the survey period.
The recession and ensuing global financial crisis have caused their own challenges in the Calais
market. With a strong euro, high petrol prices and job insecurity, the economic argument for
travelling to France is far weaker. Strong drinks promotions, including BOGOFs, is another
disincentive to travel to Calais.
7
Source: WSTA Budget Submission, February 2008
Away from the Calais market, and even closer to home, with the euro’s strength against sterling, a
development during 2008 had been the increased purchase of alcoholic drinks in Northern Ireland for
personal consumption in the Republic of Ireland. The WSTA budget submission for 2010 reported
‘Treasury revenue receipts have been boosted in 2009 by revenues from cross-border trade from the
Republic of Ireland. Alcohol sales in Northern Ireland were estimated to be 30 per cent higher in 2009
before the Irish Government reduced duty rates by 20 per cent on 9 December 2010 to reduce crossborder purchasing.’
Additionally, the Scottish parliament have approved in principle plans for a minimum unit price for
alcohol. If England does not follow this plan, a price gradient between the two countries would likely
to lead to increased cross border trade. But minimum pricing is a strand of the Coalition’s revised
Alcohol Strategy, released in March 2012 (see page 87 for more details.)
Such a high duty regime spawns incentives to get around the system, not just by personal cross
border shopping. Illegal cross border trade becomes risk-worthy for some, and fraud is growing
issue. The WSTA reported that HMRC has increased its estimates of losses due to alcohol fraud from
£850m in 2008-09 to £1.2bn in 2009-10.
In May 2011, the WSTA set up a fraud prevention unit, closely co-operating with the police, HMRC
and the Food Standards Agency.
Exchange Rates
The recession, which lasted for much of 2008 and 2009, plus the plummeting value of sterling and the
excise situation, created a seriously challenging marketplace for the UK drinks industry. It was
equally tough in 2010 and 2011, with only a little optimism as Olympic and Diamond Jubilee year,
2012, opened.
During 2008, sterling effectively lost one-third of its value against the euro (from a high point of €1.50)
and one-quarter against the US dollar (high point of USD$2), which resulted in dramatically more
expensive imports, of any goods bought in these currencies. Over 50 per cent of the wine consumed in
the UK is bought in these two currencies.
Since the low point in January 2009 (€1.02), sterling has rallied against both currencies, to USD$1.60
and nearly €1.20.
8
The volatility of sterling against the euro
Source: ECB exchange rates http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-gbp.en.html
[Accessed 27 March 2012]
Sterling went into freefall against the euro during December 2008, reaching a low-point of near parity
right at the very end of that year. It has not recovered to its heady days of three years ago when £1
bought €1.5 or US$2.
Sterling saw a fair amount of volatility during 2009 and 2010, with extremes against the euro of €1.07
and €1.23, and against the US dollar of US$1.42 and US$1.70. Buying products in foreign currency is
thus precarious; it is a gamble to buy currency forward. Those fixing currency at the end of 2008
suffered as sterling rallied a little. Anyone buying currency in mid-October 2009, fearing a further
significant decline, would actually have seen another minor rally. The loss of value in sterling makes
euro-bought products significantly more expensive by the time they reach the shelves in the UK.
Conversely, exporting UK products benefits from a weak sterling.
The picture that evolved during 2009 and 2010 was one of sterling finding a new base level against
the euro of around €1.15 to €1.18.
During 2011, despite the Greek debt and Euro crisis, sterling performed stoically, fluctuating to a
much smaller degree than in previous years, from €1.1 to €1.2 per GBP. Similarly against the US
dollar, fluctuation in 2011 ranged more stably between US$1.53 to US$1.67
Even the South African rand, which was one of the most favourable currencies during much of 2009,
fell to less than R11 to the £, in July 2011, from around R14 in April 2010.
Sterling continued to fall against the Australian dollar during 2010. From a high of around AUD$1.8
in February 2010, it fell to AUD1.5 in December 2010, and early 2012 saw it fall to AUD$1.48, though
by March 2012 it had rallied again to AUD$1.51.
These rates are a long way from its peak of AUD$2.7 in October 2008. And the New Zealand dollar is
the strongest it has been in 30 years. In December 2010, £1 bought just NZ$2, whereas in 2000, £1
bought NZ$3.70. By the first quarter of 2012, £1 purchased around NZ$1.95.
9
Sterling remains a precarious currency, with national debts at a level similar to those of Greece, which
is being supported by other Eurozone countries. Financial collapse was averted in 2011. S
Sterling is now around the €1.20 level, rather than the parity predicted by some, and around the
US$1.60 level, rather than the US$1.20 level predicted. World markets have responded positively to
the austerity measures brought in by the UK coalition government since it came to power in May
2010. More significantly, markets have responded to the Euro zone’s persistent support of Greek debt.
(See separate piece on Euro crisis).
Consumption Patterns
The decline in total alcohol consumption since 2004 stabilised in 2010, with Her Majesty’s Revenue
and Customs (HMRC) clearances showing a 0.6 per cent increase in total alcohol consumption during
2010. In 2011, total alcohol consumption fell again, by 3%, making an overall decline of 13% in total
alcohol consumption between 2004 and 2011.
During 2010, while total alcohol consumption was up by 0.6 per cent, spirits grew by 4 per cent, but
beer continued to decline, by nearly 2 per cent. In 2011, all the main sectors, beer, wine and spirits,
declined.
By 2009, consumption had fallen by 4.6 per cent since the introduction of the Licensing Act in 2005.
Per capita consumption
While per capita consumption, combined for all types of alcohol, peaked in 2004, there has been a
gradual decline in per capita consumption since then, bar marginal increases in 2007 (1.9%) and 2010
(0.5%).
In 2011, consumption was 13% lower than its peak in 2004.
Per capita alcohol consumption, 1989 to 2011
Alcohol consumption per capita
Litres per head (100% alcohol)
10
0.06
9
3.7%3.8%
8
7
1.1%
6
5
0.04
3.1%
0.02
1.9%
1.7%
0.5%
-1.5%
4
-3.3%
3
2
-3.0%
-0.02
-2.3%
-0.04
-6.0%
1
0
-0.08
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
0
-0.06
Sources: HMRC/ BBPA, various years
http://www.beerandpub.com/news/new-figures-show-uk-alcohol-consumption-down-again-in-2011-need-for-abeer-tax-freeze-says-british-beer-pub-association?from_search=1 [Accessed Mar 26, 2012]
10
Below, Euromonitor International picks up the picture, breaking out the various drinks sectors. They
show a steady and consistent reduction in per capita total alcohol consumption since the peak of 2004.
Total alcohol
(including beer,
cider, perry)
RTDs
Spirits
Wine
Fortified
Wine and
Vermouth
Total
Sparkling Wine
Still Light
Grape Wine
2000
2001
Per capita consumption, litres, over 15
2002 2003 2004 2005 2006 2007
2008
2009
2010
2011
158.9
162.9
165.9
166.9
164.5
161.4
159.0
155.0
151.0
145.2
142.1
137.8
3.7
5.5
22.1
4.9
5.6
23.4
5.4
5.7
24.8
4.8
5.8
25.8
4.2
6.0
26.5
3.5
6.0
27.5
2.9
6.1
27.8
2.5
6.1
28.1
2.5
6.2
27.8
2.5
6.2
28.0
2.9
6.2
27.5
3.0
6.2
27.2
1.8
1.7
1.7
1.6
1.5
1.4
1.4
1.3
1.2
1.2
1.2
1.1
0.9
1.0
1.1
1.2
1.2
1.3
1.4
1.4
1.4
1.4
1.5
1.6
19.3
20.6
22.0
22.9
23.6
24.6
25.0
25.3
25.1
25.3
24.8
24.4
Source: Euromonitor International, per capita population over 15.
While fortified wine consumption is in long term decline that of sparkling wine has seen phenomenal
growth over the last decade. Total wine consumption is largely consistent at around 27.5 litres per
capita, meaning consumption of still light wine has declined slightly to accommodate the increased
consumption of sparkling wine.
The longer term per capita consumption for wine has followed a dramatic path. It increased from
fewer than 2 litres in 1961 to over 28 litres in 2007. Since then it has largely flattened.
In their 2010 budget submission, the WSTA reported that the number of new adults drinking wine,
specifically, had decreased over the previous four years. In all likelihood the UK wine market has
now peaked.
Total market, volumes and values
The chart below shows that total volumes (off- and on-trade) of alcoholic beverages declined during
2011 by 3 per cent, on top of a 1% decline in 2010. Fortified wines saw the biggest decline, while
sparkling wine and cider were the only categories in growth.
(For definitions and detail of off and on trade see pages 26 & 33.)
11
Total UK trade (on and off), spirits and wine volume trends, 2011
Source: WSTA Budget Submission, 2011
Fortified wine is in on ongoing decline. And sparkling wine and cider contradict the overall picture of
decline.
Total UK trade (on and off), spirits and wine value trends, 2011
Source: WSTA Budget Submission, 2011
The picture is different in value terms for the whole trade. The value growth of 4% was largely due to
duty and VAT increases. VAT increased from 17.5% to 20% on January 4, 2011.
12
The UK Market for Ready-to-Drink Alcoholic Beverages (RTDs)
This category is variously known as RTD (ready to drink) and FAB (flavoured alcoholic beverages) or
alcopops.
Research from Mintel (October 2005), showed ‘after an impressive value increase of as much as 70 per
cent between 2000 and 2002, sales have plummeted by 22 per cent from £1.6 billion in 2002 to just £1.2
billion.’
The catalyst for this decline was due to a sharp increase in duty. In the 2002 budget, the Chancellor
created a new fiscal category by linking spirit-based RTDs to the duty on spirits. Previously, spiritbased RTDs had carried duty at the same (lower) rate as wine and cider-based RTDs.
Source: WSTA Budget Submission 2010
The decline is continuing in a sector that represents just over 1 per cent of all liquor sales.
In 2010, the RTD sector actually saw a 1 per cent increase in volume sales. Most of this was in the offtrade, which saw a 13 per cent growth over 2009, accounted for by new launches, and new pre-mixed
cocktail products.
In 2011, the total RTD sector (on and off trade) fell by 1% by volume and value (WSTA Budget
Submission, 2012). Decline was particularly pronounced in the on trade (see chart above, in
Consumption Patterns).
The UK Market for Beer
Information from BBPA shows:
 Pubs closed at a rate of 25 per week in 2010 and 2011, down from the 40 a week in 2009.
 Beer tax has increased more than 42% since March 2008 (introduction of the escalator)
 Total beer consumption down 5 per cent in 2011.
 According to a study published in February 2011 by Oxford Economics for the BBPA, 72 000 UK
jobs depend on the UK brewing industry and a million jobs depend on beer and pubs as a whole.
13
Numbers of pubs
Year
Pub
No.s
Year
Pub
No.s
1980
69,000
1996
60,800
1981
68,500
1997
60,600
1982
67,800
1998
61,000
1983
67,400
1999
61,500
1984
66,700
2000
60,800
1985
66,500
2001
60,700
1986
66,200
2002
60,100
1987
65,700
2003
59,400
1988
65,200
2004
59,000
1989
64,100
2005
58,600
1990
63,500
2006
58,200
1991
62,200
2007
56,791
1992
61,600
2008
54,818
1993
61,000
2009
52,453
1994
60,700
2010
51,178
1995
61,000
Source: BBPA
NB: total number of pub closures will be higher, as these data include new openings
This represents more than a 15% net reduction in the number of pubs since the turn of the
millennium.
There remains a misconception that brewers still own the majority of pubs in the UK and hence are
responsible for on-trade prices. Over 80% of pubs are independently managed or run by selfemployed licensees.
There are over 51,000 pubs in the UK and around 130 000 on-licensed outlets in total. Of these,
brewing companies own around 9500 (6 per cent), of which 2500 are directly managed houses and
7000 are tenanted/leased pubs.
Top pub / restaurant operators
2009
2010
2011
Enterprise Inns
7400
6800
6289
Punch Taverns
7600
6700
5004
Greene King
2500
2400
2400
Admiral Taverns
2000
2400
2400
Scottish and Newcastle
2000
2200
1380
Pub Co. (Heineken)
Marston’s
2000
2000
1700
Mitchells and Butlers
2000
1600
1600
Sources: 2009 data: various company websites [Accessed March 2010]
2010 data: various company websites [Accessed March 2011]
2011 data: various company websites [Accessed March 2012]
In August 2011, Punch separated its managed pub business, Spirit. This leaves the company with
around 5,000 tenanted pubs. At its peak in 2006, Punch owned more than 9200 pubs.
In 2012, the UK beer market declined 4% by volume, and increased 2% by value. Decline was
fractionally greater in the on trade (see chart above, in Consumption Patterns).
14
The UK Market for Spirits
Overall, the market for spirits was quite flat in 2010. This recent flattening of the market follows a
period of steady growth. Vinexpo/IWSR 2011 reported an overall growth of 6 per cent between the
years 2005 and 2009. And Euromonitor International reported a 5.5% growth between the same
years, though with larger calculations for overall volume sales.
Spirits consumption (millions of 9 litre cases)
Vodka
Scotch whisky
Liqueurs
Rum
Gin
Bourbon
Brandy
Cognac /
Armagnac
Tequila
Other spirits
Total
2005
7.132
7.391
4.232
2.39
2.315
0.968
1.358
2009
8.498
6.588
4.695
2.526
2.463
1.21
1.259
Actual
evol.
2005/2009
19.2%
-10.9%
10.9%
5.7%
6.4%
25.0%
-7.3%
0.867
0.114
1.101
27.868
0.752
0.152
1.442
29.585
-13.3%
33.3%
31.0%
6.2%
2010
8.439
6.503
4.791
2.659
2.516
1.248
1.227
2014
9.006
6.506
4.921
2.974
2.601
1.524
1.131
Forecast
evol.
2010/2014
6.7%
0.0%
2.7%
11.8%
3.4%
22.1%
-7.8%
0.731
0.153
1.473
29.74
0.672
0.161
1.632
31.128
-8.1%
5.2%
10.8%
4.7%
Source: IWSR/Vinexpo 2011
Spirits Total
Whiskies
Bourbon/Other
US Whiskey
Irish Whiskey
Blended
Scotch Whisky
Single Malt
Scotch Whisky
Gin
Vodka
Brandy and
Cognac
Liqueurs
Rum
Tequila (and
Mezcal)
2000
29.082
UK spirit consumption (million 9 L cases)
2002
2004
2006
2007
2009
30.627
32.269
33.355
33.903
34.830
2010
35.106
2011
35.487
10.272
10.239
9.803
9.601
9.367
9.229
9.149
9.050
0.620
0.729
0.930
1.105
1.142
1.175
1.202
1.238
0.261
0.286
0.301
0.320
0.357
0.347
0.347
0.348
8.578
8.382
7.719
7.424
7.102
6.992
6.905
6.782
0.653
0.706
0.783
0.717
0.744
0.700
0.682
0.672
3.135
6.654
0.000
3.108
7.565
0.000
3.234
8.555
0.000
3.247
9.667
0.000
3.189
10.277
0.000
3.259
11.065
0.000
3.340
11.096
0.000
3.396
11.153
0.000
2.263
2.265
2.233
2.229
2.210
2.134
2.085
2.037
2.976
2.923
3.576
2.996
4.133
3.022
3.870
3.193
4.016
3.221
4.072
3.306
4.178
3.393
4.378
3.487
0.144
0.135
0.125
0.128
0.134
0.139
0.140
0.141
Source: Euromonitor International
NB: the individual volumes for Bourbon, Irish, Scotch whiskies are already included in the ‘Whiskies’ figures
In the medium term, spirits consumption has had mixed fortunes in the UK. Vodka is the category
most in favour now, and is forecast to break through the nine million cases barrier by 2014. It was in
2006 that vodka became the biggest spirit category in the UK, tumbling the whisky category off its
long-held perch.
15
Growth in liqueurs is being driven from the increase in the number of style bars and the rediscovery
of cocktails, as these drinks are promoted as ‘mixables’. The growth of the tequila category has been
limited only by issues of production, both through plant disease and the long lead-time to maturity of
the blue agave. As these issues are addressed, significant growth is forecast.
The following data show a clear divide between the on- and off-trades, with the off-trade growing at
the expense of the on-trade.
UK spirits market by volume and category (000 9 L cases)
%
change
2000
2008
2009
2010
'09 vs
08
Off trade
Total spirits
Brandy
Liqueurs
Rum
Tequila
Whisk(e)y
White spirits
other spirits
20,359.181
1,625.038
1,736.522
1,605.384
42.000
7,950.191
6,760.956
639.090
On trade
Total spirits
Brandy
Liqueurs
Rum
Tequila
Whisk(e)y
White spirits
other spirits
8,723.060
637.873
1,239.949
1,317.770
102.370
2,321.506
3,028.037
75.556
25,651.673
1,659.783
2,529.033
2,005.077
47.718
7,554.659
10,459.301
1,396.101
26,306.709
1,625.661
2,735.828
2,103.697
51.917
7,499.479
10,823.943
1,466.185
%
change
'10 vs
'09
26,856.159
1,598.245
2,896.112
2,223.186
55.006
7,461.587
11,059.510
1,562.514
2.6%
-2.1%
8.2%
4.9%
8.8%
-0.7%
3.5%
5.0%
2.1%
-1.7%
5.9%
5.7%
5.9%
-0.5%
2.2%
6.6%
8,914.271
8,522.841
8,249.826
538.330
508.476
487.249
1,491.833
1,335.850
1,281.995
1,246.192
1,202.654
1,169.957
89.976
87.279
85.263
1,769.760
1,730.021
1,687.075
3,625.765
3,500.279
3,376.031
152.415
158.283
162.256
Source: Euromonitor International
-4.4%
-5.5%
-10.5%
-3.5%
-3.0%
-2.2%
-3.5%
3.9%
-3.2%
-4.2%
-4.0%
-2.7%
-2.3%
-2.5%
-3.5%
2.5%
In their Spirit Report 2011, Off Licence News reported a value growth figure of 7% for off trade spirit
sales, being led by imported whiskey and single malt.
In the off-trade the top ten spirits brands are:
% sales
Brand
Distributor
change
Smirnoff red
Diageo
+11
Bell’s
Diageo
+8
Glen’s
Glen Catrine
+10
Famous Grouse
Maxxium
+14
Gordon’s
Diageo
+17
Jack Daniel’s
Bacardi-Brown Forman
+13
Bacardi
Bacardi-Brown Forman
+7
Baileys
Diageo
+4
Grant’s
First Drinks
-7
High Commissioner
Glen Catrine
-18
Source: OLN Spirits Report, September 16, 2011, Nielsen year to August 6, 2011
16
There was just one change on the rankings from the previous year, with Jack Daniel’s jumping above
stable mate Bacardi.
With a channel to market growth of 7%, these data show all top brands, bar William Grant’s and High
Commissioner, growing at or in excess of the market growth.
WSTA data showed that in 2012, the spirits market declined 2% by volume and grew 5% by value.
Decline was twice the proportion in the on trade as the off trade, (see chart above, in Consumption
Patterns).
The UK Market for Wine
The size of the UK total wine market is around 155 million 9L cases (13.95 mhl)
The UK is the biggest market in the world among non-producer countries (the production of English
and Welsh wine is not significant in global terms). According to Vinexpo/IWSR 2011 data the UK is
the biggest importer of wine in the world, by the volume shipped. Some 12.28 million hectolitres of
wine were imported in 2009.
The wine market has witnessed unparalleled growth since the 1970s. Many factors have played their
part, including the country’s major supermarkets and multiple wine merchants targeting the category
and making it accessible to the mass market. During this time, standards of living have risen
dramatically and lifestyles have changed almost beyond recognition. Air travel has permitted regular
overseas travel for almost all and the health benefits of moderate wine consumption are more widely
understood.
But after 40 years, the wine market appears to be levelling off.
Vinexpo/IWSR 2009 estimated total UK wine consumption in 2007 at 144.6 million cases, or 13 million
hectolitres.
In their 2011 data, Vinexpo/IWSR estimated total UK wine consumption (still and total sparkling) in
2010 to be 13.24 million hectolitres.
Total UK wine consumption (million hectolitres)
2005
2009
2010
2014
Still
11.715
12.294
12.425
12.717
Total
Sparkling
0.688
0.799
0.817
0.915
Total
12.404
13.094
13.241
13.632
Source: Vinexpo/ IWSR 2011
This is broadly consistent with Euromonitor International data:
2000
Total wine
mhl
m 9 L cases
Still light wine
(mhl)
Total
sparkling wine
(mhl)
Total UK wine (including sparkling) consumption
2002
2004
2006
2007
2008
2009
2010
2011
10.52
11.949
12.927
13.766
14.055
13.999
14.209
14.082
13.979
116.889
132.767
143.633
152.956
156.167
155.544
157.878
156.467
155.322
9.183
10.578
11.539
12.38
12.665
12.666
12.851
12.687
12.555
0.445
0.522
0.61
0.681
0.72
0.687
0.727
0.773
0.812
Source: Euromonitor International
NB Total wine includes sparkling, fortified, aromatised and non-grape wines so totals do not tally
17
These wine figures also show that, while total alcohol consumption has been declining since 2004,
wine consumption grew up until 2009, and only since then has it started to fall back as well.
Economic austerity measures notwithstanding in the UK, Vinexpo/IWSR forecast that the wine
market will grow. Still wine is forecast to grow by a modest 2 per cent to 2014, and sparkling wine by
a bullish 12 per cent to the same year.
Virtually everything the UK consumes is imported. The main supplying countries are shown below.
Total UK wine consumption (still and sparkling),
by top country of origin (millions hectolitres)
Evol.
2005 to
2005
2009
2009
Australia
2.6703
2.6037
-2.5%
France
2.42766
2.08845
-14.0%
Italy
1.31265
1.66815
27.1%
USA
1.49031
1.52766
2.5%
Spain
0.96435
1.19052
23.5%
South
Africa
0.95247
1.18638
24.6%
Chile
0.7884
1.1106
40.9%
New
Zealand
0.19053
0.34137
79.2%
Total
12.40353 13.09365
5.6%
Source: Vinexpo/the IWSR 2011
Euromonitor International shows a notably different picture, however the Euromonitor International
data below are IMPORTS by country, not SALES, i.e. consumption.
A clear point of difference below is the USA, coming in at number 7 for wine imports to the UK. Part
of this will relate to brand-leading Blossom Hill, a wine from the USA, which is shipped to Italy in
bulk for bottling. Bottled stock is then shipped onward to the UK. The UK will receive imports from
Italy. Such a scenario also helps explain why Italy is number two below, sales of pinot grigio and
Prosecco notwithstanding.
Total UK wine imports by top country of origin (millions hectolitres)
2000
2002
2004
2006
2007
2008
2009
Australia
1.475
1.807
1.995
2.095
2.267
2.084
2.171
Italy
1.240
1.222
1.415
1.793
1.607
1.701
2.214
France
2.418
2.767
2.730
2.694
2.698
2.443
2.025
Chile
0.463
0.484
0.747
0.755
0.994
0.908
1.106
South Africa
0.517
0.821
0.937
0.821
0.750
0.938
1.147
Spain
0.782
0.940
1.110
0.999
1.014
0.995
0.915
USA
0.572
0.768
1.218
0.757
0.797
0.836
0.751
Germany
0.877
0.984
1.347
0.750
0.654
0.701
0.620
New Zealand
0.114
0.104
0.149
0.212
0.267
0.288
0.383
Portugal
0.154
0.178
0.169
0.160
0.180
0.177
0.174
Total wine
9.073
10.472
12.227
11.538
11.827
11.659
11.98
Source: Euromonitor International
2010
2.412
2.373
2.241
1.172
1.042
1.034
0.973
0.644
0.490
0.151
12.975
For 2009, Euromonitor International also has Italy as a country of origin higher than the UK’s imports
from France, which in the light of the runaway success of pinot grigio, may well be accurate. France’s
resurgence (too early to call it that?) is more recent, with 2009 looking like it is the bottom of the curve
for that country.
18
The top 20 companies selling all types of wine (still light wine, fortified wine, aromatised wines,
sparkling wine and Champagne) into the total UK market looks like this:
Top 20 (all) wine suppliers to UK market, 9 litre cases
2007
2008
2009
2010
2011
18,775,899
5,136,463
2,141,111
19,912,852
5,481,490
3,950,000
18,714,967
5,522,511
4,396,667
16,788,960
5,897,778
5,212,222
16,373,397
6,442,798
5,428,889
17,132,464
6,094,658
5,563,056
%
change
2011 vs
2010
4.6%
-5.4%
2.5%
4,867,761
5,067,901
4,970,017
4,866,667
4,438,889
4,394,537
-1.0%
4,089,099
6,022,007
1,136,558
4,365,556
6,405,762
1,708,587
3,798,814
6,397,605
2,879,312
3,206,605
5,362,222
4,333,364
3,001,111
3,803,333
3,544,692
2,899,012
2,777,778
2,654,265
-3.4%
-27.0%
-25.1%
1,241,697
1,338,889
1,282,390
1,391,111
1,792,222
1,698,889
-5.2%
1,186,799
1,124,506
1,051,709
992,024
956,119
973,296
1.8%
541,039
535,052
569,172
682,222
784,444
842,750
7.4%
874,444
540,750
396,044
422,012
1,007,778
177,778
575,556
421,111
445,556
1,034,185
477,778
620,511
441,253
444,082
1,084,445
833,333
697,778
473,333
443,000
881,111
877,778
837,778
705,556
507,010
783,333
744,444
744,444
655,556
611,542
-11.1%
-15.2%
-11.1%
-7.1%
20.6%
512,751
540,000
579,144
572,222
585,556
595,556
1.7%
1,172,222
1,088,889
788,889
1,070,556
973,877
867,396
595,114
513,655
461,111
270,000
307,401
344,444
Source: Euromonitor International
692,222
521,044
447,778
388,889
566,667
454,704
452,691
434,429
-18.1%
-12.7%
1.1%
11.7%
2006
Accolade
Diageo
Concha y Toro
Treasury Wine
Estates
Pernod Ricard
E & J Gallo
Brand Phoenix
Grands Chais
de France
Bacardi
J Chandler
(Buckfast)
Raisin Social
Delegat's
Fratelli Martini
Miguel Torres
Freixenet
Reh
Kendermann
Castel
Beam Inc
LVMH
Codorníu
1,210,000
1,117,530
558,429
242,660
Accolade Wines is by far the biggest supplier of wine to the UK. The OLN Wine Report 2011 lists the
company having eight brands in the top 50 off trade brands, including three in the top ten: Hardy’s,
Echo Falls, Kumala, Stowells, Banrock Station, Turner Road (USA), Gran Tierra (Chile) and Nobilo.
Grands Chais de France are the makers of JP Chenet, J Chandler is the supplier of Buckfast tonic
wine, and Delegat’s make Oyster Bay.
The level of consolidation of wine supply remains notably fragmented. The top ten companies
account for 29% share of ‘all-wine’ market, while the top twenty account for 33%.
Still Light Wine
Even with fortified and non-grape wines excluded from the data, Euromonitor International (chart
below) has UK imports from Chile and South Africa above those of the USA and Spain, which
IWSR/Vinexpo have in their top five CONSUMPTION nations. IWSR have the UK’s consumption of
USA wine at twice the level suggested by the import data collected by Euromonitor International,
otherwise the data are all within some sort of order of magnitude.
19
Australia
Italy
France
Chile
South Africa
US
Spain
Germany
New Zealand
Argentina
Total Light
Wine
2000
1.438
1.191
2.245
0.462
0.516
0.556
0.717
0.871
0.106
0.107
8.711
Imports of still light wine
2002
2004
2006
2007
1.768
1.951
2.029
2.184
1.152
1.340
1.549
1.538
2.489
2.442
2.359
2.381
0.484
0.747
0.755
0.993
0.815
0.933
0.818
0.749
0.764
1.209
0.747
0.787
0.838
0.912
0.784
0.779
0.980
1.305
0.697
0.612
0.094
0.138
0.200
0.252
0.099
0.187
0.189
0.210
9.953
11.549
10.588
11.044
2008
2.017
1.641
2.151
0.905
0.936
0.826
0.750
0.652
0.274
0.199
2009
2.099
2.127
1.769
1.101
1.142
0.743
0.726
0.598
0.368
0.179
2010
2.350
2.255
1.957
1.165
1.022
0.966
0.808
0.621
0.480
0.149
10.907
11.305
12.207
Source: Euromonitor International
Both sets of data show that the top five supplying countries accounted for around a 70 per cent share
of the UK market in 2009.
With more recent data, to 2010, Euromonitor International shows that France’s plight might have
reached its nadir, and Australia too, seems to have recovered in 2010.
There has been a phenomenal, relatively, increase in imports from New Zealand in the last few years.
A 40 per cent bigger crop in 2008 than 2007 saw much greater availability of liquid for export, and the
UK lapped up their favourite New Zealand sauvignon blancs. The 2009 harvest was just as big as the
2008, producing concerns about overproduction in that country, and giving rise to big promotions in
the UK on NZ wine, fuelling the dramatic increase in imports. While the 2010 harvest was a little bit
down on 2009, this was followed by a huge 2011 harvest, up another 15% on top of the big 2008
harvest. New Zealand has been selling much of this increased in crop in Australia, contributing to
the ‘savalanche’ phenomenon in the latter country.
When reviewing consumption by colour, the rise of rosé over the last decade is plain to see. In 2000
rosé consumption accounted for just 3% of total still light wine consumption. By 2010, in a bigger
overall market, rosé consumption reached 14% of the market. Over that time rosé sales have come
from both of the other colours: red wine share in 2000 was 45% compared to 39% in 2010, and white
wine share in 2000 was 52% compared to 47% share in 2010.
Still Red Wine
Still Rosé Wine
Still White Wine
Total STILL
Light Wine
Total UK still light wine consumption by colour (mhl)
2000
2002
2004
2006
2007
2008
2009
4.161
4.805
5.152
5.278
5.276
5.191
5.177
0.266
0.335
0.518
0.898
1.139
1.318
1.465
4.756
5.438
5.869
6.204
6.251
6.157
6.208
9.183
10.578
11.539
12.38
12.665
12.666
12.851
2010
4.994
1.642
6.052
2011
4.871
1.783
5.9
12.687
12.555
Source: Euromonitor International
These data also show consumption of still light wine declining since 2009. Full year data for 2011
from the WSTA show the UK wine market declined 3% by volume and grew 5% by value. Decline
was particularly marked in the on trade (see chart above, in Consumption Patterns).
20
Still light wine brands, total UK market, 9 litre cases
Brand
Owner
Hardys
Blossom Hill
Echo Falls
Kumala
First Cape
E & J Gallo
Stowells
Wolf Blass
Isla Negra
Concha y Toro
Accolade
Diageo
Accolade
Accolade
Brand Phoenix
E & J Gallo
Accolade
Treasury
Concha y Toro
Concha y Toro
2006
2007
2008
2009
2010
2011
4,946,853
4,335,833
1,738,889
2,244,445
1,136,558
5,089,833
3,688,889
1,782,117
555,556
891,111
5,689,243
4,679,167
2,066,667
1,588,889
1,708,587
5,473,540
3,711,111
2,104,150
961,111
1,716,667
4,761,111
4,725,834
2,388,889
1,700,000
2,879,311
5,528,889
3,166,667
2,123,527
1,355,556
1,666,667
5,341,111
5,126,667
2,912,294
2,055,556
4,333,364
4,588,889
2,754,445
1,932,222
1,666,667
2,000,000
5,715,555
5,485,021
3,315,647
2,638,889
3,544,692
3,261,111
2,876,667
1,972,222
1,788,889
1,882,222
5,942,664
5,210,770
3,547,778
2,688,889
2,654,265
2,333,333
2,227,778
2,133,334
1,911,111
1,897,778
%
change
2011 vs
2010
4.0%
-5.0%
7.0%
1.9%
-25.1%
-28.4%
-22.6%
8.2%
6.8%
0.8%
Source: Euromonitor International
The OLN Wine Report 2011 reports significant losses in the off trade sector from Gallo being due to
their doing fewer price promotion. Additionally, First Cape introduced their Café Collection, a range
of 5.5% abv wines, which fall outside the definition of light wine (8 to 14%).
Sparkling Wine
In 2011 Euromonitor International forecast the size of the total sparkling wine market in the UK, both
sparkling wine and Champagne, was 108.267 million bottles. Champagne accounted for more than a
quarter of this volume. This suggests a volume growth for total sparkling wine of 5% during 2011.
This growth was driven by the sparkling wine sector. In 2011, WSTA data show the sparkling wine
sector grew 7% by volume (as do the Euromonitor International data) and 11% by value, hugely
bucking the trend of decline seen in most other alcohol sectors. Most of this growth was in the offtrade (see chart above, in Consumption Patterns).
In 2011, WSTA data show the Champagne sector declined 7% by volume (compared to Euromonitor
International’s 0.5% growth) and grew 4% by value. By far most of this decline was in the on trade
(see chart above, in Consumption Patterns).
2000
Total Sparkling
Wine
Champagne
Other Sparkling
Wine
Total sparkling wine consumption, million bottles
2002
2004
2006
2007
2008
2009
2010
2011
59.333
69.600
81.333
90.800
96.000
91.600
96.933
103.067
108.267
23.333
27.333
29.600
30.800
31.600
27.867
28.000
28.000
28.133
36.000
42.267
51.733
60.133
64.400
63.733
68.933
75.067
80.267
Source: Euromonitor International
CIVC data reports that 34.5 million bottles of Champagne were shipped to the UK in 2011. Some of
these will be pipefill and inventory i.e. not all consumption, so the data bear reality checking.
Longer term trend data from IWSR, below – just for sparkling wine – shows the dramatic growth of
this category in just 20 years.
21
Total UK sparkling wine market, excluding champagne
%
Million bottles change
1990
32
2000
35.7
11.6%
2005
55.2
54.6%
2006
61
10.5%
2007
64.46
5.7%
2008
67.35
4.5%
2009
74.325
10.4%
Source: IWSR UK Domestic Market 2008, 2009 courtesy Moët Hennessy, 2011
Evidently, suppliers of sparkling wine are different from those of Champagne. Below are charts
showing the main brands in the UK.
Sparkling wine brands, (9L cases)
Brand
2005
2006
2007
2008
2009
2010
2011
Freixenet
350,000
383,075
404,445
402,067
403,333
468,232
568,099
Codorníu
200,000
242,660
270,000
307,401
344,444
388,889
434,429
Asti Martini
294,669
261,637
245,556
242,517
245,556
253,333
274,024
Jacob's Creek
275,556
293,333
305,556
243,333
202,222
175,556
163,333
Brancott Estate
103,648
111,577
115,556
113,281
110,000
106,667
120,303
Hardys
79,817
86,481
98,424
92,542
87,778
86,667
93,569
Banrock Station
47,754
55,082
61,111
85,625
72,222
66,667
73,519
Segura Viudas
36,167
38,937
41,111
42,015
39,667
38,778
43,443
Seaview
Mumm Cuvée
Napa
33,333
34,444
34,444
33,506
31,111
30,000
36,759
5,556
6,203
8,889
10,105
12,222
14,444
16,709
Source: Euromonitor International
Sparkling wine is dominated by sparklers produced in the Old World. Of the top ten brands, the Old
World accounts for some two thirds of consumption.
Spanish sparkling, i.e. Cava, is the big leader here, accounting for 55 per cent of these top ten brands
In terms of value, Lanson International Champagne Category Report 2012 reports a different picture
for sparkling wine (excluding Champagne) sales, by country of origin. This may bear reality testing
given that Euromonitor International detailed only the top ten brands, with an ‘others’ category
accounting for 40% of the value share.
Top ten UK sparkling wine sales
Source Lanson International Champagne Category Report 2012
22
The level of consolidation of supply in the sparkling wine sector is modest, as shown by the number
of different companies supplying the UK market.
Owners of sparkling wine brands selling in the UK market, by each country of origin
Country
Spain
Spain
Spain
Spain
Spain
Spain
Italy
Italy
Italy
Italy
Italy
Italy
Australia
Australia
Australia
Australia
Australia
Australia
France
Brand
Codorniu
Marques de Monistrol Sparkling
Wine
Freixenet Sparkling Wine
Cristalino Sparkling Wine
Campo Viejo Cava
Castellblanch
Martini Sparkling Wine
La Gioiosa Sparkling Wine
Tosti
Gancia Sparkling
Canei Sparkling Wine
Cinzano Sparkling
Jacob’s Creek Sparkling
Hardy's Sparkling Wine
Wynns Seaview Sparkling
Seppelt Sparkling
Angas Brut
Foster's Pink Sparkling Wine
Veuve du Vernay
Owner
Codorníu
France
France
France
France
Champteloup Sparkling Wine
Gratien & Meyer
Blanquette de Limoux
Kriter
France
New Zealand
New Zealand
Ackerman Laurance
Lindauer
Pelorus Sparkling Wine
Arco Bodegas Unidas
Freixenet
Grupo Garcia Carrion
Pernod Ricard
Freixenet
Bacardi – Martini
La Gioiosa
Giovanni Bosca Tosti
Gancia
Baarsma
Campari
Pernod Ricard
Accolade
Treasury Wine Estates
Treasury Wine Estates
S. Smith & Son
Treasury Wine Estates
Groupe Patriarche
Grands Chais De
France
Henkell
Sieur D'Arques
Groupe Patriarche
Ackerman Remy
Pannier
Lion
LVMH
US
Beringer Sparkling Wine
Treasury Wine Estates
Source: IWSR UK Domestic Market 2009 courtesy Moët Hennessy 2011
Moving on to Champagne, the Champagne market in the UK stands at around 28 million bottles.
This is some 10 million more bottles than in 1990 (18m bottles).
At its 2007, pre-2008-recession peak, the UK was consuming around 32 million bottles. This
sensitivity of Champagne consumption to the economy at large is demonstrated in the chart below.
Since the recession, sales have been largely flat from 2009 to 2011 as the economy has bumped along
the bottom of a continued financial crisis during those years.
Although shipments of Champagne to the UK were up in 2010, by 16 per cent, to 35.5 million bottle,
the growth in sales was less pronounced, as the supply chain began to be restocked, after an absence
of ordering for the previous eighteen months. For 2011, the Lanson International Champagne
Category Report 2012, reported 4% value growth in consumption for the total UK market (on and off).
This was despite shipments from Champagne falling by nearly 3% to 34.5 million bottles in 2011.
23
Top ten Champagne wine brands in the UK, (9L cases)
2005
2006
2007
2008
2009
2010
2011
Moët & Chandon
337,778
376,453
404,445
335,093
295,556
291,111
287,757
Lanson
226,667
199,240
212,222
193,635
204,444
207,778
210,554
Veuve Clicquot
Heidsieck & Co
Monopole
Bollinger
188,889
181,976
190,669
178,562
165,556
156,667
164,934
65,733
77,342
84,444
81,165
113,333
121,111
128,672
68,889
76,928
81,111
61,453
66,667
68,889
73,694
Mumm
47,778
55,790
66,667
64,932
57,778
52,222
57,318
Nicolas Feuillatte
88,333
86,858
81,111
65,556
54,444
47,778
51,469
103,333
81,137
72,323
57,975
48,889
44,444
47,960
Taittinger
50,000
51,280
46,667
31,306
36,667
40,000
46,790
Piper Heidsieck
55,556
61,794
65,556
53,337
48,889
43,333
45,620
2,525,469
2,562,629
2,632,503
2,318,986
2,329,229
2,329,146
2,339,489
Laurent Perrier
Total Champagne
Source: Euromonitor International
The top ten brands account for some 46% of total Champagne sales, But of the top 12 Champagne
brands in the UK, there are 10 different owners, suggesting the Champagne category is also not
overly consolidated.
A different picture emerges when sales value is studied, but beware the different data origin, and
indeed data collection. The Lanson International Champagne Category Report 2012 focused
specifically on ‘grandes marques’ (an unofficial term of no certain definition, but for this report
included the original sixteen exporting houses).
Euromonitor International list Heidsieck, Mumm and Nicolas Feuillatte, but these three are missing
from the value chart below, being replaced by Pol Roger, Perrier Jouet and Louis Roederer. There is
no direct comparison here.
Source: Lanson International Champagne Category Report 2012
Owners of top twelve Champagne brands in the UK
Moet et Chandon
Lanson
Veuve Clicquot
Heidsieck Monopole
Bollinger
Mumm Champagne
Nicolas Feuillatte
Laurent Perrier
Taittinger
Piper Heidsieck
Martel Champagne
Perrier Jouet
LVMH
Boizel Chanoine Champagne
LVMH
Vranken Pommery
Bollinger
Pernod Ricard
Nicolas Feuillatte
Laurent Perrier
Taittinger
Remy Cointreau
GH Martel
Pernod Ricard
24
Source: Euromonitor International
Off-Trade versus the On-Trade
The off-trade is defined as channels of distribution where purchases are made for consumption at
home, i.e. consumed ‘off’ the premises where they were bought. On-trade is defined as where
purchases are made for immediate consumption, ‘on’ the premises.
Off-trade includes: multiple grocers (e.g. Asda, Marks & Spencer, Morrisons, Sainsbury’s, Tesco,
Waitrose), independent grocers (Budgens, Londis, Nisa, Spar), multiple specialists (Majestic, Bargain
Booze, Spirited Wine, Wine Rack), independent specialists (Berry Bros & Rudd, Caviste, Philglas and
Swiggot), mail order (Wine Society, Laithwaites) and online distribution (a growing band of onlineonly retailers).
On-trade includes: hotels, restaurants, catering (known as ’HoReCa’), pubs, including gastropubs,
wine bars and style bars. It also includes private clubs and bars.
Looking at the on / off split trends for all alcohol categories, the WSTA budget submission 2012
reveals a broadly similar pattern, with sparkling wines and cider static or in growth, and other
categories declining by volume, but with value increase. Value growth in excess of that attributable to
the duty/VAT increase is seen in sparkling wine and cider categories, as well as in the on trade wine
and Champagne sectors.
Source: WSTA budget submission 2012
25
Source: WSTA budget submission 2012
The Lanson International Champagne Category Report 2012, attributed this success of Champagne in
the on trade to the Royal Wedding in 2011, and suggested that in 2012, the Diamond Jubilee,
European Championships (football competition held every four years) and the Olympics might offer
similar sparkling opportunities.
The on/off switch
The sales split between on and off trade follows a long term trend to more consumption at home. The
off-trade is seeing continued consolidation, which gives ever-increasing buying power to the fewer
gatekeepers (buyers). It works because of easy access for consumers, helped by lower prices driven by
higher volumes.
The on-trade is extremely fragmented, with some 130 000 licensed premises, versus the off-trade’s
approximately 45 000 licensed premises. Such fragmentation restricts buying power. Access is more
challenging for consumers, and prices are higher, due to higher overheads and margins, plus lower
volumes. Education comes into its own in the on-trade, where hand-selling of prestige wines is a
sought-after option for ambitious niche producers.
The off-trade continues to steadily take market share from the on-trade. Initially as supermarkets
opened up the wine category and more recently as home consumption grows, in part reflected by the
growing social unacceptability of drinking and driving, and even more recently with the recession
and ‘staying in being the new going out’. Euromonitor International calculates that until 2007, the off
trade accounted for around 80% of sales, and since then has been creeping up to a forecast of nearly
83% for 2011.
The latest licensing laws, and amends, (see page 56) and smoking bans in public places amplified this
long-term trend. On 1 July 2007, England was the last of the home nations to implement a smoking
ban inside restaurants, pubs, bars, etc. The on-trade geared up for this event, where feasible, adding
roofed patios, etc., and in many cases by ratcheting up the food offering with the aim of drawing back
into the fold non-smoking diners. Factor in the recession, and eating/entertaining at home has become
the ‘new going out’.
Off-Trade
The off-trade has changed shape quite dramatically throughout and since the depths of the financial
crisis during 2009. Wine Cellar (Cellar 5, Greenalls Cellars, Parisa) plus Booze Buster, and Simply
Drinks collapsed into administration in the autumn of 2009. EFB retail (European Food Brokers,
which operates the Whittalls Wines chain) bought 109 stores, while the remaining 61 stores closed
down.
First Quench Retailing went into administration with the loss of 1200 stores. Wickham Vineyard in
Hampshire bought fourteen branches, Rhythm and Booze bought 34 branches and Venus Wine and
Spirit wholesaler bought thirteen London and south east located branches of Wine Rack, plus that
trading name, to operate under LCL Enterprises, a new company, trading as ‘Wine Rack’.
At the end of March 2011, Oddbins went into administration.
The Nicolas chain of off licences, some of which were old Oddbins stores with new fascias, finally
limped off the stage at the beginning of 2012, when they stores were bought by Spirited Wines.
Of the ‘old guard’ Majestic Wines continues to thrive and Bargain Booze has expanded into the
convenience sector.
26
Discount supermarket stores, such as Aldi, Lidl and Netto, have made small inroads. Part of the
ability of discounters to offer cheap product is achieved by keeping SKUs (stock keeping units) low,
keeping in-store design minimal, and keeping product on pallet rather than using shelf stackers. Aldi
has about 80 wines. The core wine range at Netto is focused around 50 wines, plus another 50 parcels
on rotation.
Tesco acknowledged the threat from discounters when it launched a ‘discounter’ range during 2009.
Light wine accounts for well over a third of the total market value for liquor in the UK off-trade. Beer
accounts for a quarter of market share, with spirits claiming 24 per cent. Cider, plus Champagne and
sparkling (measured together) both account for around 5% share.
In 2010, the off-trade wine market contracted for the first time in about a quarter of century. The chart
below shows five straight years of a staggering 10 per cent growth rate at the beginning of the 1990s,
followed by an even longer period of sustained growth at a rate of 5 per cent.
Size of the UK off-trade wine market
Million
%
Year
cases
change
1991
35.619
1992
39.181
10%
1993
43.099
10%
1994
47.409
10%
1995
52.624
11%
1996
57.886
10%
1997
60.781
5%
1998
64.427
6%
1999
68.293
6%
2000
72.391
6%
2001
76.734
6%
2002
80.571
5%
2003
82.988
3%
2004
87.982
6%
2005
91.289
4%
2006
91.783
1%
2007
95.686
4%
2008
96.247
1%
2009
100.054
4%
2010
98.526
-2%
Source: various Nielsen data
The off trade market levelled off during the 2008 recession. Then, having broken through the 100
million case barrier in 2009, as consumers continued to divert their spending from the on-trade to the
off-trade, the wine market finally reached a tipping point. As the financial crisis showed little sign of
improving during 2010, and the coalition government started to introduce austerity measures to claw
back the country from the spectre of vast debts, off-trade consumption dropped off a couple of
percent.
In their Wine Report 2011 (July 8, 2011), Off Licence News reported Nielsen 12-month data to mid2011 showed the wine market had declined by 1.8 million cases in the off trade. This placed the size of
the off trade at 97.9 million cases, worth £5.3 billion, up 3% on the previous 12 months. Much of the
volume loss came from seven of the top ten brands registering losses.
27
The off-trade has about an 85 per cent share of the total wine market by volume.
Within the total off-trade, multiple grocers account for the majority of off-trade wine sales. It is these
grocery supermarkets that continue to take share of off-trade sales. In 2010, they increased their share
of volume sales to reach an 84 per cent share of all off-trade sales.
All other off-trade channels now account for just a 16 per cent share of sales. This is down from a 20
per cent share in 2008.
Supply to the off trade is quite consolidated. The top ten countries, below, account for 98% share of
the value of all sales in the off trade.
The OLN Wine Report 2011shows value shares among the top ten countries as follows:
Current rank
(2011)
Australia
USA
Italy
France
South Africa
Chile
Spain
New Zealand
Germany
Argentina
Total value
last year
rank
(2010)
1
2
4
3
5
6
7
8
9
10
Market share Market share
Sales
% (MAT to
% (MAT to
value (£
%
May 2011)
May 2010)
million)
change
21.5
21.2
1,100
4
14.3
14.7
763
2
14.2
12.8
757
11
13.9
14
745
4
9.1
10.7
484
-13
8.6
8.9
461
-1
7.5
7.1
400
9
5.3
4.7
282
14
2.3
2.5
121
-5
1.2
1.2
62
-1
100
100
5,300
3
Source: OLN Wine Report 2011 (July 8, 2011)
During 2011, Italy pushed France into fourth place for share of the market. The pinot grigio and, more
recently, the Prosecco phenomena continue.
With the value of the market growing at 3%, there were three countries significantly outperforming
that growth: Italy, Spain and New Zealand.
The medium term evolution in the UK off trade shows the move to consuming more new world
wines.
Australia
France
USA
Italy
South
Africa
Spain
Germany
Medium-term evolution of market share in the UK off-trade (% of volume)
To
To
To
To
To
To
To
To
To
J/A
J/A
June
Sept Sept
Nov
Dec
Dec
Dec
2000 2001
2002
2003
2004 2005
2006
2007 2008
2009
15.8
16.5
18.9
20.3
20.3
21.2
22
22.5
21.6
20.6
23.4
22.1
21.4
20.1
18.8
17.2
16.4
15.9
14.8
12.4
6.3
7.6
8.5
10.2
13
14.5
15.8
15.9
16.4
14.9
13.4
13.5
12.5
11.5
11.2
11
11.8
12.2
12.6
13.3
To
Dec
2010
21.2
12.2
14.4
14.7
6.4
7.7
10.8
10.7
7.6
2.9
8
7.9
10.1
8.5
7.8
9.1
9.9
7.2
8.7
10
6.6
7.4
9.9
7.1
6.6
28
8.9
6.9
5.8
8.3
6.8
4.9
10.1
6.7
4.2
12.3
7.1
3.4
Chile
Argentina
New
Zealand
Portugal
5.9
5.9
6
5.4
1.5
6.4
1.7
6.5
1.5
6.5
1.5
7.8
1.4
7.5
1.3
8.9
1.3
9
1.1
0.8
1
1.4
1.7
2
1.1
1
1
0.9
0.9
Source: various Nielsen data
NB: beware various MATs
NB: ranked according to 2005 leader board positions
2.2
0.9
3.1
0.9
3.9
0.8
The 2005 leader board rankings help to illustrate some fundamental shifts in consumption patterns
over the past five years.
It was in 2003 that Australia took the top slot, by volume, in the UK off-trade. Even with the
difficulties of 2009, the country has regained some market share during 2010, and share is up again to
mid-2011.
France’s market share, however, has been in steady decline in the decade since the turn of the
millennium. At the beginning of 2010, South Africa briefly overtook France, before South African
exports to the UK dropped off quite significantly. South African exports to the UK were extremely
and unusually strong in both 2008 and 2009, so in essence, the 2010 figures show a return to a more
normalised pattern. With nascent signs of favour again for French wine, its share looks to be
stabilising.
However, France can now claim only fourth most popular place after Australia, the USA and Italy. In
2008, the USA overtook France to become the second largest supplier to the UK off-trade. This is a
remarkable achievement from just 6.3 per cent market share in 2000, and is, to a large extent, driven
by Blossom Hill, Gallo, as well as other white zinfandel brands that fulfil about two-thirds of the rosé
market in the UK.
On the back of the pinot grigio phenomenon, Italy overtook France in 2009, having seen a steady
increase in share since 2005–6, about the beginning of the pinot grigio affair. Prosecco marks a new
Italian trend.
In 1992, New World share was just over 5 per cent, rising to 21 per cent in 1996 and 41 per cent in
2000. In 2009, the New World accounted for 61 per cent volume market share, up 2 per cent share
over 2008. The long-term trend from Old World to New World consumption in the off-trade is
continuing steadily. New World value share was 62 per cent in 2009, up 1 per cent over 2008. By 2010,
New World volume share had dropped marginally to 60 per cent, largely due to South Africa, and for
the same reason value share also dropped 1 per cent to 61 per cent. By mid 2011, value share
stabilised at 60%.
Price Points
The increases in excise duty and VAT, as well as the weakening of sterling against the euro and
increases in other costs such as dry goods, bottles, fuel, etc., have seen an unsurprising halving of the
size of the market below £3 a bottle since 2008, when the duty escalator was introduced. The under £4
category is also markedly reduced, falling a further 10 million cases’ worth in the twelve months to
mid 2011. Though about 8.5m cases of this moved into the £4+ sectors, reported the OLN Wine Report
2011.
Off-Trade Average Price Per Bottle
It was in 2007 that the average price for a 75cl bottle of wine finally moved over the £4 marker.
29
£4.80
£4.68
£4.60
£4.47
£4.40
£4.32
£4.18
£4.20
£4.01
£4.00
£3.93
£3.83
£3.80
£3.60
£3.40
2005
2006
2007
2008
2009
2010
mid 2011
Source: various Nielsen, various MATs.
Breaking this down by country provides a more detailed picture:
New
Zealand
France
Argentina
Australia
Total
Light
USA
Spain
Chile
Italy
South
Africa
Portugal
Germany
MAT to
Dec
2008
MAT to
Dec
2009
MAT To
Dec
2010
MAT to
May
2011
%
change
2011 vs
2010
MAT to
Dec 2006
MAT to
Dec 2007
£5.95
£4.19
£3.64
£4.27
£6.29
£4.31
£3.80
£4.31
£6.53
£4.49
£4.05
£4.43
£6.12
£4.91
£4.32
£4.49
£5.95
£5.11
£4.62
£4.60
£6.02
£5.15
£4.85
£4.63
1.2%
0.8%
5.0%
0.7%
£3.93
£4.04
£3.66
£3.81
£3.56
£4.01
£4.10
£3.94
£3.76
£3.61
£4.18
£4.19
£4.13
£4.04
£3.89
£4.32
£4.31
£4.22
£4.16
£4.08
£4.47
£4.43
£4.30
£4.29
£4.18
£4.68
£4.52
£4.36
£4.35
£4.25
4.7%
2.0%
1.4%
1.4%
1.7%
£3.76
£3.78
£3.83
£3.85
£4.05
£4.19
£3.36
£3.44
£3.44
£3.59
£3.85
n/a
£2.62
£2.69
£2.99
£3.33
£3.58
£3.68
Source: Nielsen to December 2008, 2009, 2010, May 2011
3.5%
2.8%
Argentina has seen the biggest improvement in bottle price, moving it above that of Australia, which
is still suffering from a position of overproduction and therefore downward price pressure.
New Zealand has seen marginal recovery in average price. After the big vintages of 2008 and 2009,
production stabilised in 2010. Those steep promotions from the large vintages have slowed. Average
bottle price for New Zealand is still nearly 30% above the average for all light wine.
Where there is only a marginal increase in average bottle price, this is most simply explained by duty
increases. Increases in the average off-trade bottle price for several years have failed to keep pace with
30
either inflation or the annual excise duty increases, which have amounted to an average of £0.04 per
bottle for the last several years, prior to 2008.
With the introduction of the ‘inflation plus 2% tax escalator’ in the March 2008 budget, duty increases
have added 57p to a bottle since that time. Excise duty increased 13p in March 2008, followed by
another 11p in the December 2008 pre-budget report (this was added ostensibly to offset the
temporary reduction in VAT from 17.5 per cent to 15 per cent. However, when VAT returned to 17.5
per cent in January 2010, excise duty did not come down). Plus 4p in March 2009, 8p in March 2010
and 12p in March 2011, and 9p in March 2012. These costs exclude VAT.
VAT was increased to 20%, from 17.5% in January 2011.
On the average purchase price during 2010 of £4.47, UK tax accounted for 55 per cent. VAT at 17.5%
per cent is £0.78, and excise was £1.69.
On the average purchase price during 2011 of £4.68, UK tax accounted for 59 per cent. VAT at 20% is
£0.94, and excise was £1.81. This is only a couple of pence below the amount of tax and VAT payable
on a litre of unleaded petrol.
Brands and Packaging
From the 1970s and 1980s heydays of brands such as Mateus Rosé, Black Tower and Blue Nun, it is
the New World that has been enormously successful in re-introducing brands into the UK market.
The top twenty brands of the modern era are dominated by New World brands, accounting for
around 30 per cent share of total off-trade. The Old World is represented by just J.P. Chenet, Canti,
and exclusive Tesco line, Ogio. Both Canti and Ogio are Italian brands.
Given the slow re-growth of brands, since the millennium the wine market has slowly, and
increasingly, become less fragmented, although in comparison to both beers and spirits it remains a
highly fragmented category.
From 2005 to 2006 the top twenty brands increased their volume market share in the off-trade from 34
per cent to 35 per cent. By the end of 2007, this share had risen to nearly 39 per cent. These data were
calculated with the entire Hardy’s range (e.g. Stamp, Banrock Station, Crest, VR) as one ‘brand’. By
2008, the top twenty wine brands accounted for nearly 40 per cent of the off-trade volume in 2008.
In 2009, share fell away to nearer 35 per cent. This was largely due to an accounting change. In 2008
the four core Hardy’s brands were separated out as four individual brands in the top 20. It means that
2008 is not a like for like comparison with earlier years. Effectively the top seventeen brands attained
a 35 per cent share. Having said this, Stamp, Banrock Station, Crest, as well as Concha y Toro and J.P.
Chenet did experience poorer than expected sales during 2008. In addition, Constellation (now
Accolade Wines) announced in March 2009 that it was cutting its global workforce by 5 per cent (400
jobs) to offset losses during 2008 in the UK and Australian markets. All those brands saw falls in share
during 2009.
When all brands – not just the top twenty – are considered, ‘brand’ being defined as ‘not own label’,
they accounted for an 80 per cent share of the off-trade in 2010. (See Appendix 1)
The top 10 wine brands, by value, in UK off-trade are:
31
Rank
1
2
3
4
5
6
7
8
9
10
Brand
Owner
% change on
previous year
-10
+6
Blossom Hill
Diageo
Hardy’s (Stamp, Nottage Hill, Crest,
Accolade Wines
VR)
Echo Falls
Accolade Wines
E & J Gallo
Gallo
First Cape
Brand Phoenix
Jacob’s Creek
Pernod Ricard
Kumala
Accolade Wines
Lindemans
Treasury Wine Estates
Wolf Blass
Treasury Wine Estates
Isla Negra
Concha y Toro
Source: OLN Wine Report 2011, AC Nielsen data to May 14, 2011
+30
-16
-24
-23
-4
-21
+10
-2
When the Hardy’s brands are counted separately, they do not feature in the top ten.
With 30% growth, Echo Falls jumped two places in the rankings above both Gallo and First Cape.
Both Gallo, and Jacob’s Creek did less price promoting, while First Cape introduced its Café
Collection of 5.5% abv wines which are not included in the above chart.
In the top 25 wine brands in the off trade, Tesco’s power is demonstrated by having two exclusive
labels in the ranking (only available in Tesco): Ogio at number 17, and Dino, at number 25, both
Italian wines.
Kumala used to be the biggest South African brand in the UK before the owning company, Vincor,
was bought by Constellation in 2007. The brand dropped off the radar, and in the time the brand took
to recover, First Cape filled the void. It increased sales by over 100 per cent during 2008, and
continued this level of growth to mid 2009, plus growing at 60 per cent during 2010, to move up five
places in the top 10 to number 4. At the end of 2007, First Cape had been just inside the top twenty
brands. The brand’s position was strengthened during 2011 when Distell, one of the suppliers of
wine to First Cape, bought a significant but undisclosed stake, in the company owning First Cape,
BrandPhoenix.
It is widely acknowledged that consumers’ perception of what constitutes a brand differs significantly
from brand owners’ perceptions. Among consumer definitions are: ‘Chardonnay’; ‘Chablis’;
‘lifestyle’; ‘Rioja’; ‘Gallo’ and ‘Penfolds’.
Sparkling wine in the off trade
While Champagne sales in the off trade shrank by 4.2% by volume and grew by 1.2% by value,
sparkling wines fared much better, with a 7.5% volume and 11.6% value growth. UK consumers have
an affinity for (total) sparkling wine consumption, and in straitened times are evidently choosing
other sparkling products.
Off-trade sparkling volumes, 2011 versus 2010
Source: Lanson International Champagne Category Report 2012
32
Off-trade sparkling values, 2011 versus 2010
Source: Lanson International Champagne Category Report 2012
On-Trade
The on trade wine market accounts for around 15 million 9 L cases.
The on trade comprises all types of premises where the consumption of alcohol beverages is
undertaken on the premises:
CGA Strategy divide up the nearly 130,000 on trade licensed premises thus:
Source: Lanson International Champagne Category Report 2012
NB: ‘wet-led’ means drinks-led; ‘dry-led’ means food-led
Up until the end of 2004, the on-trade saw tremendous growth in wine sales, up 24 per cent since the
new millennium. The picture in 2005 was much more mixed as harsher economic conditions are
mirrored in the hospitality sector. As with Champagne sales, the on-trade is sensitive to the wider
economic environment. It is discretionary spend that is among the first to be hauled in during times
of economic uncertainty. During 2008, the on-trade declined by 8 per cent, and by a further 4 per cent
in 2009. Wine volumes declined another seven per cent in 2011.
Given the on-trade’s sensitivity to the broader economic environment, it is no surprise that the market
continues to decline during this ongoing time of global financial crisis. Especially when that is
coupled with the very long term trend to consume at home rather than out.
In the twelve months to May 2009, long drinks were down 6 per cent value and 10 per cent volume;
wines were down 5 per cent value and 9 per cent volume, and spirits were down 3 per cent value and
8 per cent volume. Given the recession, Champagne was also hard hit, being down 6 per cent value
and 16 per cent volume. Sales moved into sparkling wine, which saw a 7 per cent value and 3 per cent
volume increase during this time. This trend continued during 2011, with Champagne volumes down
14%, and sparkling wine up just 1%.
33
Declining sales of beer in the on trade is another long term phenomenon. In 1988 beer accounted for a
55 per cent share of the total on-trade liquor market, with wine having a 19 per cent share and spirits
23 per cent (remainder share cider/perry). By 2008 those shares of total liquor had evolved to: beer 43
per cent, wine 30 per cent, spirits 20 per cent and cider/perry 7 per cent.
Trends over the last decade show a similar pattern as in the off trade, though they start from a more
staunchly old world position.
Market share trends in the UK on-trade (% of volume)
Ranked at 2005
MAT
MAT
MAT MAT MAT MAT MAT
to
to
to
to
to
to
to
March March March Sept
Nov
Nov
Sep
2000
2003
2004
2005
2006
2007
2008
2009
France
Australia
Italy
Germany
Chile
USA
South
Africa
Spain
Argentina
New
Zealand
Bulgaria
Hungary
Portugal
TOTAL
MAT
to
Jan
2010
41
11
13.8
15.5
4.5
3.2
39.4
14
16.1
9.9
5.2
4.2
37.3
16.2
15.5
8.5
5.7
4.8
34.2
17.3
15.4
7.6
6.8
5.9
28.6
16
16.4
6.1
7.8
8.6
26.6
15
20.6
4.9
8.3
9.6
26.4
13.9
20
4.1
8.8
11
24.1
12.6
22.2
3.3
10.2
11.9
23.7
12
23.5
2.9
10.5
11.9
3.1
4
5.1
3.3
0.5
5.3
3.8
0.8
5.5
3.9
1.3
5.9
4.2
2.2
5.8
4.4
2.1
5.5
4.8
2.4
5.3
4.8
2.9
5.2
4.8
2.8
1.4
0.3
0.1
1.4
0.2
0.2
1.6
0.2
0.1
1.5
1.7
1.8
1.8
1.9
99.1
.3
99.5
3.9
99.5
99.7
99.8
99
Source: various AC Nielsen data
NB: beware various MATs
98.7
For a long time France dominated the on trade scene, but these data show the country’s share of
market has almost halved since the turn of the millennium.
While Australia’s market share has been decreasing from its peak of nearly 21 per cent in 2007, Italy
has experienced steady growth for more than a decade.
Portugal makes its way into the number eleven slot of trade supplying countries. A concerted
marketing effort over recent years by Wines of Portugal, with its ’50 great Portuguese wines’ selected
by different wine journalists, as well as wider retail availability, has given this country a stake in the
top-selling countries.
The big three Old World countries of France, Italy and Spain increased their share of a stable market
from 50 per cent to 52 per cent. Given that Spain’s share is the same, and France’s has decreased, this
success is entirely due to increased sales of Italian wine, which shows the strength of the pinot grigio
phenomenon, more recently joined by Prosecco.
34
Of the New World countries, Chile and New Zealand have both gained a little share of the on-trade
market. Overall, total New World share steadied at around 45 per cent in 2009 and 2010. This was up
from a 43 per cent share in both 2007 and 2008. Earlier still, New World share was 41 per cent in 2006,
which was up from less than 20 per cent at the beginning of the millennium.
The on-trade has had its fourth tough year in a row through 2011, with the only glimmer of hope
being that sales stabilised in 2010 compared with 2009 at 16.5 million cases, before dropping again in
2011.
It’s not only the economic climate that weighs on the on trade. This sector is also notably affected by
the weather. The three summers of 2007, 2008 and 2009 were pretty much of a damp squib. In 2007
there was no major sporting activity to counter the effect of a damp summer. Clearly the Beijing
Olympics in 2008 were unable to counter the spreading effects of credit crunch into full-blown
recession. In 2010 the UK summer was pretty sunny, but even the football World Cup in June of that
year in South Africa did little to improve sales during the ongoing economic crisis. Few major
sporting events offered an opportunity in 2011, though the royal wedding added a little sparkle to on
trade sales.
A triple-whammy opportunity is up for grabs in 2012: the Queen’s diamond jubilee, The European
championships (four-yearly football competition), and the Olympics, being held in the UK.
From share of market to physical numbers of listings: a survey of the UK on-trade, published in May
2009 by Wine Business Solutions found that France accounted for 45 per cent of the total listings,
followed by Italy with 14 per cent, Spain with 9 per cent, Chile with 6 per cent, then South Africa,
New Zealand and the USA, each with 4 per cent.
The survey ranked the top ten on-trade distributors according to their number of listings:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Matthew Clark
Enotria
Bibendum
Waverley TBS
Hallgarten Druitt
Liberty Wines
Fields, Morris, Verdin
Pagendam Pratt 136
Alliance Wine
Forth Wines
838
553 (Enotria wine only 187)
317
288
283
187
167
105
84
Regional wholesalers Merchant Vintners (Yorkshire), Christopher Piper (Devon) and Wine World of
Cornwall were highlighted.
Sparkling wine in the on-trade
While Champagne volumes fell by nearly 14%, value growth stood at nearly 8% in 2011. A muted
market saw sparkling wines hold their own in volume terms, and value growth was in line with the
market.
On trade sparkling volume, 2011 versus 2010
Source: Lanson International Champagne Category Report 2012
35
Off-trade sparkling values, 2011 versus 2010
Source: Lanson International Champagne Category Report 2012
______________________________________________________________________________________
Additional reading
The Drinks Business, August 2011. Multi-page analysis of the UK market.
36
Chapter 6
UK LOCAL MARKET – BUSNIESS STRUCTURE
The democratisation of wine by grocery stores and supermarkets since the 1970s has driven wide
open the wine category for consumers. Wine has become accessible to the mass market, and has
become main stream. In that time there has been a concomitant and no doubt related improvement in
overall quality of the wines available for sale in the UK.
The structure of the UK trade has also evolved significantly during this time. Companies that could
previously be neatly defined and pigeonholed, as ‘wholesalers’ or ‘retailers’ or ‘importers’ have
diversified, been bought out, merged or gone out of business. This is one of the most significant
trends that continues apace – the industry is still consolidating, in fact at every level from producer,
shipper, wholesaler and retailer. Indeed the supply chain that services the industry also continues to
consolidate. See the growing list of mergers and acquisitions, below.
Another factor to consider is that the UK operates an open and free market. It is not legislated that
any intermediary businesses must compulsorily be used to get product to market. (See separate pieces
on the USA three tier system and Scandinavian monopolies, for different systems). For the bigger
retailers, this means, where their volumes allow, they can source product direct from producers, thus
cutting out the margins of middle men.
This has also resulted in the morphing of business types, for example, traditional cash-and-carries
now offer a delivery service; or traditional broking businesses now hold stocks of some of their wines
so can offer a DPD service. With increasing competition and maturity in the market, existing
businesses need to be flexible and adapt to the market, offering additional service or cheaper costs, or
some other added value benefit, to maintain a competitive edge.
Here we primarily explore the types of company that exist in the UK to service the industry and how
their traditional boundaries have become blurred over time as the industry has developed and
expanded:
1.
Producer
 Grape grower/contract grower
 Estate producer/domaine/’vigneron’ (grower, winemaker, and wine seller)
 Co-operative
 Winery: own fruit and/or bought-in fruit
2.
Intermediary (B2B)
 Brand owner/distributor (agent): not necessarily owning land or winery
 Broker/négociant (agent)
 Importer (agent) (bottled and bulk wine)
 Wholesaler (agent)/Cash and carry
3.
Point of sale to consumer/end user (B2C)
 Retailer (off-trade)
 HoReCa (Hotels, Restaurants, Catering)/pubs, clubs, bars (on-trade)
 Auction houses
 Mail order/internet
37
The Intermediary Companies (B2B)
The Broker and/or Négociant
Includes companies offering ‘winemaking projects’ for clients
Charles Blagden (Rhône broker, living in France)
Charles Sydney (Loire broker, living in France)
Farr Vintners
Richards Walford (now part of BBR-FMV)
Thierry’s Wine Services (started by Frenchman living in the UK)
The traditional UK image of the négociant is that of the companies of Bordeaux, through which much
of Bordeaux wine, notably Crus Bourgeois and Crus Classés must be bought.
The more modern type of broker is the company that has been created and evolved originally to
service the growing demands of the main high volume UK buying points, e.g. major multiple grocers
and specialists. This is because, traditionally, the broker businesses did not hold stock themselves.
As the competition and drive to reduce costs has increased, an obvious way to remove costs from the
historical trading pattern was to shorten the supply chain and by-pass some of the links in the chain.
Producer
Agent
Importer/Shipper
Wholesaler/Distributor
Retailer
Specialist brokers came into being in the 1960s and 70s to fill some of the gaps created by this
changing structure.
Often these businesses started up in one room with a fax and a phone (before the age of the internet
and email and the smart phone) and specialist knowledge of a particular region or country. Using this
specialist knowledge they were able to add value for buyers by liaising with various producers to put
together samples and offers that fitted the brief from the buyers, thus saving the buyers significant
time and travel. Increasingly, mobile communications have aided this business sector. Response times
can be virtually immediate.
As a result of the higher volumes of wine being traded, these brokers were able to work off lower
margins, often as low as 2–5 per cent commission, thus adding considerable value to their clients.
That they only worked on an ex-cellar basis and therefore had no UK stockholding, cut significant
costs from the equation.
Other added value elements might include:
 Translation skills as appropriate
 Liaising with producers to vinify wine styles more appropriate for the UK market
38

Offering a single invoice point to the buyer on behalf of several of their principals. In an era
when supermarkets are being targeted to reduce their supplier base, this can be a significant
added value.
The success of these businesses relies upon building excellent relationships, attention to detail and
significant pro-activity. The deal does not revolve around well-known brands, so the wine quality
and company service must continually match that of the competition. Their success has played a big
part in the steadily falling wine prices in real terms over the last 20–30 years.
Often these business types have evolved into more diversified companies over time, representing
wines from a number of different countries. Typically though, they are still dominated by an
individualistic and visionary founder with business flair and focus.
The Bulk Shippers/Bottlers
Accolade Wines
Kingsland Wine & Spirits
Quinn’s
The trend to bottle at source started after Château Mouton Rothschild began bottling at the château in
1924, removing this role from the négociants, during a time of fraudulent blending practices.
Bordeaux classed growths ceased to be shipped in bulk in the 1960s, vintage Port in the 1970s.
Advantages to bulk shipping still remain, largely for the high volume end of the market, where
economies of scale begin to take effect and marginal savings can be made on the cost price per bottle.
The environmental benefits of bulk shipping have been an added bonus.
Shipping in bulk and bottling at or near the destination market is experiencing a resurgence in the
new millennium. See separate piece The Bulk Wine Market for trends in bulk shipping.
Bulk wine shipments traditionally took place in 250 hectolitre ISO-tankers – stainless steel containers.
Ideally, these containers are dedicated to the transport of wine only; hygiene is a real issue because
wine readily takes on board aromas from foreign sources. The WSTA produces a code of practice on
the shipment of wine in bulk to ensure that minimum standards are met across the industry.
More recently, flexitank technology has improved to the state where single-use flexitanks of about the
same size are frequently used. An advantage of flexitanks is that it eliminates the need to ensure rigid
steel containers are in the right place at the right time. Also checks on cleaning regimes are not
required because only new flexitanks are used.
During the final wine filtration and filling operations, some wine volume losses will and are expected
to occur, maybe a couple of percent. One 25 000 litre container will fill about 2500 to 2750 9-litre
equivalent cases. This is approximately the same as two full containers of bottled wine, so there is an
immediate saving in transport costs to be made by bulk shipping.
Other considerations include the sourcing of glass bottles. The UK-based glass container
manufacturers produce a limited, but growing, range of bottles, so the costs of using what is available
versus importing from mainland Europe (or elsewhere) need to be factored in. Additionally,
producing countries may not have access to competitively priced dry goods or those appropriate for
the brand image.
Bulk shipment for UK bottling can still be an attractive option, especially for deep-sea movements, i.e.
from the southern hemisphere and North America. As these markets continue to grow their volume
39
share of the UK market, economies of scale for UK bottlers mean they can provide competitive
quotations for contract bottling and even offer their own brands for onward distribution.
With price points still one of the key volume sales drivers, the calculations for profitability at around
the £4.50 to £5 retail price become precise and minute. Filling in the UK is an obvious option to
eliminate some cost in the equation in order to meet these price points.
WRAP (the Waste & Resources Action Programme) was instrumental in getting the wine industry to
move to lighter weight glass bottles, as one part of a strategy to reduce packaging waste and thus
reduce carbon emissions. To the same end, it has promoted bulk shipments for bottling/packaging in
the UK.
During 2007, a global glass bottle shortage became evident, as glass manufacturers retrenched some
production capability. Glass manufacturers have been accused of not making available sufficient
quantities of lighter weight glass bottles.
In the first half of 2009, Constellation (now owned by Accolade Wines) opened a vast bottling,
warehouse and distribution facility at Avonmouth near Bristol. The bottling line capacity is estimated
at 9 million cases a year. Such brands as Hardy’s and Stowell’s of Chelsea are bottled there.
UK bottling companies are benefiting from the drive towards reducing their carbon footprint. Bulk
shipping for packing in the UK greatly reduces the greenhouse gas emissions of shipping the same
volume of liquid in bottles. In addition, lighter weight glass bottles are often used extensively in the
UK, further lessening companies’ damage to the environment.
The recession of 2008–09 and ongoing global financial crisis during 2010 and the beginning of 2011
have steepened this trend. The cost of shipping one container of bulk liquid is half that of shipping
two containers of bottled stock, equating to the same volume of liquid.
Companies Shipping in Bottle
This is a diverse category of companies with differing evolutionary scenarios such as:
 the traditional shipper/importer who sold onto retailers and wholesalers and which has
developed its own wholesale business
 the traditional wholesaler which has developed a direct shipping and agency business
 those that have also developed B2C business arms, offering wine direct to consumers.
 Those now shipping a significant proportion of their business in bulk as well as bottle.
Companies that started out as Importers
Bibendum
Enotria
Liberty’s
Richards Walford
Stratford’s
Thorman Hunt
Generally this type of company is the agent for their principals: they service retailers and/or
wholesalers, offering an ex-cellar service to bigger customers and a DPD service to smaller customers,
both on- and off-trade.
Companies that started out as Wholesalers
Great Western Wines, now owned by Enotria
Matthew Clark Wholesale (50 per cent owned by each of Accolade Wines and Punch Taverns)
40
Anthony Byrne
Nisa Today
St Austell Brewery
Tanners of Shrewsbury
Historically these were discrete businesses, often regionally based, which would buy stock ex-UK.
Some were composite wholesalers who offered their clients the full range of alcoholic beverages and
soft drinks.
As these businesses have grown, often by merger and takeover, and expanded their customer base
and geographical reach, they also have developed their own direct shipment divisions, both via UK
shippers and developing their own agencies, where volumes justify such arrangements.
Wholesale businesses exist at national, regional and local levels, and some wholesalers are also
retailers.
Cash and Carry Businesses
Bestway
Booker
Landmark
Makro
These businesses offer a one-stop option for food, alcohol and soft drinks for other businesses. They
are well suited as suppliers to the many individually owned corner shops, pubs and restaurants.
Arguably this is a variant of the traditional wholesaler for both on- and off-trade. Here the end user,
e.g. retail and/or HoReCa outlet, goes to the warehouse to select purchases. Prices are made
competitive partly by the avoidance of delivery charges. Regular visits by the customer enable a tight
control of cash flow and stocking levels of the customer’s own business, as he or she buys only the
quantities their business immediately needs.
The classic boundaries become blurred as some Cash and Carry businesses now also operate a
delivered wholesale division. This is all part of offering ‘added value’ to the customer.
Brand Owners’ Subsidiary Companies
In this type of importing company the principal, or producer, owns a whole or a part of the
distributing company in the UK. A benefit of this type of operation is that the entire profit stream is
kept within the company, although infrastructural costs to establish a destination market base may be
quite high.
Stock is generally available on both an ex-cellars and DPD basis, as with the larger wholesalers.
Arguably there is greater control for brand management in this type of business and this applies for
both on- and off-trade sectors. The brand owner retains direct contact with all customers and has
greater control of route to market depending on brand image and positioning.
There are essentially two types:
1. The dedicated office, where a producer works alone to service the market.
a. Concha y Toro
b. De Bortoli
41
2.
The diversified portfolio, where the brand owners are the main focus of attention and the
company offers a wider portfolio of agencies:
a. Hatch Mansfield – owned by Errazuriz and Louis Jadot
b. Maisons, Marques et Domaines – owned by Louis Roederer, Henriot
c. Mentzendorff – owned by The Fladgate Partnership and Bollinger
d. Pol Roger Ltd
Companies at point of sale to consumer (B2C)
Retailer (Off-trade)
The off-trade retail sector comprises the following categories of outlet, numbering over 46 000
licensed premises:
 Multiple grocers, e.g: Aldi, Asda, Lidl, Marks & Spencer, Morrisons, Netto, Sainsbury’s, Tesco,
Waitrose.
 Co-operatives, e.g. The Co-operative Group (including Somerfield), Southern Co-operatives,
Oxford, Swindon & Gloucester.
 Independent grocers, e.g. Budgens, Costcutter, Spar.
 Multiple specialists, e.g. Majestic, Bargain Booze.
 Independent specialists, e.g. Berry Bros. & Rudd, Corney & Barrow, Philglas & Swiggot, Swig.
Businesses in this sector work to widely differing target margins, varying from around 20–50 per cent
POR (percentage on return). With significant volumes of wine being sold on promotion through
multiple grocers and specialists, the POR for the retailer may be reduced to as little as 10–15 per cent
POR. The cash generated during the period of the deal is greater due to the higher volume
throughput on promotion.
HoReCa (On-Trade)
This is the vast sector of on-trade outlets including about 25 000 restaurants, over 50 000 pubs and
nearly 50 000 hotels. Including pubs, clubs and bars the total on-licensed premises amount to around
130 000.
Businesses in this sector also work to widely differing target margins and the on-trade is notorious for
its high margin markups on wines – anywhere from about 60 to 300 per cent. Some argue that the
profitability of the on-trade outlet is vested in the drinks sales with the food aspect contributing little
to the bottom line, and with little opportunity to increase prices for the food elements.
Auction Houses (Off-Trade)
The main UK ones are: Christie’s and Sotheby’s. Bonham’s also has regular wine auctions.
Main Mail order/internet Companies (Off-trade)
Certain ‘bricks and mortar’ retailers have established strong mail order and internet marketing
channels. The ‘clicks and mortar’ option, where the internet channel has been bolted on to an existing
physical store appears to work well, e.g. Lay & Wheeler (owned by Majestic), Waitrose (launched
1999), and Tesco (launched 2001).
The Association of Small Direct Wine Merchants (ASDW) was founded in 2004 by a group of
independent direct-selling small wine merchants.
See separate piece Mail Order Business Overview for more details.
42
Mergers and Acquisitions
See Chapters 1–4 for notes on globally significant merger and acquisition activity.
Here are some recent examples of UK-based activity:
March 2012: UK: Spirited Wines bought Nicolas off licence chain.
January 2012: UK-based Wine Intelligence merged with Germany-based Wine Networks.
November 2011: Crewe wholesaler Rodney Densem bought wholesaler Telford Wines.
October 2011: Sogrape bought UK wine agency Stevens Garnier
July 2011: Greene King bought Capital Pub Co for £93m.
July 2011: IWSC Group bought The Polished Palate, organiser of tequila and rum consumer events in
North America.
July 2011: WM Morton bought Inverarity Vaults to become Scotland’s largest independent drinks
supplier.
June 2011 : Ian Macleod Distillers bought Tamdhu distillery from the Edrington Group
March 2011: Novus Leisure bought London bar and restaurant business Balls Brothers.
March 2011: William Reed Business Media (owner of The Grocer magazine), bought The Publican from
United Business Media for £1.65 million.
March 2011: Diageo bought Turkey’s leading spirits producer, Mey Içki, for US$2.1 billion.
December 2010: Constellation Brands sold 80 per cent of its Australian and UK business to Champ
Private Equity for AUD$290 million.
December 2010: Young & Co Brewery bought Geronimo Inns for GBP60 million (US$93.4 million).
September 2010: Ardagh Glass bought Impress for €1.7 million.
September 2010: UK merchant New Generation Wines bought merchant Stokes Fine Wines.
August 2010: UK importer Enotria bought importer/merchant Great Western Wines.
August 2010: Matthew Clark (Constellation) sold Forth Wines to a private consortium.
July 2010: William Grant & Sons bought the spirits and liqueurs business of C&C Group for €300
million; notable brand included is Tullamore Dew.
June 2010: Heineken sold UK drinks distributor WaverleyTBS to private investment group Manfield
Partners.
June 2010: UK supermarket Waitrose bought Channel Islands’ supermarket chain Sandpiper.
June 2010: UK’s Bestway bought Scottish wholesaler Bellevue.
May 2010: www.fromvineyardsdirect.com bought The Vintry.
March 2010: Goedhuis & Co. bought David Roberts Domaines.
December 2009: The Oxford Wine Company bought wholesale company Bona Wines.
August 2009: PLB bought HwCg.
July 2009: Hull-based House of Townend bought Yorkshire merchant Playford Ros.
July 2009: Wine investment fund Global Vintners bought Ehrmanns.
Mar 2009: Majestic Wine bought traditional merchant Lay and Wheeler.
January 2009: Coe Vintners bought Hayman Barwell Jones.
November 2008: William Reed bought Harpers drinks magazine.
September 2008: Armit sold 75 per cent stake to Baarsma Wine Group.
July 2008: Co-operative bought Somerfield.
May 2008: Berkmann Wine Cellars bought Vinoceros, and Laymont & Shaw.
October 2007: Berry Bros & Rudd bought importer/agent Mistral Wines.
August 2007: Greene King bought Loch Fyne restaurant chain.
July 2007: Marston’s Brewery bought Ringwood Brewery.
May 2007: India’s UB Group bought Whyte & Mackay.
April 2007: JF Hillbrand bought Trans Ocean Distribution (specialist bulk shippers).
February 2007: The Co-operative Group merged with United Co-operatives.
September 2006: Thierry’s bought Edward Cavendish, distributors of KWV. KWV took stake in
Thierry’s as part of the deal.
43
May 2006: WaverleyTBS bought Cellar Wines Direct, an independent wholesaler in Cardiff.
May 2006: WaverleyTBS bought Everards brewery.
May 2006: Charles Wells merged with Young’s Brewery.
February 2006: AC Nielsen bought Beverage Data Network.
January 2006: Bargain Booze bought by ECI Partners, private equity.
January 2006: Enotria bought by Isis Equity Partners, private equity.
December 2005: Punch Taverns bought Spirit Group.
November 2005: Fullers bought Gales’ Brewery.
November 2005: Castel bought Wine Cellar (via Oddbins).
November 2005: France: ChâteauOnline merged with retail chain Le Repaire de Bacchus.
October 2005: Apax consortium bought Somerfield.
September 2005: PLB bought Lane & Tatham.
July 2005: Punch Taverns bought Avebury Taverns.
July 2005: Greene King bought T.D. Ridley & Sons.
May 2005: Wolverhampton & Dudley bought Jennings Brothers.
March 2005: DM Private Equity bought Unwins for £32 million.
January 2005: Wolverhampton & Dudley bought Burtonwood for £119 million.
October 2004: Malmaison bought Hotel du Vin.
September 2004: InnSpired Pubs bought by Punch Taverns for £335 million (from Alchemy Partners).
March 2004: CL Financial bought Paragon Vintners.
January 2004: Tesco bought Adminstore (Cullens, Europa, Harts the Grocers).
December 2003: Vinoceros bought Laymont & Shaw.
September 2003: Morrisons bought Safeway.
September 2003: Scottish & Newcastle bought Bulmers, including The Beer Seller.
44
Chapter 7
UK LOCAL MARKET – SUPPLY CHAIN, LOGISTICS AND DISTRIBUTION
Some financial considerations in the buying process
Wine cost and buying terms
Rates of exchange
Shipping/insurance
Warehousing
Onward distribution
Supplier payment
Bank charges
Bank overdraft
Inventory – cost to finance
Customer credit
VAT
Duty payments
Profit margin
Selling prices
negotiate with supplier
negotiate with bank
negotiate with shipper/forwarder
negotiate contract
negotiate contract
negotiate terms with supplier; instruct bank
negotiate with bank
negotiate with bank
control stock levels; balance with frequency of purchase
debtor control mechanism
20 per cent from 1 January 2011
maximise potential for under-bond stockholding; duty
deferment facility
control
control for margin and competitiveness
Warehousing
Shipments arrive to the UK in a state of duty suspension, e.g. at Tilbury or Liverpool. The onward
transport is by road/rail/canal to the nominated tax warehouse (previously known as bonded
warehouse). Tax warehouses, such as London City Bond and Octavian are premises which are
allowed to store and despatch goods in duty suspension, i.e. duties unpaid. Duties and VAT become
due for payment only when goods are released from the ‘bond’, that is, the tax warehouse.
Duty Deferment
Duty deferment is effectively a period of four weeks’ credit for the payment of duties, i.e. duties
become payable a month after goods leave the ‘bond’ (tax warehouse). It is both an aid to cost
management and cash flow and an opportunity to sell product prior to the requirement to pay excise
(and common customs) duties.
See WSTA’s Freight Forwarding booklet for more details. Available by email as a pdf file – free to members;
£45 for non-members. Contact www.wsta.co.uk
Examples of Supply Chain/Logistics/Distribution Companies
Distribution within the UK has undergone substantial change over the last decade or so, eliminating
costs and inventory from the supply chain pipeline. The introduction of new IT-rich logistics systems
and deliveries increasingly on a JIT (just-in-time) basis has enabled outlets to reduce stock-holding.
Distribution involves managing the complete supply chain network and integrating its corollary data,
knowledge and legal requirements in order to meet the logistician’s adage – to get the right quantities
of the right product in the right place at the right time and for the right cost.
The supply chain incorporates importation, storage and distribution to retailer. It comprises
information, specialised knowledge and expertise, inventory and lead-time management. A trend is
for greater partnership approaches being developed between importers and transporters.
45
Distribution may be carried out by contract logistics companies such as Cert, London City Bond or
TDG (part of Norbert Dentressangle), for example, or by retailer-owned or dedicated-leased
distribution fleets.
The hotel, restaurant and catering (HoReCa) industries are considerably more expensive to service
than the major retailers as they require high frequency of low volume deliveries. Distributors such as
Wincanton and 3663 are known to have expertise in the on trade sector.
46
Chapter 8
UK LOCAL MARKET – LEGAL ISSUES
In this chapter we cover the main legal issues relating to trade in alcohol/foods and we outline the
main related issues around quality assurance.
Legal
Enforcement agencies
Major legislation – European and national
Food safety and labelling legislation
Licensing laws
Quality Assurance
Definitions and examples
Emergency product recall
Due diligence
Legal
The following text has kindly been prepared for the WSET by Wine Standards, Food Standards Agency.
Wine legislation and controls in the United Kingdom
Controls in the wine sector in the EC
Wine Standards – Enforcement ‘Competent Body’
www.food.gov.uk/wine
Wine Standards (WSB) became part of the Food Standards Agency in July 2006. It remains an
enforcement authority in the wine sector and as such it is one of the ‘competent bodies’ described in
regulations issued by the European Commission. In particular it is required to carry out the checks on
compliance with Community rules described in Commission Regulation 555/2008 (‘laying down
detailed implementing rules [including] on controls in the wine sector‘).
This control regulation states that checks must be facilitated by ensuring that competent authorities
have access to commercial premises, and have the means to take action in regard to any wine sector
product ‘if there is reason to believe that there has been a serious infringement of Community
provisions‘. In the UK, the wine regulations that are enacted by parliament provide the means of
making the provisions of this and other EC rules enforceable for the various authorities named in the
regulations.
There are eight inspectors covering different areas of the UK who are part of Operation Group in the
Food Standards Agency. Wine remains part of Standards Branch. Contact details for the Food
Standards Agency and inspectors are given on the Food Standards website (www.food.gov.uk/wine).
Defra – EC Liaison Authority
The control regulation also refers to a single liaison body in each EC country (member state) to
maintain contact with their counterparts in other member states and with the Commission. The
Commission publishes a list of authorities in each country in The Official Journal of the European
Union (C Series Journal) from information supplied. In the UK, this body is the Department for
Environment, Food and Rural Affairs (Defra). The predecessor of Defra – the Ministry of Agriculture,
Fisheries and Food (MAFF) – was responsible for the creation of the WSB in 1973, when the UK joined
47
the Common Market. This was achieved with the support and financial contribution of the Vintners’
Company in the City of London, with its historic links with the wine trade.
EC Council and Commission regulations
Contact with the Commission is maintained by the Cereals Hub of Defra largely through regular
meetings of the Single Management Committee (Wine) organised by the Commission in Brussels.
This is responsible for discussions on new legislation. There are two tiers of legislation; Council
Regulations are the higher and may only be put to a vote in the Council of Ministers.
Both types of regulations and the C Series (information) Journals are available on the Commission
website http://www.europa.eu. These regulations include:
1234/2007
607/2009
555/2008
436/2009
606/2009
1601/91
Umbrella Council regulation on the Single Market, which includes permitted
winemaking practices, labelling, criteria for wines imported from Third Countries
labelling rules and annual verification requirements for specified categories of wines.
Requirements for VI1 document (certificate of origin and analysis, issued in the Third
Country of origin). Responsibilities of control authorities in Member States.
Vineyard Register; harvest declarations; accompanying documents and records.
Transport of grapes and wines, records of winemaking processes. Documentation
provisions overlap with fiscal documentation required by customs authorities for
dutiable goods.
Winemaking practices and processes.
Aromatised wines. Includes vermouth and sangria.
Exemptions to certain requirements on importation and labelling apply to specific third countries that
have negotiated bilateral agreements with the EC. These countries are Australia, Canada, Chile, South
Africa and USA.
Reform of the wine sector
The European Commission carried out a review of the wine sector in 2006, with detailed discussions
in Wine Management Committee and the Special Committee for Agriculture taking place in summer
and autumn 2007. The main regulation was published in June 2008 with implementing regulations
introduced in 2009.
Proposals for reform have been largely prompted by the growing surpluses of European wine and the
challenge from new world producers. One strand is to achieve a reduction of 175 000 hectares of vines
in the Community. Further information is available on the Commission website.
http://ec.europa.eu/agriculture/capreform/wine/index_en.htm
UK legislation
Wine regulations
The wine regulations is a Statutory Instrument (SI), which incorporate EC regulations, covering the
UK.
The authorities identified in the SI are the Food Standards Agency, HM Revenue and Excise and local
authorities. Local authorities are Trading Standards and Environmental Health, with responsibility
for enforcing Community regulations in the retail sector – as opposed to the Food Standards Agency,
which supervises importation and wholesale activities. The role of Revenue and Customs in terms of
this regulation is limited to checks on import documentation.
48
The wine regulations set out penalties for offences committed ‘on conviction’. If the WSB discovers an
offence that it considers a serious infringement of Community regulations, it will consult the Food
Standards or Defra legal departments to see if there is a case for prosecution in the courts. Although
the WSB places much emphasis on giving advice to traders to forestall the risk of infringements, it
will always recommend prosecution where it considers it feasible and appropriate. The regulations
also specify a power of control on movement, which reflects the ‘protective measures’ specified in the
control regulation. This allows the WSB to stop the movement of wine at wholesale level, again for
serious infringements.
Legislation not within WSB remit
The jurisdiction of the WSB is based solely on Council and Commission Regulations. EC directives,
which usually cover a range of products, are implemented by UK legislation and enforced by other
authorities. An example is Food Labelling Regulations (1996) based on directive 2000/13, which is
enforced by food authorities, usually Trading Standards (Environmental Health in Scotland and
Northern Ireland).
Powers of inspectors
The wine regulations decree that an authorised officer (of one of the specified enforcement
authorities) has certain powers on production, if required, of a warrant testifying to his or her
authority, and WSB inspectors always carry their warrants on inspection visits. The powers set out in
detail in the warrant repeat those in the wine regulations and are as follows.
1.
On production of the warrant:
 To enter any land (which expression also covers buildings and other constructions) or
vehicle (other than any land or vehicle used wholly or mainly as a dwelling) for the
purpose of ascertaining whether any offence under these regulations has been or is being
committed.
 To take with them when entering any land or vehicle such other persons as considered
necessary.
2.
Having entered any land or vehicle in accordance with (1) above for the purpose specified, or for
the purpose of securing evidence of any such offence:
 To inspect any materials or articles found in or on that land or vehicle;
 To examine and take copies of any register, record or document (including material kept by
means of a computer), or any entry in such record, register or document, which is required
to be kept under Community provisions or is in the possession or under the control of any
person, unless it is an item subject to legal privilege or is excluded or special procedure
material;
 To seize and retain any such register, record, document or entry as described above which he
has reason to believe may be required as evidence in proceedings;
 To undertake stock counts and to take samples of any products and of any thing which may
be used for the preparation of products.
3.
Having procured a sample of any product, to analyse or examine or have analysed or examined
that sample.
These powers may be exercised in connection with wholesalers (including certain cash and carries),
importers and handlers of any wine sector products, bottlers of wine, warehouse keepers (tax and
otherwise), brokers/agents, vineyard holders and winemakers.
49
The WSB and the wine trader
Each WSB inspector is responsible for the enforcement of EC wine regulations throughout the
importer/wholesaler community within his or her own allotted region. To achieve this, the inspector
will compile and maintain a register of all qualifying traders, and will add to or delete from this
register as and when appropriate. There is a database of all qualifying traders throughout the
country, and the Food Standards Agency is subject to the terms of the Data Protection Act and the
Freedom of Information Act.
Inspectors’ visits
Each inspector will prepare and carry out a visit programme so that in the course of any year they
will have inspected a pre-determined percentage of the traders in their region. Depending on risk
assessment of an individual trader’s operation (e.g. bottling/bag-in-box, direct importation, tax
warehouse facilities, compliance record, etc.) the inspector may visit more than once during any one
year. Furthermore, the visits may be pre-arranged or unannounced.
Visit objectives
The objectives of any visit will depend on a number of factors, but in general terms the inspector will
be interested in the following aspects as appropriate:
 Ensuring that those concerned have a clear understanding of the responsibilities of the WSB and
the powers of its inspectors.
 Ensuring that there is an awareness of those EC regulations that affect the trader’s business.
 Compiling or updating the basic details of the trader’s operation for record purposes.
 Checking records and documentation.
 Inspecting stock and taking samples if required.
 Checking that corrective actions required from previous visits have been completed.
The inspectors are empowered to inspect, copy or retain records and documentation as required. In
essence, the EC regulations on records and documentation (other than documentation for fiscal
reasons) are aimed at ensuring there is a clear and continuous trace of wine products from the
producer right through to the final consumer. In this way, not only are the trade and the consumer
afforded the maximum protection against contaminated or counterfeit wine products, but also the
enforcement authorities are provided with information that will assist in the detection of fraudulent
or otherwise illegal activities.
Investigations
If, by whatever means, the WSB becomes aware of any serious contravention of any wine regulation,
it will be necessary for an inspector to carry out a formal investigation, possibly leading to a
prosecution. Such investigations will invariably be carried out in conformity with the Police and
Criminal Evidence Act (PACE) and the Criminal Procedure and Investigation Act 1996. On
completion of an investigation, the WSB will assess the results and will forward the dossier, together
with recommendations, to either Defra or the appropriate local authority for a decision on whether or
not to prosecute. As stated earlier, the WSB is not itself a prosecuting authority.
Sampling
The WSB is empowered to take samples of wine products when required, and will on such occasions
conform to the procedures set out in the appropriate Community regulation. In the normal course of
events, these procedures involve the collection of five samples, which will then be labelled and sealed
in the presence of a representative of the owner/possessor of the product, who will retain one as a
control sample. The labels, together with a short written report on the circumstances, will be signed
by both the inspector and the representative. On occasions, abbreviated procedures may be used.
50
Movement controls
The WSB is also empowered to control the movement of wine products if there is reason to believe
that infringement of the wine regulations has occurred, especially where there is any risk to public
health or that there has been any dishonesty or deception associated with the product. Once having
established that there is reasonable evidence of such a situation, the inspector can issue a Prohibition
Notice, which will prohibit movement of the product concerned until the notice is rescinded.
Advice and education
Quite apart from their legal responsibilities for enforcement of regulations, the WSB’s inspectors are
encouraged to provide an advisory service to traders and to assist in educating wine trade personnel
in the intricacies of the regulations. The inspectors welcome consultation on any matters within their
overall responsibilities – particularly on the labelling rules, the requirement for accompanying
documents, the keeping of records, Quality Wine rules, etc. Indeed, on the basis that prevention is
better than cure, traders are actively encouraged to send draft labels to their WSB inspector so that
any irregularities can be sorted out before the labels are printed.
By way of conclusion, the main thrust of the WSB’s operation is directed towards achieving the
following objectives:
1.
2.
3.
Advising and educating traders on the wine regulations.
Deterring would-be offenders by spot checks, inspections, etc.
Co-operating with other enforcement authorities, either in the UK or in other member states, to
conduct successful prosecutions against persistent or serious offenders.
Over the years, there have been numerous convictions, either in the UK or elsewhere, resulting from
investigations instigated or assisted by the WSB. Nevertheless, prevention/deterrence are considered
better than cure/war, and so opportunities to discuss, advise and assist are always welcomed.
Further Sources
Food Standard Agency website – WSB section
www.food.gov.uk/wine
EC regulations – Official Journals
European Commission website provides access to regulations in each Community language.
http://eur-lex.europa.eu/en/legis/20081201/chap036055.htm. Wine is found under the heading
Agriculture’; ‘03.60 Products subject to market organization; 03.60.55 Wine.
EC Wine Regime reform
http://archive.defra.gov.uk/foodfarm/food/industry/sectors/alcohol/wine/regime.htm
For information published by the European Commission, see Agriculture and Rural Development
http://ec.europa.eu/agriculture/markets/wine/index_en.htm
Wine Regulations: SI 2936 (2011)
Available from The Stationery Office – www.tse.co.uk or via the government website
www.legislation.gov.uk (see Statutory Instruments)
Other enforcement agencies
In the United Kingdom, local authorities have been given the responsibility of protecting public
health. The responsible local authority bodies are the Environmental Health Office (EHO) and the
Trading Standards Office (TSO). It is they who are responsible for the enforcement of food safety
legislation.
51
Main functions of EHOs:
 To ensure food businesses comply with current food legislation.
 To ensure food is safe and fit for consumption.
 To advise food businesses on the above.
How this is achieved:
 Regular inspections (usually unannounced) of food businesses. This can be once every five years
for a ‘low risk’ business such as a wine warehouse, to every six months for a ‘high risk’ business.
 Investigating food complaints and food poisoning incidents.
 Communication through seminars, press releases and local business forums.
Action EHOs can take:
If a food business is not complying with the legislation the EHO will do one of the following,
depending on how serious the offence is. The last – prosecution – is the most serious.

Verbal, or informal written advice/warning.

Detain or seize unsafe food.

Emergency prohibition notice on all or part of the food business.

Formal caution.

Prosecution.
Legislation and regulations governing the sale of wine
The essential reading for this section is from the book Understanding Wine Technology: The Science of
Wine Explained, by David Bird MW, third edition (2010), pp. 285–290.
Food safety notes for diploma
These notes are an overview for diploma students and should not be taken as a full guide to legal
requirements. For the UK, detailed information is available in the industry guide applicable to your
business (catering, market stalls, retail, etc.) and is available from The Stationery Office www.tso.
co.uk (formerly HMSO) or their nominated bookshops, or your local environmental health officer
(EHO) can help and advise.
Definitions wsed in the following notes:



FOOD: All food for human consumption, wrapped or unwrapped, drinks including soft and
alcoholic, and ice. Alcoholic beverages come under food legislation.
FOOD PREMISES: All premises where food (as defined above) is sold or supplied publicly or
privately. The only exception is food cooked and served at home for private consumption.
FOOD HANDLER: Any person involved in a food business that handles or prepares food
whether open or packaged. This includes bar staff and sales staff in wine shops and people
working on wine stands.
These notes cover:


Food Safety (General Food Hygiene) Regulations 1995.
Food Safety (Temperature Control) Regulations 1995.
The Food Safety Act 1990 effectively swept away previous legislation and introduced the concept of
‘due diligence’ whereby suppliers are required to take positive action to ensure the goods they supply
are up to standard. Similar legislation was introduced throughout EU countries.
Aspects of food safety introduced by this legislation included:
 the registration and inspection of premises
 the issue of compulsory improvement notices
52



training
temperature control
a food hazard warning system, among many things.
Food safety (General Food Hygiene) Regulations 1995
Developed in accordance with Article 5 of the EC Directive on the Hygiene of Foodstuffs (93/43/EEC)
applies in England, Scotland and Wales with equivalent regulations in Northern Ireland.
All premises are covered whether large, small, static, mobile (travelling wine float), manned,
unmanned (vending machine) permanent or temporary (a wine show stand).
All food business activities are covered from preparation, processing, manufacturing, transportation,
distribution, handling, packaging, storage, selling and supplying.
A basic tenet of the legislation involves the assessment of risk levels. Everything in life carries a
degree of risk, for example walking is a ‘low risk’ activity while motor sports are ‘high risk’ activities.
Food businesses also carry different degrees of ‘risk’.

A restaurant handling cooked and raw foods would be a high-risk food business as the potential
for contamination, spoilage or food poisoning is much greater.

A wine shop selling only fully packaged products such as wine, beer, sweets and crisps would
be a low risk food business, as the potential for product contamination, spoilage or food
poisoning is low and, if occurring, very unlikely to be caused by the wine shop.
o However, the risk for the wine shop increases if they:
Conduct customer tastings in the shop.
Supply biscuits/hard cheese to eat.
Supply high-risk foods (such as soft cheeses, which require special
storage conditions) to eat at the wine tasting.
The proprietor of each food business must assess what the level of risk is in their particular
circumstances and take the relevant precautions for the level of risk.
The Regulations have a number of legal requirements, the key points of which are
listed below.
1.
IDENTIFICATION OF STEPS CRITICAL TO FOOD SAFETY
This is sometimes referred to as a HACCP (Hazard Analysis Critical Control Points). It is now a legal
requirement for a food business to look at the activities critical to food safety in their business and
find ways of controlling them by:
1.
Analysing the potential hazard.
2.
Identifying where it might occur – the critical control points.
3.
Deciding if it is critical to food safety (i.e. could it lead to prosecution?).
4.
Putting in place a control and monitoring system.
5.
Reviewing.
For example, pub restaurant, with self-service salad bar:
 Hazard: a customer getting food poisoning.
 Might occur: uncovered raw chicken dripping onto cooked meat being used for service.
 Critical to food safety?: Yes. Customer could become ill leading to possible prosecution.
 Control: cover all food and store raw food under cooked in the fridge.
 Monitor: staff rota to check fridge compliance four times daily.
53
For example, wine shop:
 Hazard: loss of quality in wine stored at too high a temperature.
 Might occur: from wine bottles displayed in a sunny window.
 Critical to food safety: No. Would not result in prosecution. However, could result in a
disappointed customer.
 Effective control: blinds, good rotation of stock in window, or use dummy bottles.
 Monitor: document weekly window stock rotation.
2.
FOOD HYGIENE SUPERVISION, INSTRUCTION AND TRAINING
The Act created a new legal requirement.
‘The proprietor of a food business shall ensure that the food handlers engaged in the food business
are supervised and instructed and/or trained in food hygiene matters commensurate with their work
activities.’
The level of supervision, instruction and/or training required will again depend on the level of ‘risk’
in the food business, your job and the types of food handled. It applies to all staff, temporary,
permanent or agency. Therefore a chef in charge of a kitchen requires a higher level than a
salesperson in a wine shop.
All food handlers should have hygiene awareness instruction. This can be formal or informal, written
or verbal. Food handlers who prepare open high-risk foods or any food handler with a supervisory
role should have basic food hygiene training, which large organisations carry out in-house or it is
available from local authorities or an accredited organisation such as the Society of Food Hygiene and
Technology (SOFHT).
The points covered by hygiene awareness are:
 Personal hygiene, including hand washing.
 Health: reporting of certain conditions (NOTE: You are breaking the law if you do not report
certain conditions, such as sickness and bowel disorders, e.g. campylobacter).
 Covering of sores and cuts.
 Smoking and eating.
 Storage and heating of foods.
 Cleaning.
 Germs.
 Cross contamination.
 Foreign body contamination.
The basic food hygiene course covers the above, plus:
 Food poisoning.
 Simple microbiology.
 Common food hazards.
 Pest control.
 Prevention of food contamination.
 Legal obligations.
 Effective temperature control.
And it usually involves a written test/assessment.
3.
RULES OF HYGIENE
General requirements for all food premises:
It is a legal requirement for all food premises to be kept clean and maintained in good repair and
condition. This covers all aspects such as construction, lighting, sanitation and many more.
54
Requirements for rooms used for preparing, treating or processing food:
NOTE: This does not apply to food storage rooms, cellars or dining rooms.
As the risks in these areas are higher, this covers such things as fly screening on windows, ease of
washing and disinfecting surfaces and use of non-toxic non-absorbent equipment, e.g. plastic
chopping boards not wooden.
Requirements for movable and/or temporary food premises:
This could be a stand at a wine show, a travelling wine float, a vending machine or a catering
business run from home.
These should be constructed and designed so that they can be kept clean and in good repair and
avoid the risk of food contamination and harbouring pests ‘as far as is reasonably practical’.
There should be ‘appropriate facilities to maintain adequate personal hygiene‘. This includes hand
washing. (This second point does not apply to vending machines.)
Equipment
All equipment that comes into contact with food must be kept clean, made of suitable material and in
good condition to minimise the risk of any contamination of the food.
Personal Hygiene
Everyone working in a food handling area must maintain a high degree of personal cleanliness,
including suitable clean clothing.
‘Rules of Hygiene‘ also cover:
 Water supply, e.g. ice must be made from potable water and as good practice should not be
touched with bare hands or ‘shovelled’ with glassware.
 Food waste.
 Transport.
Food Safety (Temperature Control) Regulations 1995 SI No. 2200
This applies in England and Wales; similar provisions apply in Northern Ireland. Scottish Regulations
differ in some points. Again this covers all food premises and food business activities although clearly
of limited application to shops selling only alcoholic drinks.
There are temperature requirements regarding the holding of food. It is required for all types of food,
which without temperature control might support the growth of harmful bacteria or the formation of
toxins.
Generally these temperatures are:
 At or below 8°C for chilled foods (e.g. prepared salads, cooked meat and dairy products).
 At or below –18°C for frozen foods.
 At or above 63°C for food served hot.
There is a degree of flexibility allowed for chilled food to rise above 8°C for limited periods:
 Delivery of food.
 Equipment breakdown.
 Fridge on defrost cycle.
 Service and display.
And for hot food to fall below 63°C:
 Service and display.
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Some foods are exempt from these Regulations, such as:

Foods that can be stored at room temperature throughout their shelf life without any health
risk, like certain bakery products and wine

Preserved foods like dried or canned food (however once rehydrated or opened may need
chilled storage).

Mail order foods, providing they are supplied at temperatures that will not give a health
risk.
Introduction to Licensing law
The following notes on the licensing regime have been kindly prepared for the WSET by specialist licensing law
firm Poppleston Allen (www.popall.co.uk). Students are referred to their website for additional information.
An introduction to the Licensing Act 2003
Since 2005 there has been a new system for dealing with alcohol and entertainment licences. The
Licensing Act 2003 brought together 6 previous licensing regimes (Alcohol, Public Entertainment,
Cinemas, Theatres, Late Night Refreshment Houses and Night Cafes) into one licensing process.
There are four licensable activities, which are regulated by the provisions of the Act.
These, in brief, are:
 The sale by retail of alcohol.
 The supply of alcohol by clubs.
 The provision of regulated entertainment.
 The provision of late night refreshment.
The sale by retail of alcohol:
Bars, Nightclubs, Theatres, Cafes, Wine Shops and Off-Licences all carry out the licensable activity of
the sale by retail of alcohol.
The supply of alcohol by clubs:
This is essentially the same as the sale of alcohol, except that clubs are defined as Working Men’s
Clubs, Political Clubs and other Sporting Clubs where the members of the club actually own the
stock, and therefore are not considered to be “buying” the alcohol when they order a pint or a glass of
wine from their bar, hence the different category.
The provision of Regulated Entertainment includes:
Plays; indoor sporting events; the exhibition of films; live and recorded music (e.g. juke boxes or DJs);
facilities for customer dancing (e.g. discos); dancing by performers (e.g. podium dancers or lap
dancers) or facilities for these activities e.g. a karaoke machine, music systems, pianos etc. An
interesting example is karaoke – the customer singing is “live music”, the sound from the machine is
“recorded music” and the machine itself is a facility for making music! All three should in theory be
licensed.
The Government has recently issued proposals to deregulate almost all types of regulated
entertainment for audiences up to 5,000. These proposals may take some time, and could be subject
to substantial opposition and/or amendment, and indeed might not go ahead at all. Additionally, the
Live Music Act, is likely to become law sometime in 2012. This will de-licence amplified live music
(i.e. bands) in pubs, clubs, bars and other alcohol-licensed venues (excluding off-licences) between
8am and 11pm for audiences of up to 200, and unamplified music for any audience size. This Act was
brought into force as a result of pressure by musicians’ unions and performers who argued that the
present licensing regime was damaging live music in pubs.
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The Provision of Late Night Refreshment:
The last category is the provision of Late Night Refreshment, which is the sale of hot food and hot
non alcoholic drinks between 11pm and 5am. This generally covers late night takeaways which can
sometimes be associated with crime and disorder at the end of an evening’s drinking.
If you are carrying out any of the above activities then you will need a licence. There are three types
of licence:

A Premises Licence. These types of licences are held by pubs and nightclubs, restaurants, offlicences, supermarkets, theatres and cinemas.

A Club Premises Certificate - this is used for the supply of alcohol to members and guests of a
defined club, and the provision of Regulated Entertainment within the club.

A Temporary Events Notice is used to permit licensable activities for a short period only. This
can be held by anybody provided they complete the form and have not exceeded statutory
limits.
Important note about the Police Reform and Social Responsibility Act 2011
The above Act (the “PRSR”) was enacted in 2011 but at the time of writing has not yet been brought
into effect. It is anticipated that the provisions of the PRSR will come into effect at various stages
between April and October 2012. The PRSR includes many significant changes to the Licensing
regime, including adding a Licensing Authority as a Responsible Authority; removing the so called
‘vicinity test’ changing the rules for Temporary Event Notices by adding Environmental Health
Officers in addition to the Police as an Authority who must be served with the notice, and allowing
Licensing Authorities to add conditions on Temporary Event Notices when the event takes place at a
premises with a Premises Licence; an additional “Late Night Levy” that may have to be payable by
alcohol-licensed premises trading after midnight; Early Morning Restriction Orders where, if brought
into effect in a relevant Licensing Authority area, could restrict the sale of alcohol between the hours
of midnight and 6am; and replacing the word “necessary” with the word “appropriate” in relation to
how a Licensing Authority must promote the Licensing Objectives (in effect lowering the burden of
proof). Where applicable, reference to the PRSR is included in [square brackets]. Readers will need
to clarify whether the relevant section of the Act has come into effect at the time of reading.
In addition to the four licensable activities, there are four licensing objectives. They are: The prevention of crime and disorder.
 Public safety.
 The prevention of public nuisance.
 The protection of children from harm.
These objectives are the basis on which the licensing authority determines what is in the overall
public interest when carrying out its functions, including whether to grant an application for a new
licence, or a variation to a licence. A Licensing Authority may only restrict licensable activities where
it is necessary [appropriate] for the promotion of these licensing objectives. Each objective is of equal
importance.
Lastly, even if you have shown you can promote the four licensing objectives and have been granted
a Premises Licence, you will still need a Personal Licence in order to sell alcohol (a Personal Licence is
not required for Regulated Entertainment or Late Night Refreshment). The Personal Licence acts in
the same way as a driving licence; it enables the holder to work in any premises that hold a Premises
Licence in order to sell alcohol. Some premises have several Personal Licence Holders, but all
premises that sell alcohol must have at least one – who would be called the Designated Premises
Supervisor (DPS). This person would be considered by the Authorities to have day to day
responsibility for the running of the premises and the selling of alcohol.
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Premises Licences
Applications for new premises licences, or variations to a premises licence, must be made to the
licensing authority within whose area the premises is situated. This will normally be the local
authority. The local licensing authority may be able to help the applicant with any queries or give
advice on how to complete the application. The applicant may also wish to consider other sources of
advice such as a relevant trade body, or by engaging professional assistance, such as legal advice.
In order to make an application for a premises licence or club premises certificate, the applicant will
need to know the Non-Domestic Rateable Value (NDRV) of the premises. This can be obtained from
the Valuation Office Agency www.voa.gov.uk, and it is this figure upon which the fee for the
application will mainly be based (the other factor is whether the premises is primarily or exclusively
concerned in the sale of alcohol for consumption on the premises, in which case in certain
circumstances there will be an additional fee to pay).
Plans
The applicant will also need a plan of the premises. The plan must conform to certain requirements,
as set out in the Licensing Act 2003 (Premises licences and club premises certificates) Regulations
2005. The most important requirements are that the plan is clear and legible; it must show the areas
where licensable activities are to take place, and it must show exit and fire escape routes; fixed
structures (e.g. furniture) or other temporary structures (e.g. games machines) but only where they
affect escape routes; the height of raised areas; toilets; kitchens and fire safety equipment.
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The applicant is required to give a copy of the application, including the accompanying
documentation, to the ‘responsible authorities’ on the same day as the application is given to the
relevant licensing authority. Responsible authorities are the public bodies that are entitled to make
representations to the licensing authority in relation to an application. The responsible authorities
include the following, for the area in which the premises are situated:









The chief officer of police.
The fire and rescue authority.
The health and safety authority.
The local planning authority.
The environmental health authority.
The body recognised as being responsible for protection of children from harm.
Inspectors of Weights and Measures (trading standards officers).
The Licensing Authority itself [when the Police Reform and Social Responsibility Act
comes into force].
The local Primary Care Trust [again, when the PRSR comes into force]
With regard to a vessel, this list also includes the relevant navigation authority, the Environment
Agency, British Waterways Board or the Secretary of State.
Advertising the Application
Applications must be advertised as set out in the regulations. This includes displaying a sign at or
outside the premises and an advertisement in a locally circulating newspaper. This must be done
within 10 working days of the day after the licensing authority receives the application.
The Notice
The Notice
A copy or copies of the notice of application must be displayed in a position where they can be
conveniently read by members of the public walking along the public highway. Members of the
public must not have to cross what appears to be private land to read the notice. The notice must be
on display for 24 hours a day. The notice must not be obscured by any windows, doors or shutters.
The notice must be displayed on or at the premises for the full 28 day period as required by the
regulations. This period begins on the day after the licensing authority receives the application (e.g.
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sent 23rd, received 25th, period commences 26th). If the notice is not displayed for 28 consecutive
days beginning with this day then the application will fail and will need to be reissued with
additional advertisement costs.
The notice must be on at least A4 size paper, pale blue in colour, and in black ink in font size 16 or
above.
Notice of application for the grant of a Premises Licence under
Section 17 of the Licensing Act 2003
Notice is hereby given that Joe Bloggs Ltd has applied to Chelmsford Borough Council
for the grant of a Premises Licence in respect of Premises to be known as Joe Bloggs,
First & Second Floors, New London Road, Chelmsford.
The proposed licensable activities and their hours are:
Sale of alcohol and provision of live music 10:00 to 02:00 the following morning 7 days
per week and otherwise for certain special occasions
Showing of films, indoor sporting events, recorded music and facilities for making music
24 hours, 7 days per week.
Any representations by an interested party or responsible authority regarding the abovementioned application must be received in writing by Chelmsford Borough Council, Civic
Centre, Duke Street, Chelmsford, CM1 1JE no later than 8th February 2006 stating the
grounds for objection.
The register of Chelmsford Borough Council and the record of the application may be
inspected at the address of the council, given above, during normal business hours or on
the council’s website – www.chelmsfordbc.gov.uk
It is an offence knowingly or recklessly to make a false statement in connection with an
application. The maximum fine for which a person is liable on summary conviction for the
offence is £5,000.
Representations From Responsible Authorities and Interested Parties
Responsible authorities are listed above. Interested parties can include local residents or businesses,
or organisations representing them, including ward councillors. Additionally, the Licensing Act was
amended in early 2010 to allow a ‘member of the Authority’ to also be treated as an Interested Party;
in other words local councillors can make objections simply by virtue of the fact that they are
councillors, and they do not need to live in the vicinity of the premises in order to do so . [When the
PRSR comes into force, anyone will be able to object to an application, wherever they live, so long as
the objection is about the likely effect of the application on the Licensing Objectives].
Any of these parties can lodge an objection, known as a ‘representation’, to an application for a new
premises licence or club premises certificate, or a variation of one of these. These representations must
be made within the 28-day period during which the notice is on the premises. If the representation
cannot be resolved between the parties, then the Licensing Authority must list the application for a
hearing within twenty working days of the end of the 28-day notice period. A full set of papers
(including all the representations) must be provided to the applicant no less than ten working days
before the hearing. Applicants themselves must inform the Licensing Authority no less than five
working days before the hearing whether they are attending, being legally represented, what
witnesses they intend to call and the general nature of their evidence.
Thus an example timeline for an application, where all requirements under the Regulations were
carried out on the last permitted day would look like this:
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2 January
3 January
16 January
30 January
14 February
21 February
28 February
Licensing Authority (and other authorities) receives application.
Notice to be displayed on premises for 28 consecutive days.
(a working day) Advert appears in newspaper.
Final day of the 28-day period (if there are no representations then the
Licensing Authority must grant the application. If representations are
received, the Licensing Authority must now list the matter for a hearing.
Licensing Authority sends hearing papers to the applicant.
Applicant informs Licensing Authority whether he or she is attending, etc.
Hearing day (last day on which hearing could be held).
Appeals
If applicants are unhappy with the decision of the licensing authority then they may appeal to the
Magistrates’ Court. An appeal must be lodged within 21 days of the applicant being notified of the
original decision, which, to be safe, should normally be taken as the date of the original hearing. The
Appeal hearing is a rehearing of the original hearing, and is therefore a ‘second bite of the cherry’ for
the applicant. Be warned, however, that the Magistrates can dismiss the appeal, remit it back to the
Licensing Authority with directions, or substitute its own decision for any the Licensing Authority
could have made – i.e. applicants could be worse off than before! It is also likely that if applicants lose
the appeal they will be required to pay some or all of the Licensing Authority’s legal costs, but if they
win it is generally unlikely that it will be possible to recover any legal costs from the Licensing
Authority (unless the Authority is considered by the Court to have behaved ‘unreasonably’).
Equally, anyone who made representations at the original hearing can appeal the decision to the
Magistrates’ Court.
Conditions
Conditions may only be imposed on licences and certificates where they are necessary [the word
“necessary” will be replaced by the word “appropriate” when the PRSR comes into force] for the
promotion of one or more of the four licensing objectives. Conditions include any limitations or
restrictions attached to a licence or certificate and essentially are the steps or actions the holder of the
premises licence or the club premises certificate will be required to take or refrain from taking at all
times when licensable activities are taking place at the premises in question. Where responsible
authorities and interested parties do not raise any representations about the application made to the
licensing authority, it is the duty of the authority to grant the licence or certificate subject only to
conditions put forward in the application and any mandatory conditions prescribed in the 2003 Act
itself.
The mandatory conditions include the requirement to have a Designated Premises Supervisor for the
premises if alcohol is to be sold, and that that DPS must have a personal licence.
Five new mandatory conditions have been added to the Licensing Act, which specifically relate to the
provision of the sale or supply of alcohol.
Conditions 1 to 3 (from 6 April 2010) cover irresponsible drinks’ promotions, the banning of ‘dentist
chair’ type assisted drinking and the provision of free tap water.
A further two conditions, 4 and 5 (from 1 October 2010) cover the need to have an age verification
policy in force and that small measures for wine and spirits are made available to all customers.
Condition 4 is the only condition that will impact off licences and applies to age verification
requirements that all Premises Licence holders will have to address before the condition comes into
force.
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Condition 4 requires that an age verification policy be in place for the premises. The policy must
include a requirement that where individuals appear to the responsible person at the premises to be
under the age of eighteen years (or if a challenge 21 or 25 policy is in place, those respective ages) to
produce upon request a photographic ID bearing date of birth and holographic mark. Driving licence
or passport will suffice, although there are also other initiatives such as the Proof of Age Standards
Scheme (PASS) which also fulfil the requirement.
The licensing authority may not impose its own conditions unless its discretion has been engaged
following the making of relevant representations and it has been satisfied at a hearing of the necessity
[or appropriate] to impose conditions due to the representations raised. It may then only impose such
conditions as are necessary [or appropriate] to promote the licensing objectives arising out of the
consideration of the representations.
Typical conditions might be:
 The installation and maintenance of CCTV in consultation with the Police
 A refusals book to be kept and available to the police on request
 The premises licence holder shall ensure that staff conduct regular noise patrols during regulated
entertainment
 No open glasses or bottles to be used in the rear garden after 22.30 hours.
There are, however, a whole host of possible conditions that can be placed on the licence, either by
agreement or by the Licensing Committee at a hearing, but the most important points are that these
conditions must be necessary and proportionate, and they must be within the control of the Premises
Licence Holder.
Failure to comply with any conditions attached to a licence or certificate is a criminal offence, which
on conviction would be punishable by a fine of up to £20 000 or up to six months imprisonment or
both.
Fees – Premises Licence Applications
Fees are based upon the NDRV (see above) and whether the premises are primarily or exclusively
concerned with the sale of alcohol for consumption on the premises.
There are additional fees for premises licence applications, and the annual fee, for exceptionally large
scale events (5000+), unless certain conditions apply.
Fees – The Late Night Levy
When the PRSR comes into force, a Licensing Authority may decide to impose a Late Night Levy on
premises selling alcohol (including off-licences) between the hours of midnight and 6am. Certain
categories of premises, for example hotels (but only in respect of their residents, not guests), casinos
and caravan parks etc are proposed to be exempt. The Late Night Levy will not apply to premises
which do not sell alcohol (e.g. takeaways). Certain rural pubs will also be exempt. However, for late
night bars and night clubs in general where a Licensing Authority decides to impose a levy, it will be
payable. The fee will become due at the same time as the annual fee for the Premises Licence. The
fees depend upon the non domestic rateable value of the premises. Certain reduction categories are
proposed, for example if premises are members of a Best Bar None Scheme or a local Pubwatch,
although at the time of writing these are yet to be clarified.
Early Morning Restriction Orders (“EMROs”)
Early Morning Restriction Orders will again be made possible under the PRSR when it comes into
force. These will allow a local Licensing Authority, if it wishes, to restrict the sale of alcohol anytime
between midnight and 6am in any part of the Licensing Authority’s area – this includes off-licences.
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In other words, the Licensing Authority may decide that a particular high street has problems with
crime and disorder and wishes to restrict the sale of alcohol until midnight (but it could be for
example 2am). Where a Licensing Authority proposes to do this, it must notify all licence holders and
other relevant parties and must then hold a hearing where representations can be heard. Following
the hearing, the Licensing Authority must decide whether or not to continue with its plan to impose
the EMRO. No changes can be made to the proposals following the hearing, i.e. they must either go
ahead with it, or withdraw it. As this is an extremely powerful tool for Licensing Authorities, and
could have a very serious effect on late night business, it is likely that in those Authorities that
propose an EMRO there will be substantial opposition from the trade. It will be interesting to see
how many Licensing Authorities continue with their proposals if and when they have received
representations from these bodies.
Premises Licences and Off-licences
Off-licences are simply premises licences that state that alcohol can only be sold for consumption off
the premises, with or without additional conditions. All off-licences require a DPS, just like onlicences. Equally, there are no ‘standard hours’ for off-licences; the same test, i.e. whether any of the
four licensing objectives will be undermined, applies. The government’s Guidance states:
‘With regard to shops, stores and supermarkets, the Government strongly recommends that [Council]
statements of licensing policy should indicate that the norm will be for such premises to be free to
provide sales of alcohol for consumption off the premises at any times when the retail outlet is open
for shopping unless there are very good reasons for restricting those hours. For example, a limitation
may be appropriate following police representations in the case of some shops known to be a focus of
disorder and disturbance because youths gather there’ (paragraph 3.31).
Permitted Temporary Activities
The Licensing Act 2003 introduced a so-called ‘light touch system’ of permitted temporary activities
to replace the old occasional licences and occasional permissions previously granted in connection
with short-term alcohol and public entertainment licensing. The system involves an event organiser
(the ‘premises user’) giving a Temporary Event Notice (TEN) to the licensing authority and copying
this to the police.
TENs can be used to authorise relatively small-scale ad hoc events held in or on any premises
involving no more than 499 people at any one time. [The PRSR will change the rules for TENS so that
there are two different types of TENS, namely a “standard” TEN and a “late” TEN. Late TENS are a
new addition to the Licensing regime, and are supposed to allow “last minute” events, whilst still
giving the Authorities sufficient time to object if there are any concerns]. The premises user must, no
later than ten working days before the day on which the event is to start, give duplicate copies of the
notice to the relevant licensing authority, together with the appropriate fee. A copy of the notice must
also be given to the relevant Chief Officer of Police [and the Environmental Health Officer] no later
than ten working days [or no later than 5 working days in the case of “late Temporary Event
Notices”] before the day on which the event is to start. The Police can object to the TEN on crime
prevention grounds [under the PRSR, both the Police and the EHO will be able to object not just on
crime prevention grounds, but on the basis of any of the four Licensing Objectives]. Anyone aged
eighteen or over can give a maximum of five TENs per calendar year. Personal licence holders can
give a maximum of 50 TENs per calendar year. [The PRSR changes these limits]. TENs are subject to
other maximum limits, as set out below.
Each event covered by a TEN can last up to 96 hours [168 hours under the PRSR] and no more than
twelve TENs can be given in respect of any particular premises in any calendar year, subject to a
maximum aggregate duration of the periods covered by TENs at any individual premises of fifteen
days in any year [21 days under the PRSR]. There must be a minimum of 24 hours between events
notified by a premises user or associates of that premises user in respect of the same premises.
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Provided that the criteria set out above are met, only the police may intervene to prevent an event
covered by a TEN notice taking place or agree a modification of the arrangements for such an event
and then only on crime prevention grounds [under the PRSR, as mentioned, the Environmental
Health Officer can also object, and either Authority can object on any one or more of the four
Licensing Objectives. Additionally, if one of these Authorities does object, the Licensing Authority
can, in the case of licensed premises, impose any conditions on the TEN which are already present on
the Premises Licence where the TEN is taking place. This is a major change, as previously TENS, if
granted, could not have any conditions imposed on them at all].
A TEN could therefore be used to temporarily extend the hours for the sale of alcohol at an off-licence
on special occasions (e.g. Christmas Eve or St Patrick’s Day).
Personal Licences
General
A personal licence is needed only in premises licensed for the sale of alcohol. The personal licence acts
in the same way as a driving licence. It enables the holder to work in any premises that hold a
premises licence or a temporary event notice in order to sell alcohol.
Personal licences are granted by the local authority in whose area the applicant habitually resides at
the time of making the application. Where the applicant works is irrelevant for the purposes of a
personal licence. Once granted, that particular Licensing Authority retains permanent jurisdiction
over the personal licence, and renewal is dealt with by that same authority, even if the holder moves.
The Licensing Authority must be informed of any change of address.
Application for a Personal Licence
A personal licence is granted for a period of ten years.
The grant of a personal licence does not require the holder to be linked to any particular premises.
The holder does not even need to be working in licensed premises to make an application.
In order to be granted a personal licence, the applicant must provide a Criminal Records Bureau
Certificate, apply on the approved form and:
a) be eighteen years old or over
b) Poscesses an accredited licensing qualification, which must now be the National Certificate for
Personal Licence Holders. If applying for a personal licence for the first time, an appropriate
training course must be taken to obtain the new qualification
c) must not have had a personal licence forfeited in the last five years
d) must send the appropriate fee to the Licensing Authority
e) must supply two passport style photographs, one verifying the likeness to the applicant by a
solicitor or other person of standing within the community
f) must not have a conviction for any relevant or foreign offences that are not spent. This means a
large number of criminal offences and it would be advisable to contact a solicitor if there are any
convictions.
If the application fails on points a–e above, the Licensing Authority must reject it.
If the criminal records certificate discloses any relevant convictions, the authority must notify the
police who may object on the grounds of crime prevention.
If the police do not object, the application will be granted. If there are no convictions, the application
will be granted.
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If the police do object, there must be a hearing before the Licensing Committee. There is a
recommendation in the Guidance that if the police object the application should be refused unless the
applicant can show exceptional and compelling reasons to justify granting a licence. For example, a
drink-driving offence may cause the police to object to an application for a personal licence. If they
do, there have been cases where the Licensing Authority has nevertheless granted the licence, and
others where they have rejected the application. Each case is decided on its own merits.
In the vast majority of cases, personal licences will be granted without the need to attend before the
Licensing Authority.
Renewal
Every ten years a personal licence must be renewed, by the same local authority who issued it in the
first place.
Designated Premises Supervisor
Finally, for premises selling alcohol, there must be a Designated Premises Supervisor (DPS). The DPS
must be a holder of a personal licence, and should the DPS’s licence be revoked for any reason, the
premises will lose the power to authorise the sale of alcohol until a new DPS is appointed. For
example, if the DPS simply walked out following a dispute, it would be essential to immediately
apply to vary the DPS to somebody else who had a personal licence. This can be done extremely
quickly, but until it is done the premises should not sell alcohol.
Offences
Part 7 of the Licensing Act 2003 outlines many of the general offences contained within the legislation,
and is split into six distinct areas:
 Unauthorised licensable activities
 Drunkenness and disorderly conduct on licensed premises
 Smuggled goods
 Children and alcohol
 Vehicles and trains
 False statements.
Each of the offences listed in the section contains the maximum penalty for conviction. Although this
section of the Act is headed ‘Offence”, not every offence listed in the Act is recorded here and other
offences are to be found elsewhere within the Act.
It is an offence to carry on, or attempt to carry on, a licensable activity without or not in accordance
with the authorisation provided by a premises licence, a club premises certificate or a temporary
event notice. An example of this type of offence would be selling alcohol without a premises licence.
It is also an offence to knowingly allow a licensable activity to be carried on in these circumstances.
There is a defence of due diligence (see below) to the offence of carrying on unauthorised licensable
activities, although this defence cannot be used where someone knowingly allowed the licensable
activity to be carried on. The unauthorised licensable activities provision is central to the enforcement
of the licensing regime introduced by the Act.
The sentence on conviction of this offence is a fine up to £20 000, or up to six months’ imprisonment,
or both.
Exposing Alcohol for Unauthorised Sale
It is an offence to expose alcohol for sale by retail on premises without an authorisation or in such a
way that does not comply with the authorisation. The effect of the provision is that an offence can be
committed even where no sale or attempted sale is made. An example of this offence would be where
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alcohol was displayed in a shop as being for sale at a time when the premises licence did not
authorise sale; it would not be necessary for anyone to actually buy the alcohol. There is a defence of
due diligence (see below) to this offence.
The sentence, on conviction of this offence is a fine up to £20 000 or up to six months’ imprisonment,
or both. In addition, the court may order that the alcohol and its containers be forfeited and either
destroyed, or dealt with in such manner as the court considers appropriate.
Keeping Alcohol on Premises for Unauthorised Sale
It is an offence for a person to have in their possession alcohol with the intention to sell it by retail or
supply it unless this would be under or in accordance with an authorisation.
The sentence, on conviction of this offence, is a fine of up to £500. In addition, the court may order
that the alcohol and its containers be forfeited and either destroyed or dealt with in such manner as
the court considers appropriate.
Defence of Due Diligence
This applies to the offences described above.
This defence is available if a person is able to show two things. First, the person must show that the
act was due to a mistake; or to placing reliance on information given to him or her; or to an act or an
omission by another person; or to some other cause beyond his control. Second, he or she must show
that they took all reasonable precautions and exercised all due diligence to avoid committing the
offence.
Selling Alcohol to Under Eighteens
There are now two offences that are relevant to licensees. The first is the simple offence of selling
alcohol to under-eighteens. The due diligence defence (best summarised as ‘I did everything I could’)
can apply here, and may well involve the alleged offender showing that he or she provided thorough
training on underage sales to all members of staff, and maintained a refusals book.
The other main offence is an offence originally introduced in October 2007 as the ‘Three Strikes and
You’re Out‘ offence, but which has now been amended to be ‘Two Strikes and You’re Out‘. If, in a
period of three months, there is evidence that on two separate occasions at one licensed premises
alcohol has been sold to under-eighteens, the Premises Licence Holder can either be prosecuted or
voluntarily stop selling alcohol for a period not exceeding 48 hours [under the PRSR, a period of at
least 48 hours but not more than 366 hours – i.e. a lot longer]. This is a strict liability offence and
therefore the defence of due diligence does not apply. If someone is prosecuted and found guilty, the
fine can be up to £10,000 [under the PRSR, this increases to £20,000]. The important point here is to
ensure that underage sales simply do not occur in the first place.
Review of Licences
Any interested party or Responsible Authority can apply to review a licence, based upon the licensing
objectives. This may be because noise nuisance is being caused to local residents; or there have been
incidents of violence at the premises. The most likely applicants for Reviews are the police, the
Environmental Health Officer or local residents. If a resident makes an application for a Review of the
Premises Licence he or she (or any other local resident) cannot usually make a subsequent application
for a Review based upon similar allegations within a period of one year after the first application for a
Review.
The police and other authorities are not subject to such a restriction. The timescale for a Review is the
same as an application for a new, or variation of, a Premises Licence: namely a 28-day period in
66
which other interested parties or Responsible Authorities can make additional representations, and
then following that a hearing must be held within twenty working days. At the hearing, after
evidence is heard, the Licensing Committee can decide to do nothing, add to or modify existing
conditions on the licence, require removal of the DPS, suspend the licence for a period up to three
months or revoke the licence.
None of these decisions will take effect until a period of 21 days following the hearing, or until an
appeal against the decision to the Magistrates Court is heard or withdrawn. It is therefore entirely
legal to appeal against a decision to suspend or revoke a licence in order to continue trading, if for
example the owner wishes to implement changes in the way the premises is run before the appeal is
heard.
Summary Reviews
There is a further power that allows the police to apply for a fast-track review of the Premises Licence.
This has to be on the basis of serious crime or serious disorder at the premises, and must be
supported by a certificate by a senior police officer to that effect. Within 48 hours (not including
weekends or Bank Holidays) the Licensing Authority must hold a hearing to consider the application
for the summary review. The Premises Licence Holder does not need to be told about this initial
hearing, although there is nothing to stop the Licensing Authority inviting the Licence Holder.
As a result of the initial hearing, the Licensing Committee may decide to take one or more of the steps
described above for a full Review – these are called ‘interim steps’. This could of course mean that the
licence could be suspended, or for example the DPS removed, within 48 hours of the police making
the application, and without the knowledge of the Premises Licence Holder until he or she is notified
of the decision. Once notified, the Premises Licence Holder is entitled to request a further initial
hearing, again within 48 hours, in order to be able to make representations about the original
decision. This is obviously to give the Premises Licence Holder some opportunity to put his or her
own case forward. In any event, the Licensing Authority must list the application for a full Review
hearing within twenty working days of the original application by the police.
Note that if a Premises Licence Holder wishes to appeal a decision of the full Review, then the
decision made at that full Review will be suspended pending the appeal. However, in that event the
decision made at the ‘interim steps’ hearing will continue pending determination of the appeal. This
can lead to some odd results. For example, imagine as one of the interim steps the licence is
suspended and then at the full Review the suspension is lifted but the hours are cut back. In this case,
if the Premises Licence Holder appeals the decision to cut back the hours the suspension would
continue. It is questionable whether this was the effect intended by Parliament.
This new power is of course a very powerful tool for the police, as it does not involve the high burden
of proof required in criminal proceedings, and does not involve the expense and strict evidential rules
required in criminal prosecutions – but it is fast and can have severe consequences for Licence
Holders.
Closure Powers
The following is a short summary of the main closure powers that different authorities have, all of
which can apply to Premises Licences. By far the most commonly used are the ‘Closure Notice‘ under
Section 19 of the Criminal Justice & Police Act 2001 and a closure under either the Summary Review
procedure of Section 53B of the Licensing Act 2003 or individual premises closure under Section 161
of the Act.
The Section 19 Closure Notice has frequently been misused – the notice itself only gives warning that
no less than seven days thereafter the police or Licensing Authority may apply to the Magistrates’
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Court for an order to actually close the premises. Many licensees are under the impression that the
Notice given to them by the police at the outset is an order for them to close, or at least cease alcohol
sales – neither of which is correct. Other closure powers exist under planning legislation, High or
County Court injunctions in respect of drugs under the Anti-social Behaviour Act 2003. However,
those set out below are the ones that a licensee is most likely to come across.
Area Closure
Power
s. 160 Licensing Act 2003
Who
Police Supt applies to Magistrates’
Court
What
All premises Licences and TENs at or
near place of disorder or expected
disorder. Not CPCs.
Why
There is or is expected to be disorder.
Closure necessary to prevent
disorder.
Individual Premises Closure
Power
s. 161 Licensing Act 2003
Who
Police Insp authorises – can be served
by a PC
What
Premises Licences and TENs. Not
CPCs.
Length
Up to 24 hours.
Length
Effect
No supply to public of food, drink or
anything usually sold on premises,
or regulated entertainment.
Effect
Why
1. Actual/imminent disorder on/in
vicinity of individual premises and
closure necessary for public safety*.
2. Noise nuisance from premises and
closure necessary to prevent it*.
*Police Insp to have regard to conduct
of premises management.
Up to 24 hours. Can be extended to 48
hours.
No supply to public of food, drink or
anything usually sold on premises, or
regulated entertainment.
CJPA 2001 Closure Notice
Power
s. 19 Criminal Justice and Police Act
2001
Who
PC or LA Authorised Officer
Anti-social Behaviour Act 2008
Power
Part 6, s. 40 Closure of Noisy Premises
What
Premises Licences, TENs, CPCs.
What
Why
Sales of alcohol otherwise than in
accordance with authorisation, this
includes breaching licence
conditions.
Its length until notice is cancelled.
PC may apply to magistrates within 6
months for closure order.
Why
Length
Effect
Who
Length
Effect
Summary Review Closure
Power
s. 53B Licensing Act 2003
Who
What
Why
Chief Executive Office of Local
Authority
A public nuisance is being caused by
noise from a premises.
Closure of premises will prevent
nuisance.
Not longer than 24 hours.
Takes effect when a manager of
premises receives notice.
Fire Authority Prohibition/Restriction Notice
Power
Article 31 Regulatory Reform (Fire
Safety) Order 2005
Who
Fire Officer
Police Superintendent (certificate
needs signing by Superintendent)
Interim steps suspension of premises
licence.
Premises associated with serious
crime or serious disorder, or both.
68
What
Any premises.
Why
If the use of premises involves a risk so
serious that the use of the premises
ought to be prohibited or restricted.
Length
Effect
Until full Review decided or Appeal
determined.
(But licence holder can request own
hearing, which must be heard within
48 hours of that request.)
One option for LA is suspension of
licence as interim step, effectively
closing the premises until the next
hearing.
Length
Effect
Can only take effect immediately if the
risk of serious personal injury is or will
be imminent.
Until withdrawn by
authority/cancelled or modified by the
Court.
In serious cases immediate closure of
premises.
Wholesalers
The sale of alcohol by retail is generally a licensable activity and therefore needs to be licensed. A
licence will not be required where the sale of alcohol is:





To a trader for the purposes of his trade (e.g. sales from one wholesaler to another; it is arguable
that this provision could also include selling alcohol to companies for their Christmas parties).
To a club, which holds a club premises certificate, for the purposes of that club (e.g. a working
men’s club).
To the holder of a personal licence for the purpose of making sales authorised by a premises
licence (e.g. the deputy manager of a pub for sale at the pub).
To the holder of a premises licence for the purpose of making sales authorised by that licence
(e.g. a freeholder of licensed premises for sale at those premises).
To the premises user in relation to a temporary event notice for the purpose of making sales
authorised by that notice (e.g. someone running a one-off rave for up to 499 people).
These exceptions are ones where the sale is made to persons who will be buying wholesale and then
going on to make a sale by retail to their customers or members – note that while the wholesale may
not need to be licensed, the onward sale (by the pub, club, Christmas party or the rave to its
customers, members or guests) would need the appropriate authorisation. In the example of the
Christmas party, however, if the alcohol was genuinely given away by the employers to its
employees, then both the sale by the wholesaler and the party itself would need no licence so far as
alcohol is concerned (because the alcohol is given away free at the party, and therefore there is no
“sale by retail of alcohol”).
Perhaps the most significant change is that a sale by retail is no longer defined by reference to the
quantity of alcohol sold. The 1964 Act provided that a sale by retail did not include a sale above a
certain quantity, which for spirits or wine was not less than 9 litres or one case, and for beer or cider,
was not less than twenty litres or two cases, but there is no similar provision in the 2003 Act. Under
the old Act, therefore, a licence was not required for the wholesale of alcohol in these quantities, even
to a member of the public, but now any sale to a member of the public in wholesale quantities is a
licensable activity.
Internet and Mail Order Sales
In considering applications for premises licences involving internet or mail order sales, in which the
place where the sale of alcohol takes place is different from the place from which the alcohol is
appropriated to the contract, i.e. specifically selected for the particular purchaser, section 190 provides
that the sale of alcohol is to be treated as taking place at the place where the alcohol is appropriated to
the contract. This would mean, for example, that a call centre or the internet would not be the
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premises for which the appropriate licence is required, but instead the warehouse where the alcohol
is stored and specifically selected for and despatched to the purchaser.
Conclusion
This is only a brief summary of the main changes in licensing law since 2005. The new Act has
brought a deal of flexibility to traders, but with that flexibility comes a new regime requiring
operators to run premises proactively and with the licensing objectives as paramount. Any failure to
do so could result in a variety of sanctions, some of which are set out in the Act and others of which
are new, or extensions of earlier, statutes. The crucial point is that the enforcing authorities and
interested parties (which includes residents and local Councillors) are more aware than ever of the
numerous powers at their disposal – and tend not to hesitate to use them if there are repeated
breaches by operators.
Further Information
Details of the Award for Personal Licence Holders qualification can be obtained from Poppleston
Allen at www.popall.co.uk
Quality Assurance
The Food Safety Act created the concept of ‘due diligence’, suggesting that that it shall be a defence
for the person charged to prove that he took all reasonable precautions and exercised all due diligence
to avoid the commission of the offence‘.
Due diligence is also applicable to other legislation, notably licensing law where, again, the defence to
a charge is to prove that the defendant took all reasonable precaution and exercised all due diligence
to avoid the commission of an offence.
QA can be defined as the procedures and protocols in place to ensure products and services are safe,
consistent and of the appropriate standard, and that legal obligations have been executed.
In the defence of due diligence the defendant must prove his innocence. Evidence is therefore
required and several examples of evidential material may exist. For example:
In terms of importing and wholesaling alcoholic beverages
 Documented shipping procedures
 Own label policy documents
 Product specifications
 Emergency product recall guidelines
 Disaster contingency plan
 Supplier audit procedures
 Staff training manuals and records
In terms of selling alcoholic beverages from licensed premises
 ‘Refusal to serve’ logbook
 Display of legal notices
 Staff training manuals and records
 Support of ‘proof of age’ scheme
 Implementation of the Portman Group’s code of practice (see Chapter 9, Social Aspects, p. 77)
 Responsible sale of alcohol
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Emergency Product recall
Guidelines must exist for the procedure to follow should a product recall be needed. Despite all due
diligence, there are times when a product reaches the shelves when it should not have. In the food
industry the Sudan I affair in 2005 (where the red dye Sudan I, linked to an increased risk of cancer,
was discovered in chilli powder) was a richly public and publicised example. Another example
would be if some bottles of medium-dry wine started to re-ferment in bottle, creating the risk of
exploding bottles.
Why are guidelines important? Because accidents and malicious acts can happen.
The objectives:
 To protect lives.
 To protect company assets.
 To preserve confidence.
 To manage risks to health.
 To limit damage.
Guidelines:
 Set up a named incident team with 24-hour contact details.
 Ensure all members are fully briefed of their role and responsibilities.
 Have system in place to establish level of risk.
Example process:
 When incident occurs, research problem to identify risk level.
 Appropriate members of incident team convened.
 Identify and gather information.
 Record all details and actions throughout
 Contact WSTA and Defra if public health at risk, police if malicious damage is suspected.
 Contact overseas supplier, if appropriate.
 Freeze stock at each location – use lot codes.
 Initiate stock count.
 Recall stock to central location.
 Sort, record and take samples.
 Controlled contact with media through one person.
 Brief telephone operators and staff on what to do if contacted.
 Arrange replacement stock.
 Keep customers informed .
The costs involved in a full recall can be high:
 Stock recovery, sorting, re-packing, destruction and replacement.
 Double shipping and potential out of stock situation while new stock on the water.
 Business disruption.
 Loss of customer and consumer confidence.
 Increased insurance premiums.
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Chapter 9
UK LOCAL MARKET – MARKETING AND THE CONSUMER
Types of Consumers
Industry organisations have categorised consumers, of all goods, in various ways in order to
understand the customer better, and to sell more product to them.
Socio-economic grade of adult population (15+) (alcohol drinkers and not)
Social
Social status
Occupation of chief income earner
% adult (15+)
grade
population
Higher managerial, administrative or
A
Upper middle class
3
professional
Intermediate managerial, administrative or
B
Middle class
22
professional
Supervisory or clerical and junior
C1
Lower middle class
29
managerial, administrative or professional
C2
Skilled working class
Skilled manual workers
21
D
Working class
Semi and unskilled manual workers
16
Those at lowest level of
State pensioners or widows (no other
E
9
subsistence
earners), casual or lowest grade workers
Source: NRS (National Readership Survey) social grade definitions, from Drink Pocket Book 2006 (no longer
published)
An alternative categorisation, of consumers of all goods, is the ACORN system.
ACORN Categories
A
B
C
D
E
Wealthy achievers
 Wealthy executives
 Affluent greys
 Flourishing families
Urban prosperity
 Prosperous professionals
 Educated urbanites
 Aspiring singles
Comfortably off
 Starting out
 Secure families
 Settled suburbia
 Prudent pensioners
Moderate means
 Asian communities
 Post-industrial families
 Blue-collar roots
Hard pressed
 Struggling families
 Burdened singles
 High-rise hardship
 Inner city adversity
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Source: CACI http://www.caci.co.uk/acorn2009/CACI.htm [Accessed Mar 26, 2012]
Acorn categories take customer and consumer insight to a different level. Each of the sub-categories of
the five main types is further divided up, creating a total of 56 different segments of consumers, each
with a different, consistent set of defining variables and values.
Acorn is a geodemographic segmentation of the UK’s population. It segments small neighbourhoods,
postcodes, or consumer households into:
5 categories
17 groups and
56 types.
By analysing significant social factors and population behaviour, it provides precise information and an
in-depth understanding of the different types of people in every part of the UK.’
Businesses and organisations use these insights to better target their products and services to particular
groups of customers and consumers.
Alcoholic drinks consumers
About 30 million people in the UK consume alcoholic beverages. Less than 20 per cent of the total
adult population is teetotal, and this has remained fairly consistent over recent time.
In such a complex and fragmented market as the UK wine industry, various organisations have
divided up consumers, of all goods, into identifiable ‘wine-consuming’ groupings, which sit
alongside standard consumer demographic categories. These breakdowns help retailers, brand
owners and marketeers get more sales out of each consumer category. But it is a relatively recent
phenomenon.
We know that wine spreads from high volume/lower value product to very high value items, and
that, in terms of both packaging and wine style, the market is also split along modern versus
traditional/classic lines. Consumer categories can be mapped along these axes to give some ideas as to
drinking occasion and location.
Sainsbury’s
About fifteen years ago Sainsbury’s was already segmenting their wine consumers, to better identify
how to target them and their wants.
 60 per cent were ‘cautious converts’ to wine.
 30 per cent were ‘eager adventurers’, already willing to spend more than £4 a bottle.
 10 per cent were ‘confident connoisseurs’, who, while buying their food at JS, bought most of
their wine at specialists.
A number of other organisations have tackled this issue, with a certain amount of consistency in some
factors.
The Waverley Group – Face Value
The Face Value research ran for four years (2001 to 2004) and laid new groundwork in the way we
look at wine consumers and categorise them and their wants.
They came up with six categories of wine consumer in conjunction with TNS consumer data 2003–04
Chardonnay girl (Merlot man)
 5% of drinkers
Classic connoisseur
 3% of wine drinkers
73




Age 18–24
Female led 70:30 – C1, C2, D
Healthy, social aspect
Very open to experiment and high in
flavour demand
 Wide drinks repertoire – wine in early
evening
 Drinks wine without food
The enthusiast
 2% of wine drinkers
 Age 35–50,
 Male led 55:45, A, B, C1
 75% of alcoholic vol is wine
 Buys into traditional image of wine
 Socially aspiring – lacks confidence and
knowledge
 Relates price to quality, prefers Old World
 Seen to be correct
 Will spend £6+
The easily pleased
 37% wine drinkers
 Age 35–50 plus
 Female led, C1, C2, D
 No pretensions or ambitions
 Tends not to experiment
 Often less expensive/sweeter styles of
wines
 Wine is 71% of drinks mix
 Good new world mix and growth
 80% of alcoholic consumption is wine
 Age 50+
 Male led 76:24 – AB
 Sound knowledge – takes wine seriously
 Closely identified to Old World
 Traditional in style and taste
 Will spend £6.00+
 High level of food and wine
The adventurer
 10% of wine drinkers
 Males 51% females 49%
 ABC1, self confident
 Higher disposable income
 Interested – enjoys experimenting
 Not a detailed wine knowledge, but has
awareness of country
 Flavour and New World tendency
 Fastest growing sector
Entertainers
 43% wine drinkers
 Age 25–50
 male:female 40:60; B, C1, C2
 Family – wine with food or on its own
 Adventurous and enjoy experimenting –
New World led
 Price and promotion-conscious
 Trade up to occasions – entertaining
friends
Vin de Pays d’Oc generic campaign
Wine Intelligence was commissioned by Sopexa for a Vin de Pays d’Oc campaign. Consumers were
categorised according largely to increasing level of knowledge:
 Carefree: speed-choosers influenced by product image and price; promiscuous.
 Conformist: safety-conscious, seeking familiarity; loyal.
 Connoisseur: higher spend, wider repertoire, more traditional.
Their research found quite clearly that ‘occasion’ is a key driver to finding the right wine. It was also
suggested that part of the choice process involved choosing a wine to make a statement to others
about the purchaser’s status.
Consumer segmentation is increasingly complex in the wine industry as more data about buying
patterns and general demographic data are captured via loyalty cards and analysed in minutiae. It is
made more complex by the level of fragmentation and continued lack of brand dominance in the
wine industry, although wine is slowly becoming more branded.
Attesting to the challenge of understanding consumer behaviours, the Waverley research found that
over 60 per cent of consumers spend less than one minute choosing which wine(s) to buy.
A study by Vinexpo with Wine Intelligence in 2003 confirmed what we thought we knew, namely
that there is a significant gender variation in terms of attitudes towards wine and that those attitudes
74
change with life stages – age, marriage, children. Women are more impressionable and more price
sensitive while the men tend to knowledge-assumption.
With maturity, we become more loyal, safe in our chosen repertoire and tend towards increasing red
consumption at the expense of white.
Early into the new millennium, Wine Intelligence devised a wine consumer segmentation model. This
was based on consumption behaviour and the level of consumer involvement with wine. The five
categories were developed after an online survey that elicited 3500 valid response from people who
drink wine regularly. A regular wine drinker they defined as being at least once a month.
Wine Intelligence’s five main UK wine consumer groups (circa 2000)
1. Adventurous Connoisseurs:
 20% of regular wine drinkers
 High-income households; broadsheet readers
 High frequency consumption, at least three times a week,
 High spend, at home and on-trade
 63% aged 25–44
 Shop at Waitrose, Oddbins
 £6–7 typical off-trade spend
 Low promotional sensitivity
 Favourites: red wines, plus champagne, Port, New Zealand, Portugal
 Very high wine involvement
2.
Mainstream At-homers:
 42% of regular wine drinkers
 Suburban and rural middle income professionals, typically parents, mainly 35–64; 60% over
45
 High frequency wine consumption at least three times per week, mainly at home
 Average spend, £4–5
 Shop at Sainsbury’s, Morrisons
 Favourite countries of origin are France, Australia, Chile, South Africa
 High sensitivity to promotions
 High wine involvement; entertaining, reading about wine
3.
Weekly Treaters:
 18% of regular wine drinkers
 Generally young (18–34) and single, low–mid income
 Low frequency consumption
 Higher-than-average per-bottle spend, about £5
 Buy at Tesco, Asda and online
 Drink wine 1–2 times weekly
 Main buying cues are price and previous experience
 Moderately susceptible to promotions
 Countries of origin: Australia, Germany, Italy
 Low wine involvement, but see wine as aspirational
4.
Sociable Bargain-hunters
 10% of regular wine drinkers
 Prosperous empty nesters
 High frequency consumption, mostly on-trade
 Low spend, averaging £3.50 to £4
 45+ years old
 Big Tesco and cross-Channel shoppers
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



5.
Promotion sensitive, price is a key consideration
Not swayed at all by marketing gimmicks
Countries of origin: wide repertoire, including Germany
Low–middle wine involvement
Frugal Conservatives
 10% of regular wine drinkers
 Low-income households; TV viewers
 Low frequency consumption, once a week or less, mainly white
 Low spend, between £3.50 and £4
 See wine as an inexpensive drink to have at home
 Stick to one or two familiar brands, mainly white-wine drinkers
 Shop at Asda, Tesco
 High promotion sensitivity, main cues are price and promotion
 Countries of origin: France, Spain
 Low wine involvement
The six categories in Constellation Wines’ segmentation
In 2005, Constellation Wines in the USA released a consumer categorisation for USA wine consumers.
1.
Enthusiasts
 12% share of consumers; 29% share of profits
 60% female; Average age 46
 74% college degree
 Highest income ($76K)
 5.1 glasses wine per week
 Love the entire wine experience
 Consider themselves knowledgeable about wine
 Are influenced by wine reviews/ratings and appellation
 Are likely to have 1.5 cases of wine at home
 Surprise fact: 49% have not bought a bottle of wine over $15 in the last six months
 Differentiating need: they’re passionate about the entire wine experience from researching
what they buy to sharing their discoveries with friends and family
2.
Image Seekers
 20% share of consumers; 25% share of profits
 64% male; average age 35
 62% college degree
 Relatively affluent ($62K)
 3.3 glasses wine per week
 Image Seeker:
 Likes to introduce friends and family to new wines yet tends to view shopping for wine as a
complex process
 Are likely to seek advice from sales and wait staff and considers shelf talkers and wine
reviews to be important
 Are concerned about what their wine choices say about them
 Are likely to attend wine tastings and take winery tours
 Surprise fact: they’re insecure in their decision-making process and are just as likely to choose
wine with sophisticated labels as wine with fun, image driven labels
 Differentiating need: to feel sophisticated on one hand and fun, adventurous and trendy on
the other hand
3.
Savvy Shoppers
76











15% share of consumers; 15% share of profits
57% female; Average age 49
59% college degree
Middle income ($56K)
3.5 glasses wine per week
Enjoy drinking and shopping for wine
Believe that good wines need not cost a lot of money
Like discovering new wines, but have a group of favourites
Are less likely to be influenced by wine ratings and advice from sales/wait staff
Surprise fact: while on sale is nice, the Savvy Shopper isn’t looking for the lowest possible
price.
Differentiating need: to find a great wine at a great value
4.
Traditionalists
 16% share of consumers; 13% share of profits
 68% female; Average age 50
 42% college degree
 Middle income ($56K)
 3.0 glasses wine per week
 Much more likely to purchase familiar wines from established wineries and wines with which
they are familiar
 Say their values have become more traditional over the years
 Feel that wine makes an occasion more formal
 Enjoy entertaining and prefer staying in to going out
 Surprise fact: traditionalists are unlikely to try a brand of which they’ve never heard
 Differentiating need: to feel that their wine is made by a well-known winery that’s been
around for a long time
5.
Satisfied Sippers
 14% share of consumers; 7% share of profits
 74% female; Average age 52
 38% college degree
 Lower income ($53K)
 2.2 glasses wine per week
 Least likely to enjoy shopping for or discovering new wines
 Look for names they recognise and brands they’re experienced with
 Wine is not a significant part of their socialising
 Very loyal to the brands they like, with a skew toward White Zinfandel wine
 Surprise fact: they are not knowledgeable about wine and they’re not open to advice from
staff or reviews/ratings
 Differentiating need: a sensible choice they can feel comfortable with serving to friends and
family
6.
Overwhelmed
 23% share of consumers; 11% share of profits
 70% female; Average age 44
 Lower income ($51K)
 47% college degree
 1.7 glasses wine per week
 Find shopping for wine complex and worry about making a mistake
 They don’t know what wines go with what foods and they don’t feel comfortable ordering
wine in a fine restaurant
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


Are not likely to remember names so they just shop based upon the label: fun ones and
sophisticated/traditional ones
Are VERY open to advice
Surprise fact: they tend to buy the first thing that catches their eye and are not loyal to any
brand
Differentiating need: good shelf description or retail/wait staff recommendations play a key
role in the purchase decision.
In 2010, Wine Intelligence updated their UK wine-consumer categories into six ‘portraits’. These
portraits comprise regular wine drinkers, which Wine Intelligence define as drinking wine at least
once a month.
Adventurous connoisseurs
 11% of regular wine drinkers
 Middle-aged, confident wine drinkers
 Enjoy experimenting in the wine category
 Account for nearly 20% of spend on wine
Generation treaters
 9% of regular wine drinkers
 Younger wine drinkers, <35, growing in confidence
 Experiment with caution in the wine category
Mainstream at-homers
 29% of regular wine drinkers
 Middle-aged ‘core’ wine drinkers
 Wine is frequent treat
 Heavily influenced by promotions
Risk-averse youngsters
 18% of regular wine drinkers
 Younger wine drinkers, lacking in confidence
 Growing into the wine category, but often find it intimidating
Senior sippers
 24% of regular wine drinkers
 Older, less frequent wine drinkers
 Limited interest in wine, narrow repertoire
Kitchen casuals
 10% of regular wine drinkers
 Middle-aged, infrequent consumers
 Not engaged with the wine category
 Mostly buy in supermarkets for consumption at home
In 2011, a Wine Intelligence survey found adventurous connoisseurs and generation treaters account
for a third of total spend on wine, despite accounting for just 20% of regular wine drinkers.
The year 2011 also saw the fifth year of WineNation, Accolade Wines’ category insight into UK
consumers. In this model, UK wine consumers are segmented across a number of factors including
consumption frequency, wine knowledge and usage attitudes. Eight consumer segments are in this
model:
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Experts
5%; knowledgeable and involved
Confident enthusiasts
14%; confident and self-assured
Engaged explorers
10%; established everyday wine drinkers
Routiners
13%; midlife family established drinkers
Strong prospects
14%; potential wine drinkers
Occasionals
16%; high days and holidays
Newbies
24%; new to wine; younger drinkers
Economisers
4%; infrequent; value conscious.
The aim of any consumer segmentation is to help wine suppliers better understand their
customers/consumers, who they are, how they behave, why they’re drinking wine, what wines are
their repertoires. That two-thirds of consumers read back labels could be important when deciding
what to write on the back label. Two-thirds of consumers also find shelf information helpful for
making a purchasing decision. How consumers move through the different categories can also
provide insight for brand owners.
Consumer journey through Wine Nation’s consumer segments
Source: Accolade Wines, Wine Nation Report 2011
79
Broad brush generational consumer segments are:
Generation Y: 18 to 29 (aka the millennial generation)
Generation X: 30 to 45
Baby boomers: 46 to 55
Veteran generation: >55
80
Chapter 10
UK LOCAL MARKET – LEGAL AND SELF-REGULATION OD THE INDUSTRY
Alongside various legislated aspects, the drinks industries in the UK have been self-regulating for
many years. More recently the government has decided that the various drinks industries have not
done enough to promote responsible consumption or to combat issues such as underage and binge
drinking. So a mandatory code of practice is in the process of being drawn up by government.
One measure was the re-introduction of the 125 mL wine glass in October 2010. This was the standard
measure a generation ago, with 175 mL being a large glass. But in the intervening time, 175 mL has
become the standard, with 250 mL, or a third of a bottle of wine, the large standard.
The licensing legislation revised in 2003, and the government’s crackdown on binge drinking have
placed greater onus on the industry to meet the responsibilities. Part of this means adhering to the
Portman Group’s Code of Practice (www.portman-group.org.uk), as well as following guidance
issued by the industry about responsible alcohol retailing.
A qualification in responsible alcohol retailing has been set up covering issues such as:
 The nature of alcohol, measurements of alcohol content, effect of alcohol on the body.
 The main issues in the 2003 Licensing Act.
 The law: protection of children, sale and consumption of alcohol, and other activities, forms of
proof of age within licensed premises.
 Being a socially responsible team member with regard to the promotion and service of alcohol;
strategies which will help the responsible drink retailer.
 Recognising and handling customers’ drunkenness; legal requirements relating to this.
 Social responsibilities relating to the sale of alcohol.
 Strategies to adopt to minimise conflict and crime; personal safety.
If such a qualification becomes the norm, it could easily become viewed as an integral strand of an
organisation’s defence of due diligence, in the event of alcohol being sold to an underage person or
someone who is drunk.
Alcoholic Units
The UK government guidelines are as follows:
Women: maximum 14 units per week – calculated as two to three units per day.
Men: maximum 21 units per week – calculated as three to four units per day.
In the UK, an alcoholic unit is 8g (1cl of pure alcohol).
At the beginning of 2012 a House of Commons committee recommended consumers have at least two
‘alcohol-free’ days per week. This appears to contradict one of the longest-standing health/alcohol
studies which showed that regular, modest consumption of alcohol reduced the risk of overall
mortality. The study brought us the J-shaped curve.
Calculating Units
The abv of the drink x its volume measured in litres gives the number units in that drink. For
example: 12 per cent x .75 litre (bottle of wine) = 9 units. Or 1.5 units per 125 mL glass.
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With many wines now 14 per cent (or more), this is 1.75 units per 125 mL glass. For anyone
consuming the 250 mL serves that are common in on-licence premises, this equates to 3.5 units in one
serve. It is entirely feasible that this one measure may take an individual over the drink-drive limit
currently operating in the UK. It also takes both men and women over their guideline amount.
The industry has an important education role as part of its self-regulation, which it is attempting to
meet through the responsibility deal (see Appendix 3).
As part of that education process, a number of websites offer information and advice:
www.drinkingandyou.com
www.aim-digest.com
www.drinkaware.co.uk
Drink driving
Driving with alcohol in the body is strictly legislated. The legal alcohol limit is:
35 micrograms of alcohol in 100 millilitres of breath, or
80 milligrams of alcohol in 100 millilitres of blood, or
107 milligrams of alcohol in 100 millilitres of urine.
The drink-drive limit in the UK is 80 milligrams of alcohol in 100 millilitres of blood. With a level of
60 mg in your blood, the likelihood of you having an accident is doubled, and at 150 mg the chance of
an accident is increased more than 25 times.
Department for Transport (DfT) figures show fatalities in 2009 resulting from drink and drive
accidents were a quarter the level of 1979 (1979 – 1 380; 2009 – 350). The figure reported for 2010 was
250, accounting for 14% of all road fatalities that year.
The number of accidents in the same period, resulting when someone was driving whilst over the
legal alcohol limit, dropped from 18 090 in 1979 to 7710 in 2009. But in 2010 that figure rose again to
9.700.
Binge drinking
Reducing binge drinking is high on the government’s agenda (see Alcohol Strategy, below).
However, no standard definition is used within the research community.
 The ‘unit-based’ definition measures binge drinkers as those who have drunk more than a given
number of units during a stated period, for example, drinking more than half the recommended
units for the week in one session.
 The ‘intoxication-based’ definition measures self-reported instances of intoxication, for example
those who report feeling drunk regularly. Binge drinkers might be those who reported being
‘very drunk’ at least once a month in the preceding twelve months.
 The Office for National Statistics (ONS) definition is drinking more than double the daily
recommended units in one session, so eight or more units for men and six or more units for
women on at least one day in the week. This has been used as a proxy for binge drinking in lieu
of more nuanced data.
 Alcohol Concern: Ideally, a definition of binge drinking would take account of variables such as
motivation, alcohol tolerance, time interval and social context.
 The NHS definition is ‘drinking heavily in a short space of time to get drunk or feel the effects of
alcohol.’
Download a report of research and consultation on binge drinking conducted by MCM Research Ltd
for Wine Intelligence in September 2004:
http://www.sirc.org/publik/binge_drinking.pdf
82
Whilst consumption of total alcohol in the UK is ‘only’ around the European average (see below),
binge drinking causes a disproportionate number of serious illnesses.
UK consumers drink around the European average.
16
Per capita alcohol consumption
litres of alcohol
14
12
10
8
6
4
2
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0
Source: World Health Organization Regional Office for Europe, 2008 (latest figures available)
The British Liver Trust reported in 2010 that deaths in England from liver disease had risen above the
EU-15 average. This increase followed from having the lowest rates in the EU in the 1970s.
Source:
http://www.britishlivertrust.org.uk/modules/news/StoryViewer.aspx?pid=6&intextraid=2543&fid=2460
[Accessed March 26, 2012]
NB: graph shows government mortality statistics for the UK, not just England.
Compulsory Reading:
The Wise Drinker’s Guide: Alcohol, Health and Sensible Drinking – Your Questions Answered. Helena
Conibear, AIM.
83
Responsible retailing
The WSTA has created what it calls a toolkit for social responsibility, which includes developing a
social responsibility policy for your business. www.wsta.co.uk/Social-Responsibility.html
Several industry initiatives exist, all of which are voluntary.
 Retail of Alcohol Standards Group (RASG). Formed in 2005 as a single off-trade response to
tackling alcohol-related harm and sales to minors.

Social Responsibility Standards for the Production and Sale of Alcoholic Drinks in the UK were
jointly published by sixteen trade associations in 2005. Guiding principles drawn up following
discussions with government. Issued November 2005.
http://www.beerandpub.com/documents/publications/industry/Social_Responsibility_Standards.
pdf

The Drinkaware Trust evolved into its own entity in 2007, from a Portman Group campaign. It
aims to improve awareness and understanding about responsible drinking, and to change
drinking behaviours. www.drinkaware.co.uk

Challenge 21, or even Challenge 25, since January 2009. Asking anyone who looks underage to
provide proof of age, such as the PASS-accredited proof of age cards, which was set up in 2003 to
counter a burgeoning trade in fake IDs. www.challenge21.co.uk or http://www.challenge25.co.uk

Voluntary unit labelling was agreed between the drinks industry and the Department of Health
in 2007. Industry was to include alcohol unit content on packaging, government sensible drinking
guidelines, and a ‘don’t drink while pregnant’ logo by the end of 2008. This has not been
achieved, and unit labelling is a core part of the Responsibility Deal, started in 2011 (see
Appendix 3). http://www.portman-group.org.uk/assets/documents/Guidelines%20pdf.pdf

Stronger Portman Code of Practice from 1 January, 2008. There are now bans on speed-drinking
and on drinks sponsors appearing on children’s replica football shirts. As part of the
Responsibility Deal, the Portman Group is consulting to revise the Code of Practice again.
http://www.portman-group.org.uk/?pid=18&level=2

Community Alcohol Partnerships (CAP) to tackle public underage drinking. The scheme brings
together retailers, police, trading standards, schools, youth clubs and local media to work
together and share information to tackle underage drinking. Pilot scheme started in 2007, created
by RASG (see above), in St Neots, Cambridgeshire, which saw a 94% decrease in under-18s found
with alcohol between August 2007 and February 2008. There was also a 42% decline in antisocial
behaviour. RASG cite three pillars of ‘education, enforcement and public perception’ are key to
good practice. http://www.wsta.co.uk/Community-Alcohol-Partnerships.html
Advertising
The advertising of alcoholic drinks is regulated. From 1 January 2005, the rules changed on the
advertising of alcoholic drinks. The new rules were designed to address binge and under-age
drinking, and irresponsible drinking behaviour.
The rules cover four main areas:
1. Association between drinking and anti-social behaviour.
2. Sexual behaviour.
3. Irresponsible handling and/or serving of alcohol.
4. Appeal of alcohol advertising to youth culture.
From 3 July 2006, advertising is not allowed to make any health, fitness or weight control claims. It
can be marked as ‘diet’ if it contains 40 calories or fewer per 10 cL.
84
Also banned is describing alcoholic drinks as stimulants or sedatives.
The ban covers TV, radio and non-broadcast ads.
On 1 March 2011, the rules changed again, as digital advertising came under tighter regulation. From
this date, all online marketing, including on advertisers’ own websites, for alcoholic drinks comes
under the same regulations as print and broadcast. Other non-paid for online space, such as on
Facebook and Twitter is also included.
Paid-for space, such as banner ads and pop-ups, was previously regulated.
Details can be found in the UK Code of Non-broadcast Advertising, Sales Promotion and Direct
Marketing (CAP Code): http://www.cap.org.uk/The-Codes/CAP-Code.aspx
Minimum pricing and below cost selling
Debate around minimum pricing continues to exercise both regulators and industry, both in terms of
legality in that it may be considered to be anti-competitive, and in terms of a lack of real evidence to
suggest that a minimum price would deter harmful drinkers from excessive consumption.
During 2010 a separate debate gained ground – that of below cost selling. Supermarkets have long
been accused of using alcoholic drinks as loss leaders, to pull in shoppers on a particularly good deal,
and then rely on the fact that, once there, shoppers will remain in store to do the rest of their grocery
(and, increasingly, non-grocery) shopping. The profit margin on the rest of the shopping counters any
negative margin on the single loss-leading promotional item.
Below cost selling
Anti-alcohol lobbyists have accused the big supermarkets of promoting a binge-drinking culture by
using alcoholic drinks as loss leaders. The main issue in addressing ‘below cost’ is a technical one –
what is ‘below-cost’? Whose definition of cost should be used?
The coalition government identified possible options for outlawing ‘below-cost’ alcohol retailing:
• Disallow retailers to sell alcohol at below the cost of duty and VAT.
• Add in a sum for the production, distribution and marketing costs.
• Disallow sales below the cost of the wholesale invoice received by retailers.
In July 2010, Asda became the first supermarket to stop selling below cost, defined as the cost of duty
plus VAT. Such a definition ignores the cost of product, which varies widely according the buying
power of the retailer. However, the simplicity of this definition is that ‘everyone’ knows how much
duty is, and how much VAT is, so policing should be easier.
The advantage of this definition is that it requires no intervention to define what is ‘cost’, and all
those cost elements (duty plus VAT) are government revenue monies, so none goes to industry, at
any link in the supply chain.
A ‘below cost’ figure that includes any element of producer and/or importer margin is entirely
impracticable because the trade price of buying alcoholic drinks varies quite significantly between
retailers.
Another option is for government to intervene and to set a definition and parameters for cost.
However, this would be both anti-competitive and difficult to legislate for and enforce.
Breaches of whatever may be decided are rather easier to imagine: punitive measures could include a
loss of the licence to sell alcohol, as well as heavy fines.
85
Minimum pricing per unit of alcohol
This is potentially far more wide-reaching, and is also thought currently not to be a legal option. A
European Court of Justice ruling in 2010 has upheld the view that minimum pricing unfairly distorts
competition, and so would breach EU law.
The idea here is for a minimum price – £0.50 is frequently proposed – for each unit of alcohol, which
lobbyists argue is the best way to cut consumption and deal with the social and health issues around
excessive drinking, despite there being no evidence to support this thesis.
Regardless of arguments about social/health benefits and drawbacks, and the legality of the proposal,
the issue is fraught with practical considerations. Who gets the difference between actual cost and
minimum price? How is it managed?
In simple terms, taxes generate revenue for the government, but a minimum price looks, unless some
other measure is simultaneously introduced, to generate additional revenue for retailers. Producers
may be able to improve their margins only if they are successful in renegotiating their pricing.
In September 2010, the Institute for Fiscal Studies (IFS) reported that if a 45p/unit price were rolled
out across the UK it could generate an extra £700 million for alcohol retailers and producers, just from
off-trade sales.
The biggest bonuses would go to supermarkets who sell the most alcohol, with Tesco, Asda,
Sainsbury’s and Morrisons pocketing the most, and with the largest proportional increases in revenue
going to the discount stores such as Lidl, Aldi and Netto. Stores not selling cheaper alcohol – Waitrose
and Marks & Spencer – would derive little or no benefit from minimum pricing.
The IFS study also found, that in 2007, almost 85 per cent of all alcohol units sold at less than 45p,
including 91 per cent of lager, 90 per cent of cider and 87 per cent of spirits units.
The on-trade sector was unlikely to be affected by minimum pricing because of their higher cost and
pricing regimes.
One of the authors of the report said ‘the government should seek to change European regulations on
how alcohol taxes can be structured, so that taxes can mimic the impact of minimum prices whilst
ensuring the resulting revenues go the government and not firms.’
In Scotland, the measure to introduce a minimum price was defeated in parliament in 2010.
The Centre for Economics and Business Research (CEBR) reported that minimum pricing would
penalise moderate consumers and encourage cross-border trade – in the Scottish example. It also said
the purported benefits of reductions in health, crime and workplace harm were overestimated. CEBR
research states the case for minimum pricing is ‘extremely weak’.
That minimum pricing would punish the majority to curb the excesses of a minority is not disputed.
If a minimum price of £0.50 per alcohol unit were to be adopted, a 750 mL bottle of wine at 14 per cent
has (.75 x 14) 10.5 units. The minimum retail price would there be 10.5 (units) x 0.50 (sterling) = £5.25
minimum price. Clearly this would disadvantage wines from the New World, which tend to have
higher alcohol levels than those from the Old World. A 750 mL bottle of wine at 13 per cent works out
at £4.88 a bottle, considerable lower than a wine at 14 per cent.
Equally a 750 mL bottle of vodka at 35 per cent has (.75 x 35) 26.25 units, which equates to a £13.13
minimum price.
86
In September 2011, the Scottish government, now with a voting majority, reintroduced plans for
minimum pricing, despite having previously been ruled illegal by the European Court of Justice, and
despite lack of evidence that minimum pricing will address the real problem of alcohol abuse.
In the UK, the coalition government announced in March 2012 that it will introduce minimum pricing
in England and Wales by 2015.
As part of its revised alcohol strategy, released in March 2012 (see below), the UK government is
determined to push through a minimum price for alcohol. The legality of such a move is likely to be
called into question.
Government strategy on alcohol harm
Despite the fact that overall total alcohol consumption in the UK fell by 13 per cent in the five years to
2009, according to the BBPA, harmful levels of drinking remain a serious challenge among some
groups. And alcohol misuse is estimated to cost the health service £2.7 billion each year.
Estimates of direct costs to the NHS as a result of the three categories of physical inactivity, alcohol
misuse and obesity reach £8.7 billion.
In March 2011, the government announced the Public Health Responsibility Deal, signed by various
industries and retail organisations, including the major supermarkets and brand owners. The aim is
to improve various issues relating to food, alcohol, exercise and health to change consumer behaviour
in these areas. In the drinks industries, producers and retailers have promised clearer unit labelling,
awareness campaigns, e.g. of alcohol units and health harms, actions on underage alcohol sales, and
more support for responsible drinking.
This is the latest in a number of strategies aimed at reducing the harmful use of alcohol. In 2007 ‘Safe.
Sensible. Social.’ was published, as the next steps in the government’s national alcohol strategy, which
began in 2004, when the first national strategy was published, containing a raft of voluntary social
responsibility measures.
The National Institute for Health and Clinical Excellence (NICE) has issued three pieces of alcoholrelated guidance. In June 2010, NICE published guidance entitled Alcohol-use disorders: preventing
the development of hazardous and harmful drinking, and Alcohol-use disorders: physical
complications. This was followed up in February 2011 with guidance on alcohol dependence and
harmful alcohol use.
Among the NICE proposals are restricting the availability and price of alcohol as well as proposing
that a complete ban on advertising be considered. According to Gavin Partington of the WSTA, these
blanket measure proposals ‘will not address the root causes of alcohol misuse and will merely punish
the majority of British consumers who drink responsibly.’
Minimum pricing is one possible strand of alcohol harm reduction strategy, as is a possible ban on
below-cost selling (see Appendix 2 below)
NICE had also proposed a reduction in drivers’ blood alcohol. They said that cutting the drink-drive
limit from its current 80 mg of alcohol per 100 mL of blood to 50mg would reduce the number of
drink-driving related road accidents, which they report currently account for 17 per cent of all road
fatalities. In March 2011, the government rejected this idea in favour of stricter enforcement of
existing legislation.
87
Before this, a new mandatory code of practice came into effect in April 2010 (and part in October
2010), laid out in the Licensing Act 2003 (Mandatory Licensing Conditions) Order 2010. Five new
conditions apply to all licensed premises.
 No irresponsible promotions.
 No dispensing of alcohol directly into the mouth.
 Free tap water to be available.
 Implementing an age verification policy to prevent underage sales.
 Small measures of beers, ciders, spirits and wine to be available, such as a 125 mL wine serve.
The government has also consulted on a larger scale reform of the Licensing Act. Programme
measures on this front include:
 Overhauling the Licensing Act to give local authorities and the police stronger powers to remove
licences from, or refuse to grant licences to, premises that are causing problems.
 Allowing councils and the police to permanently shut down any shop or bar that is repeatedly
selling alcohol to children.
 Doubling the maximum fine for those caught selling alcohol to minors to £20 000.
 Allowing local councils to charge more for late-night licences, which will help pay for additional
policing.
Consultation on reform of the Licensing Act closed in September 2010. Points from this were
legislated as part of the Police Reform and Social Responsibility Act 2011, the provisions of which are
expected to come into effect at various stages between April and October 2012. (see Introduction to
Licensing Act, page 56)
While it is clear there are many strands to responsible drinking and alcohol harm reduction, there are
two broad camps to align. First, government regulation versus industry self-regulation initiatives,
such as the Campaign for Smarter Drinking and Challenge 25, although some industry initiatives are
in response to pledges made to government to address alcohol related harm. Second, blanket
regulation measures, such as minimum pricing, that affect the whole population regardless of their
consumption patterns versus behaviour-changing measures targeted at the relevant groups, such as
those drinking under-age or binge drinking.
As part of the government’s revised alcohol strategy to reduce the harm caused by binge drinking,
among other things, consultation is due to take place during 2012 regarding minimum pricing.
Additionally there is a proposal to ban multi-buy promotions in supermarkets, and one to adopt a
zero-tolerance of drunken behaviour in hospital accident and emergency departments.
Any such new legislation would work in addition to the partnership approach of the responsibility
deal, which looks to increase self-regulation rather than legal-regulation.
Sources
Public health responsibility deal (March 2011)
http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_125125.
pdf
Safe. Sensible. Social. The next steps in the National Alcohol Strategy. (June 2007)
http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/d
h_075219.pdf
National Institute for Health and Clinical Excellence www.nice.org.uk
Alcohol-use disorders: preventing the development of hazardous and harmful drinking (June 2010)
http://www.guidance.nice.org.uk/PH24
Alcohol-use disorders: physical complications (June 2010) http://guidance.nice.org.uk/CG100
Alcohol dependence and harmful alcohol use (February 2011) http://guidance.nice.org.uk/CG115
88
Home Office http://www.homeoffice.gov.uk/drugs/alcohol/
Police Reform and Social Responsibility Bill
http://www.homeoffice.gov.uk/publications/legislation/police-reform-bill/
Mandatory code of practice
http://www.homeoffice.gov.uk/drugs/alcohol/alcohol-licensing-conditions/
Full details http://www.legislation.gov.uk/uksi/2010/860/pdfs/uksi_20100860_en.pdf
Campaign for Smarter Drinking www.wsta.co.uk/Campaign-for-Smarter-Drinking.html
Challenge 25 http://www.wsta.co.uk/Challenge-25.html
Alcohol Strategy 2012: www.homeoffice.gov.uk/publications/alcohol-drugs/alcohol/alcohol-strategy
89
Appendices
Appendix 1 UK Local:
Supermarket Own Label Wines – Ranges and Trends
Before the recession hit in 2008, branded wines (defined as everything that is not an own label) were
growing market share in the off-trade.
Neilsen data show that in 2005 branded wines accounted for 75 per cent share of the UK off-trade
market. By 2006 this share had grown to 76per cent, in 2007 it was 77 per cent and by the end of 2009
it had grown to 80 per cent – a steady and sustained increase in share in a total market that was also
growing in size, from 91.3 million cases in 2005 to 100 million cases in 2009.
During 2010, the total market size decreased by a couple of percent (98 million cases), and own labels
had halted the erosion of their share by brands, retaining their share of 20 per cent.
Part of the explanation for this is likely to be due to the global financial crisis as consumers looked to
reign in spending on non-essential items. Contributing to this is the increasing tax on alcohol, which
continues to be raised by 2 per cent above inflation. Since 2008, tax on wine and beer has jumped by a
third. Tax now represents over 55 per cent of the cost of an average bottle of wine, and nearly 75 per
cent for spirits. It costs more to buy the same products, so consumers are likely to look at different,
more ‘affordable’ products.
Another contributing factor is likely to be due to an ongoing re-evaluation of supermarket own labels,
including the development of tiers of differently branded own label ranges, either two ranges of own
label: entry level ranges and ‘upmarket’ ranges, or sometimes three tiers.
By 2010 Tesco ‘Finest’, their top tier, had been running for ten years, and is now an 80-strong range.
Asda’s ‘Extra Special’ is 40-strong, Sainsbury’s has 50 wines under the ‘Taste the Difference’
branding, and Morrisons’ ‘The Best’ numbers 22 lines, with an average bottle RSP over £9.50, more
than double that of their first tier range.
While M&S has moved in the opposite direction, from a range that was almost entirely own label, into
more overtly producer-labelled wine, Waitrose made a high profile foray into publicised own label,
developing ‘In partnership with…’ in 2007, with ten wines. Numbers have grown to twelve still wines
since the launch, with an average bottle price exceeding £11.
Anne Jones, Waitrose’s information manager for wines, beers and spirits explained the move, saying
‘our customers are used to using retailers’ brands as a purchasing signpost. It takes away the risk of
not understanding regional information on a label.’
A review process showed their customers ‘were not wanting to take risk. Clarity and value has
become more important‘, said Jones, adding that does not have to be delivered via own label, but
where risk mitigation is key, own label is an easy way to achieve this, for a retail brand that already
has a high profile.
Waitrose decided to focus on their top tier of own label wines, developing a range, said Jones ‘that
“heroes” the supplier as well, so it is not an own label in the way of our competitors. We wanted
provenance as a big part of it.’ This means that supermarket and named producer are locked into a
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relationship, whereas other supermarkets can move to different suppliers from one year to the next,
with some ease, where there is no public relationship with a particular supplier.
Waitrose has a three-tiered system of own label, although only the premium range is easily
identifiable on the label. Three tiers of own label also exists at Morrisons, where ‘The Best’ range is the
only one to have a dedicated label style.
At the end of 2010, Morrisons relaunched its own label ranges after a thorough review. Arabella
Woodrow MW, Morrisons’ wine development manager, said ‘we did some customer insight research
which showed customers didn’t take Morrisons seriously because we didn’t do own label. We didn’t
expect that.’ So part of 2009 and most of 2010 was a time of serious research and development putting
together own label ranges, to complement ‘The Best’, which has been going for around six years, with
22 SKUs. They have more than three times that number now, across the three tiers.
The types of wines that appear under own labels are relatively easy to imagine. The likes of Claret,
Chablis, Châteauneuf-du-Pape, Côtes du Rhône, Chianti, Sancerre, New Zealand Sauvignon Blanc,
Australian Shiraz and Rioja, among the headliners. It makes sense to put the most popularly-selling
wines into own label alongside a branded offering.
As well as providing retailer brand reassurance, own labels give the retailer total control over the
brand feel, the message, the packaging, the cost, margin and volumes. Importantly, own labels avoid
price comparisons with competitors. Apart from Waitrose’s ‘in partnership with’ range, there is more
opportunity to shop around for the best bulk liquid prices, which will vary with each vintage.
The consistency of brand feel has become a simpler achievement with the recent trend to pack in the
UK, which offers another margin benefit. Where a range is packed in the country of origin, a retailer
is restricted by the equipment available in that country, so there may only be a screw capper available
in Australia, and a driven closure option in South Africa, or a Bordeaux bottle in New Zealand but
Burgundy in Chile – packaging choices are restricted by what is available in each country of origin.
Different from own labels, tertiary labels, also known as exclusive labels, are another way for the
retailer to keep more control over marketing. This is a wine that is exclusive to a retailer, bottled
under a label that does not mention the retailer’s name. The retailer can then effectively set its own
price. The other side of this coin, from a large producer’s perspective, is the opportunity to sell the
same liquid to a number of big retail clients, each of which has its own exclusive label.
Effectively, supermarkets’ ranges can be categorised broadly along the lines of own labels, tertiaries
and exclusives, all of which the supermarket controls, plus brands (in its broadest definition), being
wines that are owned and managed by external brand owners.
Given all the attention to own labels in recent years by supermarkets, it will be interesting to monitor
what happens in terms of sales performance as the UK emerges from challenging economic
conditions.
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Appendix 2 UK Local:
The Calais Market and its Recent Demise
The Calais booze cruise market was a startling phenomenon of the late 1990s and early 2000s.
In January 1993 the European single market came into effect, which allowed the free movement of
people, services and goods within the borders of the EU. Although quantity guidelines were
introduced in the UK, it also effectively meant that anyone returning to the UK could bring as much
alcohol (and any other goods, e.g. tobacco, sausages, toilet roll) with them as they liked, as long as it
was all for personal use only. Alcohol and tobacco are important because they carry excise duties.
The Channel Tunnel was opened in 1994, taking traffic directly to Calais, and the Cité d’Europe
shopping centre on the French side of the tunnel soon became a major retail hub. Sainsbury’s opened
their store at Calais in 1994, with Tesco following a year later, in the Cité d’Europe itself, which
proved to be a much stronger location.
At the turn of the millennium, Oddbins bought the Victoria Wine outlet in Cité d’Europe. Majestic
arrived in 2001 when they bought the three Wine and Beer World sites in northern France, under
which name they continue to trade. Eastenders Wine and Beer was one of the first UK-owned
operators to open in 1988, on the outskirts of Calais. This company was not associated with any of the
UK supermarkets/retailers.
In quick time, the amount of alcoholic drink being brought back to the UK from France, both legally
in personal allowances, and illegally in ‘white van’ trade, amounted to around 10 per cent market
share. And in its heyday in the late 1990s and early 2000s, cross-border shopping at Calais was
estimated to account for around 15 per cent market share of the total UK wine market. It was so
significant that the WSTA monitored the market through commissioned surveys. These surveys
found that, at its height, Calais also accounted for 20 per cent of the total UK sparkling wine market
volume share and 4 per cent of the spirits market volume share. They also calculated the lost revenue
to the government of the illegal white van trade.
By 2005, the wine share had halved, and times have been increasingly tough since then.
One of the main reasons trade developed was because of the wide disparity between alcohol duties in
the UK and France. Even in 1999, French duty was about 2p a bottle versus the UK’s £1.12, meaning a
more than £13 per case saving could be made by purchasing in France.
Savings on excise duty remain. French wine duty is still just over 2p a bottle for still wine and just
over 5p for a bottle of sparking wine. That compares in the UK with £1.90and £2.43 respectively.
External Factors
But the market has always been almost entirely dependent on external factors. Retail outlets were
historically quoted as saying there was a direct correlation between ferry prices and sales, or if there
was a gale or a strike, it was almost pointless opening up shop.
Transport operators fell over themselves trying to snatch greater share of customer numbers, with
heavy day-tripper deals, sometimes just £10 for a day trip. The main outlets used to team up with the
transport operators to offer cheaper, or even free, fare crossing for a minimum pre-order, that is to say
ordering in the UK for collection in Calais.
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The JP Chenet brand made its name first in Calais, as customers piled cases of the ‘wonky-necked’
bottle into their trolleys. Brand owner Les Grands Chais used that momentum to gain distribution
directly on UK soil, as customers also wanted to buy the product without having to travel to Calais.
During the 2000s in the UK, the wine market became increasingly competitive. As the global glut
grew, promotional mechanics dug deeper and deeper. Three-for-£10 became the ubiquitous
promotion, only to be bettered by the BOGOF. Petrol prices inched up in the early 2000s and even
more dramatically in the latter part of the decade. In 2000, the average price of a litre of unleaded
petrol was £0.76 but by March 2012, the cost had reached a new high of £1.3744. In effect, the
incentives to stay at home and buy all the drink there became stronger as the decade progressed.
Death Throes
One thing that was favourable throughout the early 2000s was the exchange rate, which reached a
peak of €1.67 to the pound in 2001. It was not until January 2008 that the Euro fell below €1.40 to the
pound, reaching a nadir of near parity (€1.02 to the pound) in January 2009. The rate in March 2012
had clawed its way back to €1.20.
The exchange rate slump in 2008, followed by recession and global financial crisis, has seen a
permanent demise of the main players in Calais. In early 2010 Oddbins closed, followed by
Sainsbury’s in June 2010. Then Tesco permanently closed their doors one month after that, all licking
their wounds from this once formidable ‘booze cruise’ market.
Along with Majestic and The Wine Society, whose showroom at Montreuil-sur-Mer, 45 miles from
Calais, is still open, non-UK retailers remain. And favourable transport deals still exist: in March 2012
Eurotunnel were advertising deals for £22 each way, which is a bit more than the duty saved on two
cases of wine, while P&O were offering £23 for a car and nine passengers. But this is a much
diminished market, despite the ongoing duty savings. The gloss and inverted glamour of the booze
cruise has definitely faded to grey.
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Appendix 3 UK Local:
The Responsibility Deal
UK local: background on the responsibility deal.
http://www.dh.gov.uk/en/Publichealth/Publichealthresponsibilitydeal/index.htm
The government “estimates the annual direct costs to the NHS as a result of physical inactivity,
alcohol misuse, and obesity are as high as £8.7 billion.”
To begin to address this, the Department of Health’s public health responsibility deal was launched
by the government in March 2011. The deal covers food, alcohol, exercise and workplace health. Its
key aims are to reduce alcohol consumption (further?) and reduce obesity.
The deal forms part of the government’s wider strategy for public health, which includes
 “positively promoting ‘healthier’ behaviours and lifestyles
 adapting the environment to make healthy choices easier, and
 strengthening self-esteem, confidence, and personal responsibility. “
The idea is about getting businesses, especially food, alcoholic and soft drinks manufacturers, and
retailers, to sign up to the deal, to improve issues relating to the five ‘networks’ of food, alcohol,
exercise/physical activity, workplace health and behaviour change. It’s part of the government’s
attempts to ‘nudge’ individuals towards constructive personal behavioural change, rather than go
down the path of further regulation.
Instead the deal favours a ‘partnership’ approach to change business practice and individual
behaviour, with the aim that results will be delivered quicker than the lengthy legal process of
regulation might achieve.
It is being activated by a series of collective and individual pledges made by businesses. In the
alcoholic beverages industry, just-drinks.com reported “drinks producers and retailers have pledged
to provide clearer unit labelling, support awareness campaigns and develop a new sponsorship code
on responsible drinking.”
Collective activity in our sector is being co-ordinated by the Alcohol Network, which is chaired by the
WSTA.
http://www.dh.gov.uk/en/Publichealth/Publichealthresponsibilitydeal/Networks/DH_123038
There are seven collective alcohol pledges in the first stage of the deal:
1. Labelling of unit information: by December 2013 to have 80% of products on shelf with labels
with clear unit content, NHS guidelines and a warning about drinking when pregnant. Portman
to collate industry returns.
2. On trade units: to provide consistent unit information in the on trade.
3. Off trade units: more communications including calorie contents, NHS drinking guidelines and
health harms of excess consumption. A consumer campaign was launched in February 2012.
4. Under-age sales: to reduce and prevent under-age sales, primarily through the application of
Challenge-21 and Challenge-25. BBPA / WSTA to co-ordinate a methodology to collate reporting
on this pledge.
5. Drinkaware: continued voluntary funding from industry e.g. for “Why let good times go bad?”
campaign. Funding being sought from responsibility deal partners which are not yet supporting
and funding Drinkaware.
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6.
7.
Advertising and marketing: consultation to revise the Portman Group code; no alcohol adverts
within 100 metres of schools; adhere to Drinkaware brand guidelines.
Community partnerships. WSTA / BII extra work on Best Bar None and Community Alcohol
Partnerships.
Plus there are three new pledges being developed during second phase of responsibility deal:
 actions in the retail environment to support the objectives of the responsibility deal
 encouraging consumers to reduce alcohol consumption through lower alcohol products and
smaller serve sizes.
 Targeting education at under-18s to delay commencement of drinking behaviour.
By September 2011, more than 100 drinks businesses had signed up to the deal, making pledges on
alcohol decisions. By October 2011, there were more than 300 partners across all the relevant
industries.
Individual pledges by companies include Asda having pledged an extra £1m to combat under-age
drinking, Diageo funding a training programme for midwives so they can educate pregnant women
about the risks and drinking during pregnancy, and Heineken planning to remove 100 million units
of alcohol from the market each year by lowering the strength of one of its key brands.
In a similar move, Brand Phoenix has pledged to remove 150 million units of alcohol between 2012
and 2014. OLN reported they will replace the entire entry-level tier with lower-alcohol wines.
In October 2011, The Portman Group, the self-regulatory body for the alcoholic drinks industries,
undertook consultation prior to upgrading its code of practice on the naming, packaging and
promotion of alcoholic drinks. It was last reviewed in 2006, during which time huge changes have
occurred in the marketing environment, not least the growth of social media and digital marketing.
One question they are asking is whether public relations should be brought under the remit of the
code.
In late December 2011, the British Beer and Pub Association (BBPA) launched a unit awareness
campaign in the on-trade, as part of its pledge to give better and more visible information to
customers in the on trade. On trade pledges regarding obesity include calorie labelling on menus.
One in six meals is eaten outside the home, in the UK.
In January 2012, Sainsbury’s, in conjunction with Diageo, Drinkaware and Heineken, announced a 20
day campaign that month as part of their commitment to double sales of lighter alcohol wine by 2020.
Alcohol unit management information, sampling of lighter alcohol drinks and availability of smaller
beer bottles to accentuate ‘portion control’ formed the core of the campaign.
The responsibility deal is one part of the government’s wider alcohol strategy. Alcohol pricing, for
example, remains on the agenda.
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