|Title:||United Kingdom wine and champagne sales by category in pounds sterling, liters, and percent change for year ending January 22, 2012|
Start of full article - but without data
Wine & Champagne: XXw/e XX January 2012
VALUE VOLUME [pounds sterling]m y-o-y % litres (m) y-o-y %
Still X,XXX.X XXX.X -X.X
Champagne XXX.X X.X X.X X.X
Othersparkling XXX.X X.X XX.X X.X
Cava XX.X XX.X XX.X X.X
Prosecco XX.X XX.X X.X XX.X
Asti XX.X XX.X X.X X.X
X,XXX.X X.X XXX.X -X.X
George Osborne hasn't made many friends in grocery recently. After the furore over his controversial 'pasty tax', the chancellor incurred wrath by announcing plans to implement a minimum price of XXp per unit in England and Wales - just days after the Budget's duty increases.
Wine and Champagne makers in particular will be feeling aggrieved. It was bad enough losing an average XX% of every bottle's value to tax, but the Budget pushed the price up roughly gp per bottle and minimum pricing could assert more upward pressure again.
To make matters worse, poor harvests in key wine-growing regions have prompted fears of global supply shortages, which could hit volume sales and put further pressure on prices - bad news for the brands in particular.
Their sales have already been hit hard by price rises coupled with their decision to scale back promotional activity just as own-label players have increased theirs (see box, PXX). Indeed, six out to Champagne brands have seen value sales fall, while own-label sales have soared (see right).
And the problem may well have been exacerbated by consumers trading down to less expensive wines, putting stocks (and prices) under further pressure. Or so say some experts. Others argue that the tapering-off in European consumption could put downward price pressure on bulk wines.
Confusing? You bet. Which is why makers are doing all they can to escape the commodity trap (and appease the health police) by pushing new lower-abv and sparkling wines - and why the more promo-averse brands are desperately trying to keep a lid on price hikes.
TOP XX BESTSRLLERS
Champagne: XX w/e XX February 2012
SALES CHANGE [pounds sterling] y-o-y %
Own label XX.X XX.X Moet & Chandon XX.X -X.X Heidsieck XX.X -X.X Lanson XX.X -XX.X Veuve Clicquot XX.X X.X Etienne Dumont XX.X -XX.X Andre Carpentier XX.X -XX.X Nicolas Feuillatte XX.X XX.X Taittinger X.X -XX.X AntoinedeClevecy X.X XX.X
Because make no mistake, while minimum pricing won't have the same impact on wine and Champagne as on other alcohol categories, it will have an impact. For one, the XXp price would rule out three-for-[pounds sterling] XX deals on wines above XX% abv, says Lindsay Talas, buying director at wine importer Thierry's.
This would hit stronger New World wines, particularly hard as they would not be able to rely so much on promotions to boost sales - a boost they sorely need. Volume sales of New World wines have fallen dramatically, with US wines down X%, Australian X% and South African slumping XX% [Nielsen XX w/e X February 2012].
There are a number of reasons New World wines have been struggling so much, including unfavourable exchange rates and supply problems. Poor weather has reduced harvests-particularly in the US, where unusually cool weather last year combined with low levels of planting has meant a shortage (up to XX%, according to some) of the thin-skinned white grapes used in many Californian blends.
Although some Old World regions have also reported poor harvests, this has not yet affected volume sales. In fact, sales of Spanish and Italian wines have actually risen Xi% and XX% in volume respectively [Nielsen XX w/e X February 2012], helped by a favourable exchange rate, the absence of the Common Customs Tariff excise duty and lower freight costs.
In theory, minimum pricing could offer compensation for New World producers in the form of inflated profits. But it's by no means a given that these will be passed on - indeed, experts warn extra revenue may be retained by retailers, prompting the government to increase duty rates further to claw it back.
This would be particularly bad for the brands, which are already suffering in comparison to own label. Thanks in no small part to heavy in-store promotion (see box, pXX), own-label wine sales have risen S.X% in volume and XX.X% in value - significantly better than the brands' X.X% value growth and X% drop in volume sales [Kantar Worldpanel].
Some brands, however, have little to fear from minimum pricing - not least those with an interest in low-alcohol wine. Its lower duty liability - and the fact that it caters to the government's responsible drinking agenda - have made lower-abv wine increasingly appealing to manufacturers. FirstCape launched its Light range of X.X% abv wines last month to tap into the lighter drinking trend (see box, right). The move follows forays by other New World stalwarts, including Accolade's Banrock Station, which launched a low-alcohol range last summer.
Another lower-alcohol product expected to gain traction this year is British wine, which is made in Britain from imported grape juice. The category has flourished in the downturn, with value sales up XX% and volumes XX% [Nielsen XX w/e X February 2012]. CWF, which produces British wine brand Silver Bay Point, says more consumers have become engaged with the product, particularly younger shoppers. The brand added two new sparkling wines, both abv, to its range last year-and, in February, Landmark Wholesale also moved into British wine with Ocean Star, a three-strong X.X% abv range.
The low-alcohol trend is also benefiting wines that are naturally less alcoholic, such as moscato, which ranges from X% to XX% abv. Already a hit in the US, moscato is tipped to become a top io variety in the UK. Sainsbury's BWS category manager Andy Phelps reports "strong sales" of moscato over the past year-and says the retailer is adding two new lines to keep up with demand.
Spanish regions Valencia and Piedmont are known for their moscato expertise, but New World producers are also muscling in. Californian E&J Gallo Winery unveiled new varieties last month under its Gallo Family Vineyards and Barefoot brands, and Percy Fox is eyeing a "selective launch" for its Yellowtail brand in coming months.
Pernod Ricard, meanwhile, plans to extend off-trade distribution of its Jacob's Creek moscato, launched into Tesco last summer - and will introduce sparkling variants in the autumn.
Although moscato is doing particularly well, it's a good time to be any sparkling wine brand - as long as you're not French. Major Champagne houses, such as Taittinger, have seen sales plummet as consumers turn to own-label rivals - and other sparkling wines.
"Place a French fizz not far from an Italian or Spanish sparkling and consumers begin to question if the premium is worth paying," says John Coulson, owner of Cornwall-based winemaker Polgoon. Consumer research commissioned by The Wilson Drinks Report and carried out across X,XXX British drinkers echoes this view. Twenty-three per cent had drunk cava over the last six months - more than branded Champagne (XX%), prosecco (XX%) and sparkling rose (XX%).
"It's no surprise cava has come top," says managing director Tim Wilson. "However, we expect more people will be drinking prosecco than Champagne within the next two years." Indeed, prosecco recorded the strongest sales growth in the category - up XX% by volume and XX% by value year-on-year [Kantar Worldpanel].
However, the Champagne brands are not taking the challenge lying down. Lanson, which claims very few shoppers are buying purely on cost, is gearing up to launch a non-vintage sweeter style to attract new consumers. "For those who have bought into light wine, sparkling, prosecco and are looking now to jump to Champagne, this is a good bridge," says MD Paul Beavis.
In the last six months, Lanson has also set up a US subsidiary to strengthen its international footprint. Beavis is keen to stress that the UK is a priority for Lanson - but says the US will become more of a "strategic focus".
It isn't the only brand seeking out more profitable margins overseas - or, like Blossom Hill owner Percy Fox, "dialling back" on UK promos. "Retailer strategies are going to have to evolve, not least because of the upward price pressure from duty and minimum pricing," says Percy Fox managing director Simon Lawson.
"We don't need or want to do excessive promotion because we don't have an awful lot of supply. There are strong sales and demand from other parts of the world, so we'll pull back on promotions and continue to build distribution and maintain visibility."
This doesn't exactly bode well for the UK in terms of the deep promotions once so loved by UK consumers - and retailers. Then again, if it consigns value-destroying price promotions to history, maybe that's not such a bad thing.
Symphony IRl Group
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* Although value sales of wine and Champagne are up a healthy X.X%, volumes have fallen by X.X%.
* As in other alcohol categories, rising duty, increased VAT and fluctuating exchange rates have inflated prices. Combined with less deep promotions, this has led to an increase in wine prices of Xop per litre on average.
* Still wine continues to dominate the market, but has been hit hard as retailers begin to move away from heavy deals.