Tax increases force prices up

The cost of wines and spirits in shops and bars and restaurants is increasing rapidly as tax increases continue to force up prices, according to the latest market report from the WSTA, the UK organisation for the wine and spirit industry.

Sales figures show that despite flat or falling volume sales in several categories prices are being driven up across the board by the impact of record tax increases on alcohol.

• Shop sales of spirits in the year to 14 May were flat in volume but up 6% in value
• Shop sales of wine for the same period were down 2% in volume but up 3% in value
• In the on trade sales volumes of wine fell slightly (down 1%) yet the value rose by 10% in the year to 16 April.
• On trade sales of spirits for the same period were flat in volume but up 3% in value

In the off-trade the impact of price rises driven by tax increases is demonstrated by dramatic falls in the sales of cheaper wines with figures suggesting a net loss as some consumers are switching to other categories, including British made wine using imported grape juice³ and cider. 

• Shop sales of wine were down 42% in the sub £3 category and down 20% in the £3 to £4 range in the year to 14 May 2011 – equating to10.4 million fewer cases
• Wine sales in the £4 to £5 were up 24% - equating to an increase of 6.2 million cases
• Sales of British Wine were up 39% in volume and 53% in value
• Shop sales of cider were up 5% in volume and 8% in value over the past year with a particularly marked increase in the last quarter (up 12% in volume and 19% in value) 

Further evidence of the shift from a night out to wining and dining at home as consumers see their household incomes squeezed is shown by the significant growth in wine sales at higher price points:

• Sales of wine in the £9 to £10 range are up 34% in volume and value on last year
• Sales of wine in the £10 plus range are up 12% in volume and value

The WSTA’s Market Report draws on data from leading independent sources including Nielsen and CGA Strategy¹, with analysis by Tim Wilson, author of the Wilson Drinks Report.

This quarter’s report also features exclusive consumer research² focusing on social media and online retail.  Findings include:

• While 61% of adult drinkers regularly use social media a third said most content was not relevant to them
• 71% of adult drinkers buy products and services online and the proportion is higher amongst wine drinkers

Commenting on the latest sales figures WSTA Chief Executive Jeremy Beadles said: “This year’s further above inflation increase in excise duty and the rise in VAT and other taxes have really fed through to prices and millions of hard-pressed consumers know it only too well.

“The impact is being felt particularly in pubs and restaurants as people go out less and that switch is seeing some consumers spending on treating at home instead.  Overall consumers are feeling the pinch.”

• On trade sales figures are MAT to 16 April 2011. Off trade sales figures are MAT to 14 May 2011.
• Polling data is commissioned by the WSTA from the YouGov Omnibus Panel and is based on a sample of 1731 British adult drinkers.
• British wine is not to be confused with English wine.  British wine is bottled in the UK and made using imported concentrated grape juice, whereas English wine derives exclusively from grapes grown in English vineyards.

• Read the fulll WSTA Market Report

1 June 2011 - Felicity Murray