Monday, June 30, 2008

Wine retailers fear bitter year ahead as sales tumble

The rampant growth of the UK wine market has ground to a sharp halt with sales falling at their steepest rate in living memory as consumers suffer the effects of rising taxes and the economic downturn.

Wines sales in Britain have soared this decade and the market grew 6 per cent to £5.6bn in the year to the end of February, according to Nielsen, the market research company.

However, that growth has now come to a sharp halt with off-trade sales in the four weeks to May 17 down 5 per cent, or about 4.5m bottles, against the same period last year.

The scale of the decline will be a blow to UK wine retailers who have seen demand grow strongly in recent years as consumers turned away from beer.

Analysis: Retailers sitting pretty
Jeremy Beadles, chief executive of the Wine and Spirit Trade Association, blamed the government's taxation of the drinks sector for playing a big part in the decline. The government in March pledged to raise duty on wine by 14p a bottle and a further 2 per cent above inflation annually until 2012.

"Consumers are facing skyrocketing costs for everything from bread and milk to petrol. Now we're seeing those increases effecting sales of alcohol," he said. "Politicians are making it worse with their tax increases and should remove the burden of higher taxes and end their pledge to raise taxes even higher."

The WSTA said that if the decline continued the UK wine market would be unlikely to see any growth this year.

Nielsen does not track changes on a monthly basis but industry insiders said they cannot remember a time when the sales declines has been so sharp.

Majestic last week reported a 3.4pc increase in pre-tax profits in the year to the end of March, but chief executive Tim How said that had come through price increases rather than higher sales volumes.

Wine sales have seen strong demand in recent years in pubs and bars but the on-trade is seeing declining drink sales as people begin to spend less.

The sector has also been hit hard by the smoking ban.

Any further decrease in wine consumption as drinkers seek cheaper alternatives or simply go out less will be a further blow.

Jonathan Sibun