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In This Issue...
It was an unpleasant week of home truths for our home market last week. The UK has been getting a bad rap of late, confirmed last week by two separate announcements from Bacardi and Constellation Brands.
The spirits giant Bacardi confirmed on Thursday its long-expected plan to cease production of its RTD range in the UK as sales have slumped since the turn of the century. A few days earlier, Constellation issued a profit warning for 2008, highlighting the “fierce price competition” in the UK.
Both announcements followed Scottish & Newcastle’s proposal last month to strip GBP50m (US$96m) from its costs, split equally between the brewer’s UK and Western European operations.
It has been widely recognised that the UK is a tough market to operate in, primarily for the sheer level of competition. At the same time, however, the rewards of operating in the UK can be great – we have been an exciting, dynamic market for quite some time now, with high per capita consumption in almost all drinks categories and a large level of disposable income. Not only that, but success in the UK has generally been perceived as a sign that you’re doing something right in your company – in the wine category, for example, the UK has worked as a bellweather for how successful a brand could – and should - be globally.
But it appears that the honeymoon is over and the vultures are circling. In spite of the upbeat prognosis by Beam UK’s MD, Adrian McKeon, last month, figures are showing that the country’s spirits market has ground to a halt and, in some categories, has switched to reverse. And don’t forget the introduction later this year of the smoking ban in England and Wales. The last thing any drinks company needs is a more challenging on-trade when producers are trying to drive revenues in a largely price-driven off-trade.
Is this the start of a domino effect across the continent? Or is this more of a blip than a trend, considering the unique status of the UK market?
Let us know your thoughts on this situation, at the forums.
Until next time...
Olly Wehring, Managing Editor
In spite of intense and mounting consumer interest in environmental issues and sustainable agriculture, organic wine is a comparatively undeveloped area of the market. But, writes Chris Losh, the current consumer zeitgeist and the marketing value inherent in establishing a strong point of difference for your product could change all that.
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