Presented earlier this month at the London International Wine Fair, here, for just-drinks members, is a bonus briefing for May, just-drinks' State of the UK Nation 2011 survey. Part one can be found here, while part two continues with the survey's questions.

IV - Name the three best and three worst things about the UK wine market, with reasons.

  • Best
  • Market size/diversity: mentioned by 88% of respondents (2010: 78%)
  • Openness to new ideas: 28% (30%)
  • Breadth of wine market: 25% (27%) 
  • Worst
  • Discounting/margins/pricing: 65% (71%)
  • Retailer consolidation: 47% (32%)
  • Excise duty: 36% (42%) 

Overview

Not a vast amount of difference this year for this question, although (as discussed under question II) excise duty is attracting a shrinking number of responses, reflecting the fact that, as long as the government is determined to continue with its current policy, there’s little the industry can do to change the situation.

The pluses of the UK market remain practically identical to last year, revolving around the country’s big, diverse and receptive wine market, despite its well-publicised challenges.

However, just off the radar and mentioned as a positive by over 20% of respondents is the competitive nature and low pricing of the market – the flipside result of retailer consolidation and pressure on margins. While this is the bane of many of those involved in the industry, it’s also perceived as a key driver of consumption.

Bubbling under as perceived pluses there is the strength of the independent sector, the expertise of those employed in the wine trade and, perhaps surprisingly, the potential for growth.

Responses on the negative side of this question were far more concentrated among the top three, but the prevalence of big brand and bulk wines, as well as the agenda of the anti-alcohol lobby, also featured relatively strongly. 

V - What would you most like to see change in the UK wine market – and why?

  • Promotions/discounts/pricing: mentioned by 27% of respondents (2010: 22%)
  • Excise duty: 18% (13%)
  • Power of retail multiples: 10% (11%) 

Overview

A predictable result here, with the top two responses accruing the same level of popularity as in 2009, although this remains a question which attracts a very broad range of answers, from the need for better product training among retailers to the need to build more credible brands in the sector.

Perhaps surprisingly, a relatively high proportion of those surveyed called for a higher level of minimum pricing – not for reasons of social responsibility, but in the hope that it might build a little more margin into the price of wine in supermarkets. 

Comments

“I would like to see more of the innovative way of retailing, more linked to value. Teaching the consumers new tastes, and wine and food matches, new moments of consumption.” - Jérôme d’Hurlaborde, export director, Northern Europe, AdVini.

“To see the UK consumer spend more than GBP5 for a bottle of wine! The annual duty increases and ongoing exchange rate pressure on prices will mean consumers will either switch to the wine of another country or switch to another beverage altogether.” - Paul Schaafsma, general manager, UK and Europe, Australian Vintage.

“It is very sad that the high street wine merchant has disappeared, but it is also understandable how it has happened. The smaller independents are now providing some interesting offerings and we have our own retail outlets which we’re very proud of (our flagship Laithwaites Wine shop The Arch near Vinopolis is now one year old). We would like to see a more dynamic approach to selling wine without the constant discount focus. It’s not the only way to motivate customers to buy wine.” - Becca Reeves, wine buyer, Laithwaites.

“I would like to see consumers become more adventurous in exploring new styles rather than just purchase the same brand repeatedly, and to see more emphasis placed on product training.” - Alun Griffiths MW, wine director, Berry Bros & Rudd.

“A better understanding of the civilising influence of wine and food amongst UK consumers. This would hopefully lead to less bingeing and less swingeing tax increases.” - Maria Jose Sevilla, director, Food & Wines from Spain.

VI - Is the UK wine market now out of recession?

  • Yes: 9% (2010: 11%)
  • No: 69% (62%)
  • Don’t know/not sure: 22% (27%) 

Overview

A slight firming of the negativity here, with once again respondents understanding that the definition of “recession” here has far more to do with the state of the wine market itself, rather than broader economic definitions.

Responses indicate a fear that government austerity measures – whatever individual views on their necessity or not – will hit consumer confidence and therefore spending yet further, coupled with further increases in excise duty and the recent hike in VAT.

The deeper fear remains that this new age of lower spending will not be a short-term phenomenon, but a longer-lived trend that endures well beyond the end of the current economic downturn. 

Comments

“Again, it is difficult to say; 2010 has seen a global increase in sales, however the increase has been slowing down from month to month. It seems that the market is slowing down even more during the first months of 2011. So even if we could imagine being out of the recession, the UK market remains very inconsistent and shaky.” - Caroline Defaut, director of marketing and communication, Champagne Nicolas Feuillatte.

“Tough challenges continue, but brands that are trusted by the consumer will continue to hold strong amongst those participating in deep discounting deals with no brand equity.” - Lisa Duckenfield, group marketing manager, Cellar Trends.

“No – tax increases will not encourage customers to open their wallets freely and if they don’t feel that the ‘good times’ have returned then they will continue to be careful. That doesn’t mean there aren’t opportunities and the record prices the Bordeaux 2009s were sold at show that there is still a healthy market for top wines.” - Becca Reeves, wine buyer, Laithwaites.

VII - Where is market growth going to come from during 2011?

  • Wines priced GBP5 and GBP8: mentioned by 48% of respondents (2010: 48%)
  • Rosé: 31% (40%)
  • Wines priced sub-GBP5: 25% (29%) 

Overview

This question made its debut in 2010, and little appears to have changed over the past 12 months. Respondents pinpoint price points above GBP5 for growth, a reflection not so much of successful trading up as of the movement of price enforced by duty and VAT increases.

Rosé continues to occupy the thoughts of many, although fewer than last year amid the first reports that the segment may be stagnating in terms of sales. A downturn in what has been one of the few bright spots for the sector as a whole would be bad news indeed in 2011.

And, despite those enforced price movements, a considerable number of those surveyed still believe that wines priced below GBP5 will experience growth this year – which many will find a depressing thought. 

Comments

“It slightly depends on which part of the market. Independents will see growth through innovation and sourcing good-quality, interesting wines that are probably only available in quantities that would work in smaller retail operations. Take Vagabond Wines in London, for example. This niche operation has approached wine retailing from a very different perspective. All wines are available, via a stylish wine pour system, to taste before purchase. The atmosphere is open and welcoming and is a far cry from an old-fashioned off-licence. They have approached the market from a different angle and will attract customers as a result.” - Richard Nunn, director, Louis Latour Ltd.

“The multiple grocer channel still presents opportunities for growth – we are working closely with new and existing retail partners to drive growth of the McGuigan portfolio. This year we will also see a concerted push to the independent sector, with the McGuigan portfolio having been realigned to ensure the range is appropriate to the needs of independent retailers.” - Paul Schaafsma, general manager, UK and Europe, Australian Vintage.

“Proper market growth will only come from a stronger currency, less tax and a feel-good factor from within. This government has to be able to deliver economic growth, which in turn goes back into consumer’s pocket.” - Nick James, managing director, Pol Roger Portfolio.

“Like in 2010, sales will grow if we support major multiples in price promotional strategies, but the challenge is to meet volume growth whilst achieving positive margins.” - Lisa Duckenfield, group marketing manager, Cellar Trends.