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Wine - UK - July 2011

INTRODUCTION
Definition
Abbreviations
EXECUTIVE SUMMARY
Figure 1: Forecast for total UK value sales of wine, 2006-16
Market factors
Figure 2: Annual inflation (based on RPI) for wines and spirits, by on- and off-trade, 2005-10
Companies, brands and innovation
Figure 3: Brand value sales and share within the UK off-trade wine market, 2010
The consumer
Figure 4: Attitudes towards buying wine in supermarkets over the past 6 months, May 2011
What we think
ISSUES IN THE MARKET
Will price rises trigger an inevitable decline in wine purchases over the next few years?
Is wine branding ready to come of age?
Is the UK ready to move beyond a heavy off-trade discounting model?
Is it possible for wine to innovate in order to drive sales?
FUTURE OPPORTUNITIES
Guiding Choice
Eco and Ego
INTERNAL MARKET ENVIRONMENT
Key points
Rapidly increasing duty…
Figure 5: Duty per 75 cl bottle of wine (5.5%-15% ABV), 2000-11
…combined with weakening of Sterling….
Figure 6: Annual average exchange rates for Sterling, 2005-10
…leads to escalating prices at the worst possible time…
Figure 7: Annual % change in price index (RPI) of wines and spirits compared to all items, 2000-10
…even (and especially) in the discount-driven multiples…
Figure 8: Annual % change in price index (RPI) of wines and spirits, by on- and off-trade, 2005-10
… leading to a significant decline in alcohol drinking in 2010
Figure 9: Trends in drinking total alcohol (including wine), by venue, 2006-10
Consumers lack brand guidance when buying wine…
Figure 10: Proportion of total take-home value sales accounted for by the top ten brands, for selected alcohol markets, 2009
…something which works to supermarkets’ advantage
Consumers have been trained to buy wine on discount
Wine needs to capitalise on the underlying interest in premiumisation
BROADER MARKET ENVIRONMENT
Key points
Consumer income becomes increasingly squeezed…
Figure 11: Change in average weekly earnings compared to inflation in the UK, January 2005-April 2011*
An ageing population plays to wine’s advantage…
Figure 12: Proportion of the UK adult population, by age group, 2011
Figure 13: How respondents would describe their financial situation, by age group, May 2011
… as does the continued rise in the AB population
Figure 14: Forecast adult population trends, by socio-economic group, 2006-16
COMPETITIVE CONTEXT
Key points
The bigger alcohol categories see their usage eroded
Figure 15: Trends in drink types consumed in the past 12 months, 2006-10
Wine sees the greatest decline in drinkers between 2009 and 2010
In real terms, wine is losing ground to competitors in the off-trade…
Figure 16: % annual change in off-trade value sales at constant 2006 prices for beer, wine and spirits, 2006-10
…In particular, spirits…
…But holding its own in the on-trade
Figure 17: % annual change in on-trade value sales at constant 2006 prices for beer, wine and spirits, 2006-10
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
WHO’S INNOVATING?
Key points
A challenging market in which to innovate
Packaging formats become more flexible
Smartphone opportunities empower wine consumers
MARKET SIZE AND FORECAST
Key points
Tough market conditions impact on the UK wine market
Figure 18: Market size and forecast for total UK volume and value sales of wine, 2006-16
Figure 19: Forecast for total UK volume and value sales of wine, 2006-16
Forecast methodology
MARKET SEGMENTATION
Key points
Volume sales in the off-trade will be impacted by spiralling prices…
…but value sales should benefit from a premium shift
Figure 20: Market size and forecast for UK off-trade volume and value sales of wine, 2006-16
A steadier performance from wine in the on-trade
Figure 21: Market size and forecast for UK on-trade volume and value sales of wine, 2006-16
Rosé and white wine are out-performing red
Figure 22: Wine volume sales, by colour, 2009-10
Australia and France are losing share
MARKET SHARE
Key points
A fragmented market where brands have little power
Figure 23: Brand value sales and share within the UK off-trade wine market, 2008-10
South African brands trump Australian
COMPANIES AND PRODUCTS
Key points
Brown-Forman
Concha y Toro
Constellation Brands (now Accolade Wines)
Diageo (Percy Fox)
E & J Gallo
Foster’s Wine (now Treasury Wine Estates)
Pernod Ricard
Villa Maria
CHANNELS TO MARKET
Key points
Grocery multiples continue to tighten their grip
Figure 24: Off-trade sales, split, by major channels, 2009-10
Pubs/bars move towards a 50% share of the on-trade
Figure 25: On-trade sales, split by major channels, 2009-10
Tesco aims to protect margins from online wine competitors
Figure 26: Average monthly unique users (000s), for selected wine websites, over the 12 month period (June 2010-May 2011)
BRAND COMMUNICATION AND PROMOTION
Key points
Supermarkets dominate above-the-line wine spend
Figure 27: Main monitored media advertising spend on wine (including Champagne/sparkling wine), 2006/07-2010/11*
Discounting is more a feature of the market than above-the-line branding
Laithwaites is the top ad spender
Figure 28: Above-the-line advertising spend on wine (including Champagne/sparkling wine), by brands, 2008/09-2010/11*
CONSUMER USAGE OF WINE
Key points
Wine penetration nose-dives in 2010
Figure 29: Trends in annual changes in the proportion of UK wine consumers, percentage points, 2007-10
Three quarters buy wine for in-home consumption…
Figure 30: Wine bought to drink either at home or in the on-trade, May 2011
Wine is an acquired taste
Figure 31: Wine purchasing, by gender, age and social grade, May 2011
55-64-year-olds drink more on average than any other age group...
Figure 32: Average number of bottles of wine drunk per month, by gender and age, 2011
…but the more sizeable 35-54 population drink the most volume
Figure 33: Wine consumption per year, by age group, 2010
More women drink wine, but the average man drinks more of it
A link between usage and spend per bottle
White wine is the most popular purchase type for either in or out of home
Figure 34: Types of wine bought, to drink either at home or in the on-trade, May 2011
Rosé is failing to capitalise fully within the on-trade
Rosé is appealing to young females within the on-trade
Figure 35: Index of types of wine bought, to drink either at home or in the on-trade, by gender, age group and socio-economic group, May 2011
UK wine drinkers opt for variety
Figure 36: Crossover in purchasing of red, white and rosé wine in the past 6 months, May 2011
White wine encourages loyalty from females
Figure 37: Red and white wine drinkers, by gender, age and socio-economic group, May 2011
CONSUMER SPEND ON WINE
Key points
£8.33 is the average price UK consumers pay for a bottle of wine
Figure 38: Typical price people pay for a bottle of wine by wine, for in-home and out of home, May 2011
The younger the buyer the more they are prepared to pay in the off-trade
Figure 39: Typical price people pay for a bottle of wine for in-home, by selected demographics, May 2011
Figure 40: Occasions for drinking alcohol at home, 18-24-year-olds versus all drinkers, May 2011
High earning 25-34-year-olds are the key target for the on-trade
Figure 41: Typical price people pay for a bottle of wine for out of home, by selected demographics, May 2011
CONSUMER ATTITUDES TOWARDS BUYING WINE IN SUPERMARKETS
Key points
Wide supermarket wine selection seen as a benefit, not a turn off…
Figure 42: Attitudes towards buying wine in supermarkets over the past 6 months, May 2011
…although younger wine purchasers are much more likely to do so
Figure 43: Net difference in attitudes towards buying wine in supermarkets, 18-34-year-olds versus 35+, May 2011
The importance of brand building for women as well as the young…
Figure 44: Net difference in attitudes towards buying wine in supermarkets, women versus men, May 2011
A nation of wine drinkers reared on discounts
CONSUMER ATTITUDES TOWARDS WINE BY COUNTRY
Key points
France wins on quality, Australia on accessibility
Figure 45: Attitudes towards wine, by country of origin, May 2011
Italy, Australia and RSA occupy a favourable mainstream position…
Figure 46: Attitudes towards wine, by country of origin, May 2011
…but France and Italy have more premium potential
Chile outflanks Spain in terms of value
CONSUMER ATTITUDES TOWARDS WINE PACKAGING
Key points
Resistance to new wine formats which lack the “sophistication” of glass
Figure 47: Views on whether non-glass formats have the same level of style and sophistication as bottled wine, May 2011
…and to a lesser extent concern about inferior quality
Figure 48: Views on whether non-glass formats are the equivalent in quality to bottled wine, May 2011
Boxed wine has an increasingly relevant USP…
Figure 49: Perceived advantages of non-glass wine formats, May 2011
…but bag in box is a huge turn-off for younger consumers
Figure 50: Net difference in attitudes towards non-glass wine formats, 18-34-year-olds versus 35+, May 2011
APPENDIX – INTERNAL MARKET ENVIRONMENT
Figure 51: GfK NOP Consumer Confidence Index, January 1988-May 2011
Figure 52: Trends in drinking alcohol amongst the population, 2006-10
APPENDIX – BROADER MARKET ENVIRONMENT
Figure 53: Forecast of adult population trends, by age group, 2006-16
Figure 54: GDP, PDI, consumer expenditure and savings, at constant 2011 prices, 2006-16
APPENDIX – CONSUMER USAGE OF WINE BY TYPE
Figure 55: Most popular wine drunk over the past 6 months, by type, by demographics, May 2011
Figure 56: Next most popular wine drunk over the past 6 months, by type, by demographics, May 2011
Figure 57: Wine drunk at home over the past 6 months, by type, by demographics, May 2011
Figure 58: Wine drunk at a pub/bar/restaurant over the past 6 months, by type, by demographics, May 2011
APPENDIX – CONSUMER SPEND ON WINE
Figure 59: Typical price people pay for a bottle of wine, by venue, by demographics May 2011
APPENDIX – CONSUMER ATTITUDES TOWARDS BUYING WINE IN SUPERMARKETS
Figure 60: Most popular attitudes towards buying wine in supermarkets, by demographics May 2011
Figure 61: Next most popular attitudes to buying wine in supermarkets, by demographics, May 2011
APPENDIX – CONSUMER ATTITUDES TOWARDS WINE BY COUNTRY
Figure 62: Most popular attitudes towards French wine, by demographics, May 2011
Figure 63: Next most popular attitudes towards French wine, by demographics, May 2011
Figure 64: Other attitudes towards French wine, by demographics, May 2011
Figure 65: Most popular attitudes towards Italian wine, by demographics, May 2011
Figure 66: Next most popular attitudes towards Italian wine, by demographics, May 2011
Figure 67: Most popular attitudes towards Spanish wine, by demographics, May 2011
Figure 68: Next most popular attitudes towards Spanish wine, by demographics, May 2011
Figure 69: Other attitudes towards Spanish wine, by demographics, May 2011
Figure 70: Most popular attitudes towards German wine, by demographics, May 2011
Figure 71: Next most popular attitudes towards German wine, by demographics, May 2011
Figure 72: Most popular attitudes towards Australian wine, by demographics, May 2011
Figure 73: Next most popular attitudes towards Australian wine, by demographics, May 2011
Figure 74: Most popular attitudes towards US wine, by demographics, May 2011
Figure 75: Next most popular attitudes towards US wine, by demographics, May 2011
Figure 76: Most popular attitudes towards Chilean wine, by demographics, May 2011
Figure 77: Next most popular attitudes towards Chilean wine, by demographics, May 2011
Figure 78: Most popular attitudes towards South African wine, by demographics, May 2011
Figure 79: Next most popular attitudes towards South African wine, by demographics, May 2011
APPENDIX – CONSUMER ATTITUDES TOWARDS WINE PACKAGING
Figure 80: Most popular attitudes towards wine packaging, by demographics, May 2011
Figure 81: Next most popular attitudes towards wine packaging, by demographics, May 2011

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