If you think that the UK market should be approached the same way as 10, or even five years ago, think again. Considering the trends and trepidations of this traditional market, the new focus should be on less is more. 

Ups and downs

Overall wine sales in the UK’s off- and on-trade remain down, but the price per litre is increasing in both sectors. IWSR data shows that while still wine has been on a downward trend since the recession in 2009, sparkling wine is the star of the show, particularly driven by “other sparkling wine”, mainly Prosecco.

A great deal is changing in the UK’s varied off-trade. ‘Less is more’ is the overarching theme, from mergers, acquisitions and range cuts, to consumers drinking less, but better.

It was announced a few months ago that many supermarkets will cut their wine ranges – with Tesco in particular planning to slash 33% of its offer. An Off Licence News Wine Report found that as an immediate result, 18% of suppliers lost their listings, with another 23% suffering from increased pressure on their margins and prices.

Ania Zymelka, senior consultant at the IWSR (International Wine & Spirits Research) explained at an industry briefing at this year’s London Wine Fair that consumers are overwhelmed by the wine aisles in supermarkets and therefore tend to stick to promotions and discount offers to help narrow their search. “Supermarkets are competing against discounters like Aldi – a successful chain opening more stores than Tesco each year – that offer their customers less choice. Something that consumers seem to like.”

“The cutting of supermarket ranges may be necessary for long-term stability and growth,” Zymelka explained. “Shelves are not elastic and with too much on offer, there is no room to launch and list new products. Retailers may also want to reduce the number of suppliers and simplify their offer. Brand building is key, and by simplifying the variety, consumers become more brand aware and loyal.”

On the other side of the coin, there is the important independent sector, which holds massive potential for wine suppliers. According to The Wine Merchant, there are now 760 specialist, independent wine retailers in the UK – a 50% increase since 2008.

Ben Murray, store manager at Hedonism Wines boutique shop in Mayfair, London, reveals more: “I can understand that supermarkets want to cut their ranges – a large variety can be intimidating in what is fundamentally a convenience store. Supermarkets also generally don’t have enough dedicated staff in the alcohol sections to guide customers through the range. That is why there are still independent and speciality stores, offering a wider range, with knowledgeable staff.”

Murray believes that this is where wine producers play an important role: “Whenever we have staff training with a producer and we enjoy the tasting (and obviously the wine), we notice an increase in sales. When the staff are enthused, they pass it on to the customers, who hopefully pass it on to their friends.”

On-trade: spending more less often

According to CGA Strategy data, the on-trade may be stabilising. While volume sales of wine continue their decline, the 2% annual fall was the lowest in five years, with the price per litre showing an increase of 1%. 

The latest Carpe Vinum report* had the same overall message: “The UK on-trade is on its way back – slowly. The tough times of the last few years have produced more openness to new ideas, innovation and creativity.”

Some opportunities identified by this report include younger consumers looking for interesting going-out experiences; an increased popularity of sparkling wine, craft beer, spirits and cocktails; increasing interest in local ‘designation of origin’; and a desire for the simplification of choices.

While consumers are going out less, the report shows that they are prepared to spend more, with the number of consumers willing to spend more than £10 and more than £15 on a bottle, increasing. This ‘premium resilience’ was also noted by Zymelka, who explained that consumers have gotten used to a higher price point.

“With the recession, consumers started drinking less, but better. Now, they are still drinking better quality, but also starting to drink more,” she said.

Everything that sparkles

While still wine may be waking from its slumber, sparkling wine has already taken the market by storm. According to Nielsen and CGA Strategy statistics, this category has been continuously growing in the on-trade (26% for volume and value) as well as the off-trade (16% for volume and 82% for value) over the last year. IWSR data furthermore shows that sales of Italian sparkling wines (driven by Prosecco) have outgrown that of all sparkling wines in the UK.

No-one can pinpoint exactly why Prosecco is so successful, but it is likely a combination of factors: a fresh, accessible and simple flavour profile; affordable price positioning; informal and no-fuss image; enjoyable with, or without, food.

Brand Prosecco seems bulletproof and has managed to build its own image, rather than position itself as a cheap alternative to Champagne – the reason why many believe that Cava has not been more successful.

And what about South African MCC and sparkling wines? In 2014, they held only 0,2% of the market share, with a decrease in their compound annual growth of 2,8% since 2009. 

Murray believes that this is mainly due to the dominance of Champagne, Cava and Prosecco within the category. “There are lots of good sparkling wines from other parts of the world, but in this category customers seem to be very comfortable with what they know, and prejudiced against what they don’t.”

Future trends

“The wine industry is traditionally not very innovative and there is more scope for diversity, particularly with low-alcohol and fruit-flavoured wines,” Zymelka said.

Many believe that low-alcohol wine could become more important in the future, but Zymelka believes this category needs a new image – “it is generally seen as a drink of ‘need’ for health or other reasons, rather than a drink of ‘choice’. Instead of being an alternative to wine, it should be positioned as an alternative to beer and cider.”

The same applies to fruit-flavoured wine. While many purists are sceptical, this is a category with huge potential for attracting new consumers (especially millennials), demystifying wine and hitting the ‘sweet’ spot. “Again, this category needs better defining, positioning and more innovative packaging,” Zymelka said.

The UK wine industry may not be completely rosy, but it is considerably more exciting, dynamic and encouraging than a few years ago. Recent Nielsen figures reveal that UK consumer confidence is at the highest level in nine years, with the portion of consumers willing to spend money also at its peak. 

*The Carpe Vinum Volume Two report focuses on the on-trade, with research by Wine Intelligence.