Britain (and Ireland) continue to buck the trend in Western Europe in our love affair with alcohol, in spite of relatively high alcohol prices and taxation in comparison with most of Europe. Britain has risen to number seven in the world in its per capita alcohol consumption, overtaking France for the first time in 2003. Ireland now has the 4th highest per capita consumption in the world just behind Luxembourg, the Czech Republic and Hungary. The trend otherwise in Western Europe, the USA and Australasia is more of static consumption per head in the 21st century. The balance of power between beverage type, is as ever, fluid.
The increase in consumption in the UK has been overwhelmingly driven by wine. Per capita consumption has grown 180% to 20 litres per head (of pure alcohol) in the last 20 years (320% in Ireland from a smaller base). Spirits popularity has fluctuated between 1.3 and 1.8 litres in the same period, whereas beer has declined, only growing slightly again in 2002/3. We are still way behind the ‘traditional’ wine producing countries in the amount of wine we drink however ( Italy 47.5 litres a head, France 48.5 and Spain 30.6), which may account for why both Mintel and Vinexpo forecast that Britain will become Europe’s largest consumer of wine by 2008 – a prophesy that looks optimistic and foresees growth above current trends in both volume and value. Recent predictions from Wine Intelligence forecast 3% growth in wine by volume per annum (against 6% year on year 2003/4) in the UK over the next decade with prices failing to keep pace with inflation.
Girl power in Britain
Not only is growth in drinking led by wine, but it is women driving the drinking and brand choice. More women now drink wine than men (69% versus 62% according to Mintel) in Britain though both sexes drink similar quantities at home ( but women make 70% of wine purchases in supermarkets).
The real difference is in the on-trade where women consume a greater amount of wine than men. Datamonitor predict that young people will go out three times a week by 2008 and more drinkers are going out in the week than ever before ‘the more affluent, mid-life singles , “the ‘Bridget Jones’ generation of working women with time and money to spare for luxuries such as wine - has undoubtedly played a significant part in boosting sales” according to Mintel.
There is also a general trend, confirmed by the Wine Trade Action Group’s research, for people to drinking more at home before going out. Some believe the bag in box market will grow with the drinking at home culture increasing. The Bergerac wine trade board is promoting use of the bag-in-box (3, 5 and 10 litres) to a tune of 1.5 million-euro with the take home market in mind.
Women’s affair with wine may account for new categories like low carb wines such as Brown Forman’s One 9 (few analysts expect this category to grow significantly) as well as the growth of rose and the sparkling wine sector. Dominated by Cava (54% of sales and growing), off trade sales of non champagne bubbly were up by 8% in 2004 against total light wine growth of 5% and more premium brands are appearing as well as Australian sparkling Shiraz.
The inexorable growth of wine in Britain led to the Wine Trade Action Group commissioning a paper to discover as to whether wine is contributing to Britain’s ‘ binge drinking’ culture, “we found that wine plays an insignificant role in male binge drinking “ said Mike Paul,Chairman of WTAG “ but this is not true for women. Women quite frequently start off an evening with wine at home, as a mood enhancer and then may well share a bottle with friends in a bar. They then tend to move on to other drinks later in the evening”.
Across the channel?
It could be argued that the amount of wine drunk needed to decline in France, Italy and Spain – whose populations drank over 90 litres a head in 1980, since then, wine consumption has fallen by 45% in Italy, 54% in Spain, 38% in France. The Spanish Government has become concerned at the move away from wine by it’s youth in favour of beer and is now working hard to promote wine as the beverage of moderation. Spain’s Agricultural Ministry is funding the promotion of wine as part of a balanced diet and has legally separated wine from other alcoholic drinks. The image of wine has been damaged by the growth of the ‘botellon’ or street drinking parties by the youth of Spain, where the preferred beverage is red wine mixed with coke, or beer. Spain’s per capita consumption has stabilised at 10 litres a head of pure alcohol per capita over the last ten years however.
Italy and France have spearheaded the decline in alcohol consumption in Western Europe (6.9 litres and 9.3 litres of pure alcohol a head by 2003). France, in spite of proactive campaigns and government lobbying by the industry, continues to be hit by a tough government agenda against drink driving and the Loi Evin and consumption is expected to continue to fall. Italy is at last recording a slight growth of 2% in wine consumption in 2004. This was confirmed by the country’s farmers union in March - wine sales grew by 8 million bottles and 3% in value last year. The spirits market has collapsed however, to under half a litre a head and 23% of Italians do not drink at all, overall consumption is well below France, Spain and the UK at just 7 litres a head. The trend for eetotalism is spreading in other countries too, 26% of Britons now don’t drink ( Drinks Pocket Book 2005), and according to the Institut de recherches scientifiques sur les boissons, 38% of young French women do not drink.
Sharon Nagel, Editor of La Journee Vinicole is uncertain as to the future for wine in France: “Although, as you know, over the past few decades the French have been drinking less and less wine, the latest figures point to an increase over the five months from August to December 2004. As for future trends, .....Drink-driving legislation and how well it is enforced as well as a whole host of restrictions come into the equation and are very difficult to forecast. Currently the Health Minister is mulling enforcement of new legislation on warning labels for pregnant women : will this have an impact on how much wine they drink ? Later on this year, sulphite labeling will be introduced. Will this put people off ? On a more positive note, the industry is currently assessing various ways of recruiting new consumers, including reducing alcohol content in wine (which has increased by 2° over the last forty years) or perhaps even producing a fermented grape drink with an ABV lower than the official minimum entitling it to be called wine. Through the use of reverse osmosis a 6% proof drink which has a taste profile similar to wine has been pioneered in Bordeaux”.
Boom predicted in the USA
According to Vinexpo, the largest growth markets over the next four years are expected to be the US (+28%), UK (+15%) and South Africa (+21%). The USA has the advantage of half a million new consumers coming of legal age each year, whereas Europe, including the UK has a shrinking population of young people. It is worth mentioning demographics here as Britain’s population has grown by 4 million since 1980, fuelled by immigration, to 60 million, whereas Italy’s population has grown by just 1.5 million and Spain has a population of just 40 million).
Wine consumption totalled 278 million 9 litre cases in 2003 in the US (according to Wine Business monthly). Imported wines formed 26% of that. The main growth was from Australia and South America at the expense of France and Italy). Consumption is predicted to grow to 410 million cases by 2008 (Gomberg, Fredrikson and Associates), which is ironic as we have seen California uproot 100,000 vineyard acres in 4 years, but the balance of supply and demand is now much better.
In value terms, the importance of the US is even more marked. By 2008, Vinexpo predicts that the country will be spending $24bn on wine, some 20% of the world’s total, and nearly as much as France, the UK and Italy combined. Biggest growth will come in the $5-10 and $10+ categories, both of which are forecast to rise by 17% over the next four years. 40% of adult American still do not drink at all, a shrinking percentage.
Chris Wirth from the Wine Institute commented on the estimates: “While I cannot speak as to the accuracy of the Vinexpo figures, the recent market reports I have seen seem to confirm the trends they mention. The US consumption growth seems to be coming from the continued increase in numbers wineries in both California and the rest of the US. In addition to the growth of wineries in the US and the increasing awareness of wine in each individual state, is a decline in beer consumption and the comfort level of younger adult consumers with wine which is new for their generation. I also think the aggressive marketing from other countries to gain market share in the US is increasing awareness of wine and the different varieties available”.
According to Vinexpo, Wine’s growth internationally is coming from high value rather than high volume markets. The value of the UK market is predicted to rise by 19% over 4 years, and indeed the average bottle price has broken the £4 barrier at last and stands at £4.15 , Wine Intelligence warns however, that the average bottle price in Britain has risen by 2% over the last decade, failing to keep pace with inflation, with prices predicted to continue to decline in real terms.
Spirits
The international growth in spirits over the next four years is predicted to be around 12% ( Euromonitor), or twice the rate of growth of the previous four years. Value growth is expected to be even higher, at 15%. Asia is driving the spirit growth (20% predicted) and already accounts for nearly 60% of the world’s spirits consumption. The Americas are expected to see steady if unspectacular growth, while Western Europe is generally in decline (with the exception of Britain of course).
Vodka continues to experience run away success, especially in the premium sector and now accounts for 18% of world spirit consumption, there was a 19% increase in sales between 1999 and 2003 in the US. Russia continues to be vodkas biggest volume market, accounting for 50% of world sales, but this is declining and Putin is planning to regulate spirits further in Russia in a bid to tackle alcohol misuse.
Spirits drinkers are still overwhelmingly ‘mature’ throughout western Europe – (48% are over 55 in Germany, 46% in the UK, 40% in Sweden and 37% in France). The 45+ group are the fastest growing in spending power – wanting high price and high quality.
In France whisky is highly fashionable (1.7 litres per head) and growing, whereas traditional drinks such as Pastis are declining. It is expected that spirits sales will be affected by government and self regulation and responsible drinking initiatives in Ireland (where spirit consumption fell by half a litre a head between 2002/3) and France specifically.
Britain
According to Datamonitor, the UK spirits market was worth over 9 billion in 2003 (the average adult Briton spends £152 on spirits a year and drinks 3.7 litres), the market is forecast to grow at a modest 2% a year over the next four years.
Whisky, although dominant among spirit sales in the off trade, has lost out to white spirits in the on trade as it is not seen as a good mixer for cocktails.
Premium and prestige spirits brands such as Grey Goose, Chivas Regal and single malts in general are growing at the expense of blended whisky (which still accounts for a third of spirit consumption at 1.2 litres a head). This is reflected in Bombay Saphire’s success, with 25% growth in sales in 2003 and Grey Goose against a decline for Gordons. Vodka enjoyed a 29% increase in sales the UK with a further 11% growth forecast (IWSR).
RTD’s
The RTD market in the UK and Ireland is in steady decline. (There was a further 8% drop in volume sales in 2004). This category but should not be underestimated, however, as the it is still worth over £300 million. New trends such as Bacardi Diet lemon and Hypnotiq are a new ‘twist’ and may arrest the decline, although the European Commission and WHO hold RTD’s accountable for appealing to young drinkers (actually accountable for between 5 and 9% of underage consumption according to Alcohol Concern) and they will continue to be a target for higher taxation and regulation.
Young men – still beer
Beer is still the Nations favourite drink by far (see chart below 84% beer drunk against 16% wine, although wine accounts for 30% value according to Wine Intelligence ). Specifically the British males’ favourite drink. . In the UK beer consumption plummeted between 1980 and 2000 but rose to 179 pints per head in 2004 (BBPA figures) compared to 174 in 2001. Ales continue to decline but lager and premium brands are increasing sales and it is expected that boutique beers will grow in popularity
Those girls again
11% of beer is now estimated to be drunk by females (BBPA) – and this offers a tremendous challenge to the producers to capture the affluent, independent female without losing their core male appeal.
New developments such as lower alcohol beers and low carb beers may appeal to the female drinker - the alcohol free beer market is at under 1% of sales and has zero penetration of the under 25’s market. Coors, commenting on their development of C2, believe this is due to taste and hence have developed a beer at 2% which they hope combines good flavour and low alcohol. The runaway success of the ‘light’ beer market in the USA (that is in calories and carbs rather than in alcohol) might take off in Britain, but Euromonitor forecasts that ‘light beers’ and low carb beers will reach a peak (from a tiny base!) in 2005. The light beer sector now commands 27% of the total US beer market of 249 million hectolitres in 2004 (Beer Institute figures).
Female friendly initiatives in the UK include an improvement in beer glasses (1/3 pint, and Belgium stemmed glasses) and ‘food’ beers (beer to dine for) etc showing some imagination creeping into the market .
A rise in niche beers is forecast, again led by the US, but Europe continues to be dominated by the big four brewers (Anheuser Busch, SAB Miller, Heineken and Inbev) who have 25% of sales. The EU is forecast to see growth of 1.7- 2.4% over five years overall, driven by the premium category (Euromonitor).
Growth markets for beer are Russia benefiting from heavy investment and upgraded breweries (up 35% 1980 – 2000, at the expense of Vodka, which still accounts for 90% of Russian spirits consumption (according to Datamonitor), Latin America and Asia. The market for beer has grown by 62% in China over 5 years from a low base, and it is already the largest beer market in the world (estimated to account for 22% global beer sales by 2009). China offers huge potential as per capita consumption is a just 4 litres per head (World Drink Trends) but has remained static since 1999 for wine and spirits. The balance between beer wine and spirit consumption should alter in favour of wine, however, as the government is encouraging its consumption (with tax cuts and incentives) above beers and spirits which are made of grain and are needed for food (Reuters).
Traditional wine drinking countries such as France, Italy and Spain have seen strong growth in beer consumption since 1980 when it represented just 10% consumption, driven by its popularity with youth. Growth remains strong in Spain at 78 litres a head, and Italy (30 litres), but has declined to 35.5 litres a head in France(from 40 litres in the 1990’s).
Per capita consumption trends
It is important to put these figures in perspective in per capita terms. The per capita consumption of wine in the US is at 9.5 litres ( 2003, source World Drink Trends), a level not enjoyed since the 1980’s. Beer consumption is declining (90.8 litres in 1990, to 82.8 in 2003)and spirit consumption has stabilised in the last decade at 1.9 litres ( pure alcohol) per capita according to World Drink Trends 2005.
In the UK, beer and spirit consumption levels are similar to the US (1.8 litres spirits, 100 litres beer) but a much higher wine consumption at 20 litres per capita per annum.
The downward spiral?
As the table shows, the overall picture of alcohol consumption is far from rosy for producers. Total alcohol consumption in the traditional wine producing countries in Western Europe such as Spain, Italy and Portugal shows signs of stabilising after 20 years of decline with the exception of France. The trend in the 21st century with many countries, however, is of increasing stability of per capita consumption of pure alcohol - this includes the USA (6.8 litres), Australia (7.2 litres), New Zealand (6.8 litres) Germany (10.2 litres), the Czech Republic (11 litres), Russia (8.7 litres), the Netherlands, Austria and Denmark but the balance of beverage choice continues to fluctuate within these figures with the consumer, as ever ,willing to try out new alternatives in the playing field.
The question remains, for how long will the mature markets of Britain and Ireland continue ( or perhaps be allowed) to expand? Both Governments are working hard to reduce their ‘ binge drinking culture’ with detailed Alcohol Strategies, while recognising the economic contribution that the thriving on trade culture makes to the economy. Irish consumption is already levelling off whereto Britain?
With thanks to the BBPA, The Wine Institute, World Drink Trends, Coors and La Journee Vinicole Further sources of figures include Mintel, AC Nielson, Datamonitor, Euromonitor, Wine Intelligence, Wine Business Monthly, the International Wine and Spirits Record and Vinexpo.
Copies of World Drink Trends 2005 and the Drinks Pocket Book 2005 can be obtained via WARC, PO Box 69, Henley on Thames, Oxon RG91GB EMail info@warc.com Tel: 00 44 1491 411000
